US battery supply chain faces China’s decades-long dominance as funding falls short

The US battery supply chain is receiving fresh federal investment, but the sums involved are modest against the scale of China’s grip on battery production, from raw minerals through to finished cells. The Trump administration awarded $500 million in August to seven companies working on battery minerals, materials, manufacturing or recycling, part of a broader push to secure critical minerals domestically.

The award marks the first round of funding under two $3 billion Department of Energy battery technology and materials programmes created through the Biden-era Infrastructure Investment and Jobs Act. But analysts and executives who spoke with CNBC described that figure as small relative to what a comprehensive shift would require.

What China actually controls in the battery supply chain

China’s advantage runs through almost every layer of production. Its share of mineral refining has grown since 2020, according to the International Energy Agency (IEA). The country produces around 85% of the world’s electric vehicle (EV) battery cathode active material and more than 90% of anode active material. It then manufactures 80% of the world’s battery cells. The IEA has said the lack of investment in these midstream stages in countries like the US “poses a growing risk to global supply security.”

China also controls 95% of the processing of spodumene, a mineral form of lithium extracted from hard rock mines, according to Raef Sully, chief executive of Lilac Solutions. The global lithium market grew from around 150,000 metric tons in 2015 to 1.5 million metric tons in 2025, Sully said, and most of that growth has depended on the spodumene refining stage that China dominates.

In 2025, China used that position as leverage, imposing strict export controls on rare earths, a range of other minerals and processing equipment.

The companies trying to bypass China’s chokehold

Two of the DOE grant recipients are targeting specific points where China’s control is strongest. Coreshell Technologies received $50 million to develop battery anodes from domestically sourced silicon, rather than graphite typically sourced from China. Anodes are an essential component inside every battery cell.

Lilac Solutions received $100 million. The company has developed a method for extracting lithium directly from salt water brine, bypassing the spodumene processing step entirely. “If you use our technology, you’re producing battery grade lithium carbonate or hydroxide at the site of production,” Sully said. “And you’re bypassing that important step, that processing step that China has a chokehold on today.”

Sully acknowledged China’s lead is large but argued the US has to start somewhere. Over the next decade, he said, it could see more domestic lithium, cathode material and battery cell production. “So early days, but a step in the right direction,” he said.

The scale gap and the EV market divergence

Scale remains the core difficulty. Tu Le, founder and managing director of Sino Auto Insights, put the challenge bluntly: “It takes decades and tens, if not hundreds of billions of dollars” to match China’s position across the supply chain. “We don’t have decades. We have five, six, seven years to try to become competitive.”

Richard Wang, chief executive of Voya Energy, pointed to CATL, the world’s largest EV and energy storage battery manufacturer, based in China, as the benchmark any US firm must measure itself against. “They have built up an incredible lead in terms of technology and manufacturing capabilities across the world,” Wang said, noting CATL is “one of the only battery companies in the world that’s not only high in revenue, but is significantly profitable because of how strong their manufacturing and supply chain capabilities are.”

Le also highlighted the gap between innovation and industrial scale. “We have a ton of innovation coming out of the United States,” he said. “These small fledgling companies are super innovative, but getting and building prototypes of what they’re trying to sell is one thing. Being able to mass produce them at a high quality level, repeatably in the millions of units is another thing entirely.”

The EV market itself illustrates the divergence. New energy vehicles, which include hybrids, EVs and extended-range EVs, made up 65% of China’s new car sales in July, according to the China Passenger Car Association. In the US, EVs, hybrids and plug-ins together accounted for about 24% of sales in the second quarter of 2026, according to the Energy Information Administration (EIA). Total new car sales in the US in 2025 were around 16.3 million, according to Cox Automotive, against 23.7 million in China.

Energy storage demand is growing, averaging 70% growth since 2022 according to the EIA, and EVs still account for more than 70% of total lithium-ion battery deployment, the IEA said. That demand trajectory makes the supply chain question increasingly pressing.

Cancelled projects and the policy reversal

The Trump administration has reversed or wound down many of the Biden-era policies that supported battery manufacturing and EV funding. Federal tax credits for EVs have been ended. Since January 2025, nearly $24 billion in announced battery projects have been cancelled, according to Atlas Public Policy.

Wang framed the stakes in terms of the wider automotive industry. “When you look at China, they are incredibly dominant in EVs at a time when the US is slowing down its EV development,” he said. “What this is really jeopardizing is the ability of US automakers to compete globally, where China is taking the lion’s share of all the growth globally.”

The $500 million in DOE grants represents the opening move of a much longer contest, and the companies receiving those funds are clear-eyed about what they are up against.