China's EV Supply Chain Monopoly: Why Diversification is a Lifeline for Automakers

The electric vehicle (EV) revolution is in full swing, but beneath the glitter of innovation lies a stark reality: China controls the lifeblood of the industry. With its stranglehold on critical minerals, refining capacity, and battery manufacturing, Beijing has positioned itself as the indispensable partner—and potential adversary—for Western automakers. This article explores the vulnerabilities of the global supply chain, the escalating risks of over-reliance on China, and the urgent need for diversified investment strategies.

The Iron Grip on Minerals
China's dominance begins at the source. The country produces over 70% of global lithium chemicals, 98% of lithium-iron-phosphate (LFP) batteries, and 90% of refined rare earth elements like terbium and dysprosium—critical for EV motors (see Figure 1). Its refining capacity is even more formidable: China processes 70-95% of lithium, cobalt, and graphite, ensuring it can dictate prices and supply.

The numbers are staggering. In 2024, China accounted for 11 million of 17 million global EV sales, and its battery giants CATL (38.3%) and BYD (16.7%) dominate 55% of the global battery market. Yet the real threat lies not in market share but in export controls. In early 2025, Beijing banned exports of seven rare earth metals, including terbium and dysprosium, which are vital for high-performance magnets. This unilateral move disrupted global supply chains, spiking prices for automakers like Tesla and BMW.

Why Western Automakers Are Sitting Ducks
The risks are existential. Consider this:
- Supply Disruptions: A single factory fire or trade spat could cripple production. In 2024, China's lithium carbonate prices surged 300% during export bottlenecks.
- Geopolitical Leverage: China's “weaponization” of rare earths—used in defense systems and EVs—is a stark reminder of its power.
- Cost Inflation: Over 40% of an EV's battery cost comes from raw materials. With China controlling refining, automakers face a price war they can't win.

Take Tesla, whose Shanghai Gigafactory relies on CATL batteries and local lithium. A shows how supply chain hiccups (e.g., 2022 lithium shortages) correlate with dips in its valuation.

The Path to Survival: Diversification Now
The solution is clear: diversify or perish. Investors must back companies and strategies that reduce reliance on China. Here's how:

1. Invest in Alternative Mineral Sources
2. Africa and Australia: Firms like Australianioneer (ASX:AOI) and Lithium Australia (ASX:LIT) are tapping lithium reserves outside China.

3. North America: American Manganese (AMY) and Critical Minerals (CM) are advancing U.S.-based production of cobalt and rare earths.

4. Bet on Battery Innovation

5. Solid-State Tech: Companies like QuantumScape (QS) and Factorial Energy are developing batteries that use less lithium and rare earths.

6. Recycling: Redwood Materials (RR) and Li-Cycle (LCY) are scaling up recycling of cobalt and nickel, reducing reliance on primary supply.

7. Support Diversified Supply Chains

8. European Battery Alliances: The EU's Northvolt (NVT) and ACC (Aker Horizons) are building gigafactories with non-Chinese suppliers.
9. U.S. Manufacturing: Ford (F) and General Motors (GM) are partnering with Kings Mountain Minerals to secure domestic lithium.

The Clock is Ticking
The International Energy Agency warns of a 30% copper shortfall by 2030 and lithium deficits by 2030, while China's share of refining is projected to drop only to 50% by 2027—a glacial pace. Investors who ignore this risk will pay dearly.

The takeaway? Act now. Allocate capital to miners, recyclers, and innovators outside China's orbit. The EV boom is real, but without supply chain resilience, it's a race to the bottom. Diversify, or risk being left in the dust.

Final Call to Action:
Ditch the “wait-and-see” mentality. Add SQM (SQM) (Chilean lithium giant), American Manganese (AMY), and Factorial Energy (FAEL) to your portfolio. These companies are the vanguard of supply chain independence—and the next wave of EV profits.