China plans new export restrictions on EV technology

China plans new export restrictions on EV technology

Beijing plans to restrict exports of technologies used to extract minerals crucial to the growth of the global electric vehicle (EV) industry. This measure comes as technology competition with Washington intensifies, and ahead of the inauguration of the newly elected US President Donald Trump.

Changes in the export control system

China also plans to add battery cathode technology to its list of controlled exports. This goes out a message from the Department of Commerce, which was released Thursday and sought public comment. These new restrictions add to previously proposed restrictions on lithium and gallium production techniques.

Extensive export controls in prospect

If approved, the new measures would represent a future round of export controls imposed by China on a wide range of critical materials and the technologies needed to produce them. These are crucial for the production of semiconductors and EV batteries.

In response to a question about the proposals during a regular news conference on Friday, Foreign Ministry spokeswoman Mao Ning said: "What we can basically say is that China implements fair, reasonable and non-discriminatory export control measures."

Responding to new US regulations

The plan emerged a month after China banned sales of a range of materials crucial to the production of semiconductors and other technologies - including gallium, germanium, antimony and other "super hard" materials - to the US. The move was in response to new export controls on U.S.-made semiconductors put in place by the outgoing Biden administration.

The latest proposals could be a strategy to "weaponize resources" to secure a negotiating advantage ahead of Trump's second term, Liz Lee, a director at Counterpoint Research, told CNN.

China's role in the global market

If implemented, a ban or restriction "could significantly strengthen China's dominance in the battery market, particularly to boost its EV battery supply chain," she said. “Depending on the extent of export controls, this could be problematic for Western lithium producers who want to use Chinese technologies for lithium production, as lithium is one of the core materials for battery cathodes.”

China has a dominant position in the global industry for materials such as gallium, a soft metal widely used to make compounds that enable radio frequency chips for cell phones and satellite communications. Lithium, which is widely used in everyday life as it is used to make batteries for everything from smartphones to electric vehicles, also plays a central role.

Impact on the lithium industry

Adam Webb, head of battery raw materials at consultancy Benchmark Mineral Intelligence, told Reuters that China's proposal would help maintain "70% control" over global lithium processing. "These proposed measures would represent a step towards securing this high market share and ensuring lithium chemical production for China's domestic battery supply chains," he was quoted as saying.

While an iPhone only requires a small amount of lithium, an average EV battery requires about eight kilograms of this material. For this reason, new restrictions on lithium extraction technology could become particularly relevant as global demand for electric vehicles grows. The International Energy Agency predicted, that the world will only meet 50% of lithium demand by 2035.

Growth in demand for lithium-ion batteries

Global demand for lithium-ion batteries is expected to rise sharply over the next 10 years. McKinsey reported 2023 that the demand for gigawatt hours will increase from around 700 in 2022 to around 4,700 by 2030.

Lee noted that Chinese policymakers need to consider the global ambitions of Chinese electric vehicle and battery brands when deciding on possible restrictions, as this could lead to retaliation from the West. Electric vehicle giant BYD makes its own batteries and is aggressively expanding abroad, while CATL, the world's largest battery maker, controls 40% of the EV battery market.

Expansion of export controls to US companies

Separately, the Commerce Department on Thursday placed 28 U.S. companies and entities, including major defense contractors such as Lockheed Martin and Raytheon Missiles & Defense, on its export control list for the first time.

This export control list, which regulates the sale of dual-use technologies and is based on the US Department of Commerce's Entity List, was introduced in November.

CNN's Fred He contributed reporting.