March 26, 2026: New analysis has laid bare the economic might of China’s grip on the world’s battery sector — with EV plants facing $17 billion in losses for every month of a potential halt in cell exports.
EV plants in the EU would account for over half of those losses for each month of an interruption in supply chain exports from China, according to estimates published by the International Energy Agency on March 26.
Nearly all BESS systems and over 70% of EV batteries used outside China could not be produced without Chinese-made batteries or components, the IEA’s ‘Energy Technology Perspectives 2026’ report said.
Ownership of battery manufacturing capacity outside China is only around 5% at present but is expected to rise to one quarter by 2030. However, China already wields substantial influence, with export controls on key battery components introduced since late 2023 targeting the most vulnerable links in the battery supply chain.
If the most recent export restrictions announced by China in October 2025 — and later paused for one year following a trade deal with the US — were to be enforced, battery production outside of China could face serious disruption.
Dependencies in the supply chain extend to IT systems, increased digitalization brings exposure to new, evolving cybersecurity risks that can affect energy technologies’ control systems, and with them entire distribution grids.
In response to growing unease over China’s surplus industrial capacity and surging export volumes, the US, EU and Canada have launched counter initiatives, including import duties targeting China.
In the US, the IEA estimates that average delivered costs increased by around 100% for solar PV modules during 2023-2025 and by around 8% for battery cells during in 2024-2025.
Production costs in China can be less than half those in advanced economies, such as the EU, the report said. On batteries, China’s edge is bolstered by manufacturing efficiency, thanks to integrated supply chains, advanced manufacturing processes and production scale — supported by access to cheap components.
Today, between 60% and 100% of each step of the battery manufacturing supply chain sits in China, the IEA said.
This outsized role is the result of years of sustained investment, public support, technology innovation, integration along the supply chain and the development of world-class expertise.
“Japan and Korea have also built strong battery industries with global reach, though they are less integrated than China’s when it comes to battery component manufacturing and mineral processing. By contrast, producers operating in Europe and North America face higher costs and often struggle to match the prices or quality of Chinese products.”
Chinese, Korean and Japanese companies dominate global lithium ion battery cell production, accounting for 99% of output, the IEA said.
In 2024, roughly 80% of all batteries were produced in China, while the EU and US together contributed around 15%, ironically, mostly from factories built by Korean and Japanese firms. Chinese producers are also extending their reach abroad through local manufacturing investments or technology licensing agreements.
Lack of investment in the midstream battery supply chain poses a growing risk to global supply security. Nevertheless, the size of the overall lithium-ion battery market — about $130 billion in 2024 — does create opportunities for newcomers to scale up by first targeting niche segments, such as premium applications where performance outweighs cost. “Still, competition will be fierce,” the report warned.
In terms of recycling, the IEA said lithium recycling from batteries has jumped from 4% in 2015 to around 20% today. “Even so, recycling rates for battery minerals remain well below those for metals produced at higher volumes: between 40% and 80% globally for key metals like steel, aluminium and copper.”
By 2035, recycled lithium and nickel are still only expected to meet around 5% of demand, “as usage far outpaces available end-of-life feedstock”. Innovation and shifting technology choices can also limit recycling potential for certain critical minerals, the report said.
The report comes just a few weeks after the European Court of Auditors released damning criticism of EU efforts to diversify supplies of metals and minerals critical to battery manufacturing.
The court said most EU recycling targets “neither incentivize the recycling of individual materials nor encourage the uptake of recycled materials”. There are also blind spots in the trade data used for EU critical and strategic materials lists.
European Commission president Ursula von der Leyen admitted last October that Europe’s economy was being squeezed by China and the US amid their tit-for-tat battle over battery material supplies and trade tariffs.
