The US electric vehicle (EV) market is facing new and immediate challenges as the tides of political policy and international trade turn. Recent moves by the Trump administration threaten to pull the rug out from under EV manufacturers and consumers. To achieve ambitious EV adoption targets, the Biden administration is advocating for ambitious, sometimes even audacious, targets. Today, the reality is incredibly dangerous due to the new geopolitical reality and our dependence on international supply chains.
We understand the Trump administration is making drastic changes to policy. Changes recently proposed to federal incentives available to EV buyers would significantly shift consumer demand in different directions. Meanwhile, the Biden administration has set a goal that by 2030, 50% of all new vehicles sold in the United States will be battery electric vehicles (BEVs). The collision of these competing agendas has resulted in significant confusion in the market.
Domestic Battery Production on the Rise
At the same time, the US is increasing its own domestic battery production capacity. This increase reflects both the surging demand for EVs and the new imperative for energy independence. The country is second in the world with a striking 91 lithium-ion EV battery plants. These plants are scheduled to come online between 2025 and 2032. This surge includes a mix of public and private projects, such as the Department of Energy’s Blue Oval EV Battery Plant Development Program valued at $9.2 billion and General Motors’ EV Transition Program, which has a project value of $7.2 billion.
The Department of Energy (DoE) recently announced over $3 billion in funding. This investment will go towards 25 different projects in 14 different states, all with the goal of increasing the production of advanced batteries and battery materials. These initiatives are critical to establishing a robust domestic supply chain. They’ll bring the lofty targets laid out by the Biden administration within reach.
Despite these advancements, challenges remain. China is still home to the overall global lithium-ion battery market, controlling between 75% and 85% of production capacity. Furthermore, with 277 upcoming lithium-ion battery plants set to be completed in China by 2032—more than triple the total planned in the US—the competition remains fierce. This troubling disparity adds to fears about the US’s ability to win its share in what has become a much more competitive global economic landscape.
Trade Dependencies and Risks
Further, the US electric vehicle market is extremely susceptible to international trade dynamics, especially in relation to China. Today, China dominates about 60% of global rare earth element (REE) mining and 90% of its processing. This reliance constitutes a major vulnerability for the US, particularly given rising trade tensions.
Tariffs have been a centerpiece in this trade war. In 2024, the Biden administration slapped a strict 100% tariff on Chinese-made EVs. They slapped a 25% tariff on lithium-ion EV batteries. As you may know, Trump just raised a record-breaking 145% tariff on Chinese imported goods. This includes important EV materials such as lithium-ion batteries. These sorts of tariffs would raise the cost of production for US manufacturers and in the end raise prices for American households.
With tariffs on the rise, companies that continue to do business in the US are faced with an increasingly complicated web of international supply chains. For example, Tesla currently sources 20% to 25% of its components internationally. This extreme dependence on foreign sourcing adds considerable risk to production plans, as disruptions to global supply chains have recently illustrated.
Competition in the Global EV Arena
The competitive landscape within the global electric vehicle market is changing at a breakneck pace. BYD took a huge step, overtaking Tesla in global EV sales in the fourth quarter of 2024. Combined, they shipped an amazing 594,839 units. Tesla only sold a little more than 491,062 cars. This shift highlights the intense rivalry between producers seeking to seize a bigger slice of the booming market.
As US manufacturers strive to expand their presence in this sector, they must address both domestic production capabilities and international competition. The imminent unfolding of lithium extraction projects at Thacker Pass, Nevada and Piedmont, North Carolina. Together these projects will go a long way toward increasing domestic lithium supplies. Each of these projects is slated to start medium or high-volume production within two years, which could help reduce a portion of that reliance on imports.
With demand for EVs soaring, auto manufacturers need to move fast. They need to transform their business models to meet the needs of changing consumers’ preferences and to operate within broader, changing regulatory frameworks.