Bayberry Research

Executive Summary

In October 2023, China implemented export controls on specific types of graphite, citing national security concerns. As the world’s dominant supplier, accounting for over 70% of global graphite processing, China’s move sent ripples through the electric vehicle (EV) industry, particularly in the U.S., where graphite is a critical material for battery anodes.

Implications for the U.S.

The United States heavily depends on Chinese graphite for EV battery production. With this new restriction, U.S. automakers and battery manufacturers face potential supply shortages, increased costs, and intensified urgency to diversify their supply chains.

U.S. Response: Short-Term Relief, Long-Term Strategy

To cushion the blow, the U.S. Treasury has granted a two-year grace period under the Inflation Reduction Act, allowing companies to continue sourcing critical materials like graphite from China until the end of 2026. This policy offers temporary relief to EV makers and battery firms while encouraging them to ramp up local sourcing and processing capacity.In parallel, the U.S. Department of Energy has allocated over $3 billion to fund 25 projects across 14 states, aiming to boost domestic battery manufacturing and secure critical mineral supply chains.

Geopolitical and Market Shifts

China’s policy is seen as a strategic response to rising Western restrictions on Chinese tech exports. The move is expected to push countries like the U.S., Japan, and South Korea to deepen collaboration on mineral sourcing and to build early warning systems for supply chain disruptions.However, finding alternatives to China will take time. Developing new mines and processing facilities in places like Canada or Africa requires significant investment, permitting, and environmental review—making this a multi-year challenge.

Bottom Line

China’s graphite export controls are a wake-up call for the U.S. EV industry. In the short term, flexibility in regulation will help ease the shock. But in the long run, building a more resilient and diversified graphite supply chain will be essential for securing the future of American EV production.