Electric vehicle (EV) battery manufacturing is increasingly shaped by global trade policy, supply chain concentration, and rising geopolitical risk. For much of the past decade, China has played a central role in lowering the cost of lithium ion batteries and materials through export incentives that reshaped global pricing, sourcing strategies, and manufacturing decisions across the industry.
Michael Nagus, CEO of LiNova, a US-based battery materials company.
One of those mechanisms is the export value added tax rebate. VAT, or value added tax, is a consumption tax applied at each stage of production. In China, exporters of battery cells and materials have been able to reclaim some or all of that tax, effectively reducing export prices and strengthening the competitiveness of Chinese products in global markets.
Recent plans to roll back or eliminate these rebates have renewed attention on how policy shifts could alter battery economics and influence material selection, cost modeling, and localization efforts in the US and Europe.
In this Q&A, Michael Nagus, CEO of LiNova, offers a manufacturing focused perspective on how changing export conditions are influencing battery supply chains, chemistry selection, and adoption timelines. He discusses where EV battery production remains most dependent on China, which chemistries are most exposed to disruption, and how alternative cathode technologies such as polymer systems may fit into a diversifying materials landscape.
Nagus also addresses the technical, validation, and scale challenges new chemistries must overcome, as well as how higher voltage and power requirements of modern EV platforms are reshaping cathode and cell design decisions.
Here’s what he had to say.
China recently announced plans to roll back export VAT rebates on lithium-ion batteries and materials. Can you explain what these rebates are and why their removal matters for US battery manufacturing?
An export VAT rebate allows exporters to reclaim some or all of the value-added tax paid during production. For years, China has used these rebates to lower the cost of exporting battery cells and materials, making Chinese products competitive in global markets even if their underlying production costs are higher.
Removing or reducing these rebates will raise the true landed cost of imported batteries and materials. Without those subsidies, domestic producers, including the US, are better able to compete on a more level playing field. It creates space for manufacturers to gain market share, invest with greater confidence, and build more resilient domestic supply chains. It doesn’t eliminate competition, but it makes competition more reflective of real costs.
From a technical and supply-chain perspective, which parts of an EV’s battery manufacturing process remain most dependent on China-based materials or processing?
The most China-dependent portions of EV battery manufacturing fall within upstream (mining/refining) and midstream (component manufacturing) production.
China currently dominates the processing of cathode active materials, including lithium iron phosphate (LFP) and many nickel-based chemistries, as well as the refining and conversion of graphite and cobalt into battery-grade inputs. The processing of electrolyte salts and additives also remains heavily concentrated in China.
EV battery pack integrated into the vehicle platform, reflecting the downstream impact of battery materials and chemistry decisions.
While the US and Europe have made progress in localizing cell and pack assembly, many of the materials feeding those factories still rely on Chinese processing infrastructure, creating exposure to price volatility, trade policy shifts, and geopolitical risk.
Which battery chemistries are most exposed to disruptions or cost shifts tied to China’s materials ecosystem, and which chemistries are structurally less dependent?
LFP is among the most exposed, with China controlling more than 99% of global cathode production. As a result, the US can currently meet only a small fraction of its LFP demand domestically and often at a significant cost premium. Nickel-based chemistries such as NMC and NCA are also vulnerable due to dependence on refined metals processed largely in China.
By contrast, chemistries that reduce reliance on mined and refined metals or that use more widely available industrial precursors are structurally less dependent on any single country’s supply chain and therefore less exposed to disruption.
How could shifting export conditions affect interest in alternative battery chemistries like polymer cathodes?
Changes in export conditions may accelerate interest in alternative battery chemistries by altering the economics of incumbent technologies. When imported batteries or materials become more expensive or less predictable, manufacturers and OEMs are incentivized to evaluate alternatives that offer supply stability or long-term cost resilience.
Many emerging chemistries face higher costs at early scale, which can slow adoption under normal market conditions. However, when policy shifts compress the price advantage of established technologies, those alternatives, such as polymer cathode chemistry, become viable more quickly. This dynamic creates an opening for chemistries that may already offer advantages in safety, manufacturability, or sustainability but were previously constrained by cost alone.
Polymer cathode chemistry fits into this broader trend as one example of a technology designed to reduce dependency on constrained mineral supply chains.
How do polymer cathode systems differ from conventional Li-ion chemistries in energy density, cell assembly, cycle life, and thermal behavior?
Energy density and cycle life can be competitive with conventional chemistries depending on cell design, while thermal behavior is a key differentiator. Because polymer cathodes do not rely on oxygen-releasing metal oxides, they offer significantly improved thermal stability and a reduced risk of thermal runaway.
Polymer-based cathode active material used in advanced battery chemistries.
Additionally, avoiding mined and refined metals can lower supply risk and embedded carbon emissions. Also, polymer cathodes can be paired with multiple anodes and ions, making them a flexible platform as other parts of the battery continue to evolve.
What technical barriers continue to limit the adoption of alternative cathode chemistries in EVs, even as supply-chain diversification becomes a priority?
Despite growing interest in diversification, broader adoption of alternative cathode chemistries remains constrained by scaling and validation challenges. Automotive battery manufacturing demands extremely high consistency at large volumes, and new chemistries must prove they can deliver that reliably.
Production can also require new manufacturing equipment, which can involve substantial capital investment and can lead to slow adoption. Drop-in solutions that work on existing lines and infrastructure face fewer barriers.
In addition, OEM qualification timelines are long, often spanning multiple vehicle programs, and early-stage production tends to carry higher costs until economies of scale are achieved. As a result, technical readiness alone is not enough; manufacturability and repeatability at scale are equally critical.
As EV platforms move toward higher voltages and power levels, how does that shift influence cathode material selection and overall cell design tradeoffs?
As EV platforms move toward higher voltages and power levels, cathode material selection becomes more complex. Higher operating voltages place increased demands on electrochemical stability, interface durability, and thermal safety. Engineers must balance energy density, fast-charging performance, and power output. This pushes designers to favor materials that offer greater inherent stability and safety.
What are the technical and validation challenges alternative cathode chemistries must clear before they can be deployed at EV production-scale?
Before alternative cathode chemistries can be deployed at EV production-scale, they must clear several key technical and validation hurdles. Safety testing under abuse conditions is essential, as is demonstrating long-term durability across thousands of cycles and calendar life.
Integration with existing battery management systems, pack architectures, and thermal management strategies must also be proven. Real-world pilot programs play a critical role in validating lab results under actual operating conditions.
Examples of these tests include the nail penetration test, which determines how a battery responds to extreme, sudden mechanical damage, specifically, if it catches fire, explodes, or enters thermal runaway, and a golf cart pilot that determines how it performs in real life.
Ultimately, widespread adoption depends on building confidence through data, third-party testing, and repeatable performance, which is the final step in moving any new battery chemistry from promise to production and mass deployment.
Filed Under: Batteries, Featured Contributions, Q&As