How China Is Preventing India, US From Building Low-Cost Electric Cars

Just as India and the United States were picking up speed in their race to offer affordable electric vehicles, China quietly threw up a major roadblock. On 15 July, the Chinese government changed its technology export rules.

At first glance, it seemed like a small update. But hidden within the revised catalogue were fresh restrictions on eight specific technologies; three of them directly tied to lithium-ion battery materials and five linked to lithium processing. This one move could have a lasting effect on the global EV market, especially for countries that rely on China to make their electric dreams come true.

For India and the US, the timing couldn’t have been worse. Both nations were banking on making budget electric cars more accessible in the next few years. But China’s decision has suddenly made that road steeper, with more bumps and delays ahead.

China’s Battery Secrets Just Became Locked Vaults

LFP, or lithium iron phosphate, batteries are the heart of most low-cost EVs today. They aren’t as powerful as nickel-rich ones, but they are safer, last longer and are far cheaper to produce which is exactly what’s needed in mass-market electric cars. Chinese companies like CATL and BYD have spent years perfecting LFP chemistry, using tiny tricks like layering materials in specific ways or adding special agents during the coating process. These aren’t just scientific curiosities. They directly determine how far an EV can travel, how long the battery will last, and whether the car can be sold at ₹10 lakh or less.

Indian startups had hoped to bridge this gap by importing Chinese production equipment and hiring consultants. In the US, companies were planning to partner with Chinese firms to licence their technology and build it locally.

These new rules now force every such plan to go through a government approval process in Beijing. That adds not only red tape but also the possibility of denial or long delays. A project that was expected to begin production in 2026 might now not see the light of day before 2028.

A Ripple Effect Across the Entire Supply Chain

While batteries are just one part of an electric car’s cost, they affect nearly every stage of production. India, for instance, does not refine its own battery-grade iron phosphate. That chemical is mostly sourced from provinces like Yunnan and Sichuan in China.

But now, China’s export licences don’t just cover the finished powder. They also block the knowledge needed to make it. So even if an Indian company wanted to set up a factory to make it domestically, it would struggle without access to the underlying process.

In the US, there’s heavy investment going into extracting lithium directly from underground saltwater brines, a method known as DLE. Two of the world’s best suppliers of key components for this process are Chinese.

One has already told clients it will stop exports until it gets clarity on the new rules. Without those filters, American firms will either have to delay production or buy expensive replacements from Europe, which may not even work as well.

Even the machines used to make battery cells, like the robots that stack layers of material or coat electrodes, mostly come from Chinese suppliers. These too are now under the export control umbrella. For India, that means higher costs to build battery plants. For the US, it means re-testing new machines from Japan or Germany, which could set production back by months.

India’s PLI Dreams Hit Pause

In India, the government’s big push to make EV batteries locally is tied to a ₹18,000 crore incentive scheme. Companies signed up for this thinking they could plug into Chinese know-how and scale up quickly. That assumption has just been shattered. Without access to Chinese help, Indian firms may struggle with three key problems.

First, project timelines may slip, delaying not just battery plants but the cars they’re meant to power. Second, switching to other suppliers or building everything from scratch will push costs up, making it harder to offer affordable EVs. And third, there’s a skills gap. China produces many PhDs in battery chemistry each year. India has very few such programmes. Even if money is available, trained people are not, at least not yet.

Across the ocean, the US faces its own challenge. While the Inflation Reduction Act offers generous tax credits for American-made EVs, it also penalises vehicles with Chinese parts. Many automakers were trying to work around this by licensing LFP tech from China but building the batteries locally. Now, that strategy is in limbo, just as they face tough questions in Congress about local job creation and supply chain independence.

China’s Real Goal: Keep the Profits and Power Close

China says these new rules are about balancing economic growth with national security. But there’s a deeper motive. In the past, Chinese solar-panel makers lost their edge when they set up plants abroad and others copied their techniques.

This time, China wants to make sure that doesn’t happen again. By keeping control of the most important battery technologies, China ensures that high-paying manufacturing jobs stay at home, and that other countries remain dependent on it for a key part of the EV puzzle.

Can India and the US Catch Up in Time?

It won’t be easy, but there are steps both countries can take.

First, they can put more money into local research, especially into battery types that don’t rely on Chinese materials. Sodium-ion batteries, for instance, are being explored as a cheaper alternative.

Second, India and the US can team up with allies like South Korea and Japan, who still lead in nickel-rich batteries, though these are costlier and more complex to make.

Third, both countries can invest in mining operations in Australia, Chile or Argentina to secure raw materials. And finally, there needs to be a serious push to train scientists and engineers in battery technology, starting today.

What’s Really at Stake

Making an electric car is not just about motors and wires. It’s about understanding [and controlling] the chemistry inside a battery. China’s latest move shows it understands this better than anyone.

Unless India and the US respond with the same level of focus and urgency, the dream of affordable EVs for the masses could slip further out of reach. And the race to lead the electric future may be won, not on factory floors, but in the fine print of a policy from Beijing.