China is tightening its grip on electric vehicle (EV) battery technology exports to stay competitive. The country has added specific battery production technologies, like those for cathode materials and metal processing, to its list of restricted exports. This move strengthens China’s control over the entire EV battery supply chain, from raw material processing to final production. Now, companies need government approval to export these technologies, giving Beijing more oversight over technology transfers.

Technology Transfer Challenges

While these restrictions aren’t outright bans, they increase scrutiny for companies trying to share these technologies with other countries. This strategy could affect automakers and battery makers that want to operate globally using Chinese technologies. With these new restrictions, we can expect increased volatility in the market. Our strategies must adapt quickly—not just to a new policy, but to the use of a strong market position. Recent data shows that Chinese firms like CATL and BYD hold over half of the global EV battery market. This is a real advantage and a critical point of influence. The direct approach here is to focus on volatility. We should consider buying straddles or strangles on major Western automakers, especially Ford and General Motors, which have announced partnerships with Chinese companies for their new battery plants in the U.S. Any news of delayed technology transfers or denied license requests could lead to sharp price changes, and straddles can profit from big moves in either direction. Next, we need to think about the specific risks for certain companies. The new restrictions create bureaucratic hurdles that could slow down competitors whenever needed. For automakers already trailing in the EV race, this is a serious blow, as it could raise costs and push back production schedules. This situation supports the idea of buying long-dated put options on carmakers most affected by these supply chain issues. Companies relying on licensing this technology are particularly vulnerable. Online searches reveal that China currently refines about 60% of the world’s lithium and 80% of its cobalt, so this added control over production technology tightens China’s hold even more.

Commodity Market Implications

Lastly, we should consider the raw materials involved. This situation is reminiscent of the sharp lithium price spikes in 2021 and 2022 when supply chain fears hit the market. History shows that even the hint of scarcity can cause commodity prices to rise. We can position ourselves in call options on lithium and rare earth mineral ETFs. Any slowdown in the export of battery manufacturing technology will likely be seen as a risk to the entire global battery supply. This could drive up the prices of essential raw materials needed for battery production, regardless of where they are ultimately assembled. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now