The Battery Gap: Building Industrial Strength for a Military Edge

As Allied defence budgets expand and militaries push for greater warfighting capability, attention has rightly focused on platforms, munitions and personnel. Far less attention has been paid to the batteries that support them.

For most militaries, batteries have long been treated as an afterthought rather than a strategic concern. As next-generation military systems with new battery requirements emerge, and battery technology continues to advance, that reasoning is becoming harder to sustain. Increasingly, batteries are beginning to shape not only the industrial resilience behind military capability, but military capability itself.

Their ubiquity makes the gap more striking. Lithium-ion batteries are used across all military domains and can be found in everything from portable radios to advanced platforms such as F-35 fighter jets.

The numbers speak volumes: lithium-ion battery costs have fallen by over 90% since 2010, while battery cell-level energy density – the amount of energy a battery cell can store – has more than doubled.

Further improvements in battery performance will not only enhance existing military capabilities by replacing legacy chemistries such as lead-acid batteries but also enable the deployment of entirely new systems. These include hybrid tactical vehicles, distributed sensor networks and uncrewed systems (UxS) deployed at scale.

China and the Forecast for Batteries in Defence

Military demand for batteries is expected to grow. According to a MITRE Corporation study, under an aggressive electrification scenario, the US’ military demand for lithium-ion batteries alone could increase to 1 GWh per year by 2053. For context, this would barely register in a global lithium-ion battery market now measured in terawatt-hours – more than 1,000 times larger – but it would represent a substantial increase from a defence market perspective.

Military batteries often occupy a specialised segment of the battery market. They generally face different performance requirements than civilian ones. Some need specialised form factors (shapes, sizes and configurations). Yet despite these differences, there is significant overlap between civilian and military battery ecosystems. In many cases, suppliers rooted in consumer markets also produce for defence, drawing on similar materials, components, manufacturing processes and skills.

That overlap matters because the wider battery ecosystem is centred on a limited number of suppliers and geographies. At present, Allies remain heavily dependent on imported batteries, components and the raw materials that go into them. China currently accounts for approximately 80% of global lithium-ion battery cell production capacity. Its dominance is even more pronounced in the upstream and midstream segments. It supplies an estimated 85% of cathode active materials and over 90% of anode active materials – the components that go into a battery cell. China also supplies the lion’s share of the global refining capacity for key battery metals such as graphite, manganese and cobalt.

China’s dominance emerged through almost two decades of sustained government support, investment, and the expansion of its electric vehicle (EV) sector, helping to secure offtake for domestic battery producers.

Going forward, China appears well positioned to retain a leading role in the global battery industry. It holds the pole position in battery-related patenting and is home to major industrial players such as CATL and BYD. CATL alone employs an R&D workforce of nearly 23,000 and in 2025 invested an estimated $3.2 billion in R&D, which exceeds its nearest competitors combined.

This degree of concentration can create significant supply chain and geopolitical risks.

Supply Chain Disruption

Recent shocks – from the Covid-19 pandemic to geopolitical crises and logistical disruptions such as the blockage of the Suez Canal by a single cargo ship – have shown how quickly supply chains can be upended. Lithium-ion batteries are particularly exposed because their end products depend on value chains spanning critical raw materials, chemical processing and advanced manufacturing.

Supply chain dominance can also be used to gain geopolitical leverage. A recent EU Institute for Security Studies report concludes that throughout 2025, China used export controls to extract strategic information, apply economic pressure, and deter actions contrary to its interests.

Equally concerning is the risk that China's dominance in battery technologies could translate into advantages for some military systems reliant on onboard power storage, particularly UxS. Chinese firms are already advancing technologies relevant to this space: CATL is developing high energy-density condensed-state batteries and has tested them in electric aircraft, while CALB is known for working with electric vertical take-off and landing aircraft (eVTOL) developers.

One question is whether China would weaponise its market share in a crisis, for example over Taiwan. The other is whether battery supply chains have themselves become strategic risks. Russia’s weaponisation of energy in its war against Ukraine offers a clear lesson about the danger of allowing critical dependencies to accumulate unchecked – and the difficulty of reducing them once a crisis begins.

Heavy dependence on Chinese battery supply chains is risky not only because alternatives are limited, but because they cannot be created quickly. Battery ecosystems take years, if not decades, to build. Success depends not simply on battery factories, but on industrial capabilities spanning mineral processing, component manufacturing, infrastructure, skills and demand.

However, there are significant constraints to production reshoring.

Building Battery Resilience

First, there is the cost challenge. Battery production costs in Europe and the US remain up to 50% higher than in China, tax credits or other support measures excluded. Much of China’s advantage stems from deeper supply chain integration, economies of scale, lower energy and labour costs, and fierce domestic competition among the nearly 100 battery producers. Together, these have raised manufacturing efficiency and pushed down costs.

Second, manufacturing expertise is difficult to replicate. Getting the battery chemistry right and producing small batches of cells is one thing; producing them reliably at scale is another. Part of the advantage enjoyed by Chinese battery makers comes from years of iteration and optimisation, which have raised production yields and reduced defects. New entrants typically operate at yields of 70-85% for several years, while leading producers achieve yields well above 90%. In an industry with wafer-thin margins, a few percentage points can make or break a company.

Third, the financing requirements are enormous. Battery manufacturing is increasingly defined by gigafactories, heavy capital expenditure, high operating costs and long payback periods. New entrants must be prepared to burn cash for extended periods of time. Even government support and backing from established industrial players did not prevent companies such as Northvolt and, more recently, Morrow from filing for bankruptcy.

Fourth, military demand alone would struggle to move the battery market. Armed forces will need more batteries, but defence procurement can offer industry only early orders and offtake certainty, not the civilian-market scale needed for mass production. Consumer electronics helped create the first lithium-ion supply chains, but EVs turned that ecosystem into the mass-manufacturing industry it is today. A single production line in an EV battery factory can have an output of 8 GWh a year – dwarfing total military battery demand.

If complete supply chain independence is unrealistic, the focus shifts to reducing dependency and creating greater flexibility. At least three pathways present themselves. None is without drawbacks, and each involves a different set of trade-offs.

Pathway 1: build national champions. This offers the clearest route to strategic autonomy and greater control over industrial capabilities, know-how and future battery supply. But it would also be the slowest, costliest and most uncertain path. In an industry as competitive as batteries, even billions in subsidies or tax incentives cannot guarantee long-term success. And even where they do help create viable manufacturers, autonomy would remain partial for as long as upstream inputs are dominated by China.

Pathway 2: diversify through partnerships and foreign direct investments. Outside China, South Korea and Japan remain among the world’s leading battery producers and are home to companies such as LG Energy Solution, Samsung SDI and Panasonic Energy. Partnerships with such firms could provide access to advanced technologies and manufacturing expertise. But they would not remove the underlying risk: South Korean and Japanese producers are themselves reliant on Chinese upstream inputs.

Pathway 3: pursue joint ventures and shared ecosystems. This would combine elements of the first two options through partnerships with established industry players. It could improve access to industrial know-how, reduce financing requirements and, if successful, support diversification across large parts of the battery value chain. Multilateral cooperation on this scale is notoriously difficult, but examples from aerospace, most notably Airbus, show that it can be done.

Realistically, any diversification strategy would be messier than this. The bottom line is that governments need to act: left alone, the market is unlikely to fix the status quo.

The objective, however, should not be complete lithium-ion battery supply chain autonomy. That is neither realistic nor necessary. The goal should be strategic flexibility: access to several reliable suppliers and the ability to produce batteries even in periods of geopolitical turmoil and market stress.

What role, then, can defence play? Its ability to move markets is limited, but it can still contribute in meaningful ways.

Defence as an Active Customer

First, NATO can help by aggregating demand and sending a clearer signal to industry. From a supplier's perspective, it is difficult to justify large-scale investment in a market segment perceived as small, fragmented and uncertain. However, aggregating procurement across Allies could improve demand visibility and reduce investment risk. NATO has already taken early steps to do this through its High Visibility Projects, which facilitate multinational cooperation between Allies.

Second, defence can move beyond being a passive consumer of batteries and become a more active industrial partner. Defence primes could work more closely with battery innovators through joint development efforts and longer-term partnerships, improving their bankability and reducing uncertainty. This would help ensure defence requirements are considered earlier in the development cycle, making battery technologies developed for civilian markets easier to adapt and deploy across dual-use settings.

Third, defence primes and defence investors could consider investing directly in battery developers. Batteries occupy an awkward place in the investment landscape: capital requirements are high, timelines are long and venture capital is often reluctant to finance industrial scale-up, particularly when other areas, such as artificial intelligence, offer better returns. Public funding should therefore focus on de-risking the early stages and crowding in private capital through grants, guarantees and enabling infrastructure. This support should prioritise new chemistries and battery architectures where Allied firms have a better chance of building an edge, rather than competing on cost alone. Private capital can then support industrial scale-up as projects mature.

More broadly, these and other steps align with NATO Secretary General Mark Rutte’s call to re-energise the transatlantic defence industrial base. Batteries illustrate the underlying point: modern military capability depends not only on final outputs such as UxS, but also on the industrial inputs that make them possible.

The battery challenge is therefore less about achieving complete supply chain independence and more about managing strategic dependence. The goal is not to replicate what China assembled over decades of sustained investment. However, relying on a highly concentrated supply chain without developing alternatives creates vulnerabilities that become increasingly dangerous in times of crisis or conflict. That matters more as batteries begin to play a larger role in enabling new generations of military platforms.

Waiting for the market to correct course is unlikely to bear fruit. The objective should not be autonomy at all costs, but strategic flexibility: ensuring that Allies retain access to reliable suppliers across the whole supply chain, preserve some domestic capability to scale production as technologies evolve, and maintain the capability to push the technology frontier. Ultimately, preserving credible deterrence and defence will depend not only on platforms, munitions and personnel, but on whether the industrial bases across the Alliance can keep pace.

© Lukas Trakimavičius, 2026, published by RUSI with permission of the author.

The views expressed in this article are the author’s own, are contributed in a purely personal capacity, and may not represent those of NATO.

The views expressed in this Commentary are the author's, and do not represent those of RUSI or any other institution.

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