China has pledged to peak its CO₂ emissions by 2030 and achieve carbon neutrality by 2060. To meet these goals, China needs to accelerate the electrification of passenger vehicles. However, the rapid development of electric vehicles may impact the supply of critical raw materials, which may hinder the low-carbon transition. Therefore, the impact of vehicle electrification on CO₂ emissions and the corresponding bottlenecks in the supply of critical raw materials should be systematically considered. In this study, we developed the China Automotive Fleet CO₂ Model (CAFCM) to simulate a mixed-technology passenger vehicle fleet evolution. We further assessed the impact of energy and CO₂ emissions and evaluated the demand for critical battery materials. We designed three scenarios with different powertrain type penetration rates to depict the potential uncertainty. The results showed that (1) the CO₂ emissions of passenger vehicles in both the operation stage and the fuel cycle can peak before 2030; (2) achieving the dual carbon goals will lead to a rapid increase in the demand for critical raw materials for batteries and lead to potential supply risks, especially for cobalt, with the cumulative demand for cobalt for new energy passenger vehicles in China being 5.7 to 7.3 times larger than China’s total cobalt reserves; and (3) the potential amount of critical material recycled from retired power batteries will rapidly increase but will not be able to substantially alleviate the demand for critical materials before 2035. China’s new energy vehicle promotion policies and key resource supply risks must be systematically coordinated under the dual carbon goals.