You might have noticed that batteries are everywhere these days. They power phones and many other gadgets, but also more and more cars, bikes, scooters and vans. What’s more, they’re playing an increasing role in the electricity sector as a way of storing power to help balance supply and demand. As a result, the battery industry is growing quickly.

In 2024, the global battery market passed important milestones. As electric car sales rose by 25% to 17mn, annual battery demand for EVs and storage surpassed 1 TWh, according to new IEA analysis. That’s 10 times the demand for batteries seen in 2018. At the same time, the average price of a battery pack for a battery electric car dropped below $100 per kWh – commonly thought of as a key threshold for competing on cost with conventional models.

Cheaper battery minerals have been an important driver. Lithium prices, in particular, have dropped by more than 85% from their peak in 2022. However, rapid advancements in the battery industry itself are also supporting price declines. After years of investments, global battery manufacturing capacity nearly tripled between 2021 and 2024 to 3 TWh, putting it at three times the level of demand last year. The next five years could see another tripling of production capacity if all announced projects are built.

These trends point to a battery industry entering a new phase of its development. While markets used to be regionalised and small, they are now global and very large, and a range of technological approaches is giving way to standardisation.

Looking ahead, economies of scale, partnerships along the supply chain, manufacturing efficiency, and the capacity to bring innovations swiftly to market will be crucial to compete. This will likely result in greater consolidation across the sector, which is simultaneously being reshaped by government-driven efforts to geographically diversify battery supply chains.

The pursuit of more affordable electric vehicles is also an important trend for the industry. In recent years, China has been advancing EV batteries using the lithium iron phosphate (LFP) chemistry, which are now about 30% less expensive than their main competitor, lithium nickel cobalt manganese oxide (NMC) batteries. After more than tripling their share within the past five years, LFP batteries cover nearly half the global EV market – and their popularity could continue to increase.

 

This comment first appeared in the International Energy Agency (IEA) Energy Snapshot newsletter.

For more on the latest developments in the global battery market, read our new commentary. We also published a special report on the sector, Batteries and Secure Energy Transitions, in April 2024. Plus, our upcoming Global EV Outlook 2025 will include fresh data and analysis on the EV battery ecosystem in particular.

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