IEA: Global battery industry has entered new phase

The battery industry is entering a new phase of development, the IEA has said, with the global market expanding and technology gradually standardizing. This will likely result in further consolidation across a sector which is being reshaped by government-led efforts to geographically diversify battery supply chains, according to the world energy body.

The global battery market is growing rapidly as demand increases and prices continue to fall. By 2024, with electric car sales having risen 25% to 17 million, annual battery demand is expected to have surpasse 1 TWh – a historic milestone. The average price of a battery for a pure electric car fell below $100/kWh last year, considered a key threshold for price competition with conventional cars. 

Cheaper minerals have also been a major factor in falling battery costs, with lithium prices down more than 85% from their 2022 peak. Battery technology advancement is also supporting the downward price trend.

Global battery manufacturing capacity reached 3 TWh in 2024 and would triple through 2029 if all the production facilities which have been announced actually take shape.

Dominance

China produces more than three-quarters of the world’s batteries and product prices will have fallen almost 30% by 2024, according to the IEA, faster than anywhere else in the world. Chinese batteries cost 30% less than European ones as a result, and 20% less than North American products, and many Chinese electric vehicles (EVs) are cheaper than internal combustion engine alternatives.

China’s highly integrated supply chain, below-market prices for critical minerals, and the rise of manufacturing giants such as CATL and BYD has seen the nation make more than 70% of all the world’s EV batteries to date.

A shifting focus to cheaper-to-make LFP batteries, in China, has also helped drive cost savings. LFP devices power almost half the world’s new EVs and cost around 30% less than the lithium nickel cobalt manganese (NMC) oxide products which used to dominate.

Intense competition among almost 100 battery companies in China has also nailed down prices. While that situation is likely to lead to fewer competitors in the near future, the IEA expects China to continue to dominate global battery production by some distance.

Elsewhere

South Korea and Japan’s NMC battery makers are already significant players in the industry, albeit chiefly outside their own borders. The almost 400 GWh of annual battery production capacity held by South Korean companies dwarfs the 60 GWh owned by Japanese businesses abroad and 30 GWh of overseas lines held by Chinese entities. With those overseas facilities based in key automotive markets, it will be interesting to note how far Korean and Japanese battery makers will pivot to LFP. Known for innovation, such companies are also attempting to develop new technology such as solid-state batteries.

In the United States, annual battery manufacturing capacity has doubled since 2022, following the implementation of tax credits for manufacturers, reaching more than 200 GWh in 2024. Nearly 700 GWh of additional manufacturing capacity is under construction, according to the IEA.

Around 40% of existing battery making capacity is operated or has been developed by established battery manufacturers in close collaboration with automakers. Battery component production lines have progressed more slowly, however, and most of the demand for anodes and cathodes is still met by imports.

Demand for batteries for stationary applications has increased by more than 60% per year over the past two years, opening up a customer pipeline beyond EVs, albeit smaller in volume. 

Southeast Asia and Morocco are emerging as potential production hubs for batteries and their components, according to the IEA. In Indonesia, which produces half of the world’s nickel, the first EV battery and graphite anode plants were set to begin production in 2024. Morocco has the world’s largest phosphate reserves, a key mineral for LFP batteries, as well as an established auto manufacturing industry and free trade agreements with the European Union and United States. Those factors contributed to more than $15 billion worth of announced investment in battery and component manufacturing in 2022.

New production capacity

Despite rapidly falling product prices and continued innovation, the degree of concentration in battery supply chains has raised security concerns among governments. Announcements such as China’s recently proposed export restrictions on battery cathode and lithium processing technology have further highlighted the issue. 

The IEA believes efforts to expand battery production into new markets, and to reduce the cost gap with China require sufficient, sustained demand for batteries. Sales of EVs – which currently account for 85% of the battery market – are the only driver that can create sufficient volume.

Collaboration with established battery producers, through joint ventures or technology licensing agreements, could reduce the time and investment required to produce batteries outside China and to develop domestic supply chains. 

Another important lever is international collaboration. Many markets may not be large enough to justify big investment in the manufacture of batteries and their components. In such instances, closer collaboration with EV and battery manufacturers, plus cooperation with resource-rich countries such as those in South America and Africa, Australia, and Indonesia, may be required.

From pv magazine Brasil.