The International Energy Agency’s latest assessment underscores a pivotal shift in the global battery industry. Electric vehicle sales surged 25% in 2024 to reach 17 million units, pushing annual battery demand past 1 terawatt-hour for the first time. Simultaneously, the average cost of an EV battery pack dropped below USD 100 per kilowatt-hour—a threshold long seen as critical for parity with internal combustion models.
A steep decline in battery mineral prices has been central to this cost breakthrough. Lithium, a key input, has fallen 85% from its 2022 peak. Coupled with manufacturing advances and scaling effects, these trends have driven costs down across the sector. Global manufacturing capacity reached 3 TWh in 2024, and announced projects could triple that figure within five years. The IEA notes a shift from fragmented, regionalised production toward a globally integrated market, with standardisation replacing diverse technological approaches.
“In 2024, battery prices declined faster in China than anywhere else, dropping nearly 30%—making Chinese batteries at least 30% cheaper than European alternatives and 20% cheaper than those manufactured in North America,” the report states. China now accounts for over three-quarters of global supply, leveraging decades of accumulated manufacturing expertise. Firms such as CATL and BYD benefit from vertical integration, controlling the chain from raw mineral extraction to cell production. This structure accelerates innovation and reduces costs, aided by access to below-market mineral prices.
Advances in lithium-iron phosphate (LFP) chemistry have further strengthened China’s position. Once considered inferior to nickel-based chemistries, LFP has been refined to deliver competitive range at about 30% lower cost than lithium nickel cobalt manganese oxide (NMC) alternatives. Nearly half of the global EV market now uses LFP batteries. Intense domestic competition—nearly 100 manufacturers vying for share—has kept prices low, though margins have thinned to the point where consolidation appears inevitable.
Europe’s situation is markedly different. “Several [European] manufacturers have postponed or cancelled expansion plans, and costs remain stubbornly high—roughly 50% above Chinese levels,” the IEA notes. The collapse of Northvolt highlights the structural challenges. Without swift action to build demand, secure policy commitments, and adopt LFP technology, Europe risks long-term dependence on imports. Korean suppliers, once dominant in Europe, have lost ground to Chinese rivals but are now exploring localised LFP production. Partnerships such as Stellantis’ venture with CATL may offer a path to cost reduction.
Beyond China, Korea and Japan remain influential. Korean firms have established nearly 400 GWh of overseas capacity, far exceeding Japan’s 60 GWh and China’s 30 GWh in international projects. Both countries are weighing greater investment in LFP and emerging chemistries like solid-state batteries. In the United States, capacity has doubled since 2022 to exceed 200 GWh, supported by tax incentives and 700 GWh of projects under construction. Yet cathode and anode production still lags, leaving supply chains incomplete.
New hubs are emerging in Southeast Asia and North Africa. Indonesia, with half the world’s nickel reserves, is ramping up battery and anode manufacturing. Morocco has attracted over USD 15 billion in investment to build an LFP-focused supply chain around its phosphate deposits. These regions aim to become indispensable nodes in the global battery economy.
The drive to diversify supply chains is intensifying as China tightens export controls on critical materials and processing technologies. The IEA stresses that “no country can go it alone.” Building a competitive battery ecosystem requires coordinated industrial strategy, skilled labour, and sustained collaboration with established producers. Automation, digitalisation, and next-generation chemistries may narrow the cost gap, but scaling production to match China’s efficiency will take time. International partnerships with mineral-rich nations and leading manufacturers are set to be a cornerstone of supply chain security.