The recent report from IDTechEx, “Li-ion Battery Market 2025-2035: Technologies, Players, Applications, Outlooks and Forecasts,” forecasts the Li-ion battery cell market to reach over US$400 billion by 2035. In this article, IDTechEx Research Director Dr Alex Holland examines falling battery costs and how this will affect the Li-ion battery market in the long term.
The cost of raw materials such as lithium, nickel, cobalt, and graphite plays a pivotal role in shaping the overall cost structure of lithium-ion batteries. These materials are core components of a battery cell and production, so their market dynamics directly affect battery pricing trends.
During 2022, lithium saw unprecedented price spikes due to a substantial increase in demand, while nickel and cobalt also faced supply chain pressures, contributing to rising costs. In 2022, the cost of lithium, nickel, and cobalt alone could have contributed up to US$60/kWh to the cost of an NMC 811 battery.
However, prices declined in 2023, with the cost of those same raw materials contributing only around US$20/kWh during 2024.
A Competitive Market
Supply and demand dynamics are critical to battery pricing. For example, LFP-type Li-ion batteries are widely used due to their comparatively low cost compared to NMC-based battery chemistries. However, in 2022, LFP cathode prices increased faster than expected based on underlying lithium and material prices due to a surge in demand, especially in China.
This, in turn, led to a fast rise in LFP cathode production capacity in China and overcapacity through 2023 and 2024. Subsequently, LFP cathode prices have fallen to as low as US$5/kg, squeezing producers’ margins and highlighting the intense competition in LFP production, a trend seen more broadly across the industry.
Of course, low prices benefit consumers, but they also create a challenging environment for companies aiming to grow their market share or enter the industry. New companies trying to scale production will compete against lower price points, and similar challenges can be seen across the supply chain.
This will be particularly true for companies and ventures aiming to establish production bases outside China and Asia, where players can benefit from economies of scale, lower labour costs, and favourable supply chains.
Companies such as Northvolt have struggled to scale production quickly. At the same time, electric vehicle (EV) manufacturers in Europe and North America remain concerned over the influx of low-cost EVs from China, which is partly enabled by low-cost LFP batteries.
Policy and Technology Innovation
Despite the challenges ahead, the medium-long-term outlook for the Li-ion market remains positive, with considerable growth opportunities across the supply chain. There continues to be broad policy support for both EVs and renewable deployment, which rely heavily on Li-ion battery technology.
Policy and regulation, including the US Inflation Reduction Act and European emissions performance standards, will continue to create stable demand for EVs outside China. Increasing deployment of renewable power will continue to drive the adoption of energy and battery storage systems.
Beyond policy support, technological innovation continues to improve battery performance. Advancements in solid-state batteries, silicon anodes, optimized cell designs, and more advanced battery management systems can offer safer, more energy-dense, faster charging, and longer-lasting batteries.
This will help to improve further the value proposition of battery-powered EVs and stationary energy storage systems, even if lowering costs and prices below current LFP prices is a more challenging prospect.
A combination of policy and technological advancement will also help create stable demand, diversify supply chains and material requirements, and lower the costs of higher energy density and performance battery designs.
Conclusion
Material prices and availability increasingly drive battery prices, though supply and demand dynamics remain critical to pricing. While low battery prices benefit consumers, they can also curb new investment and create a challenging environment for new entrants, an issue more keenly felt by the European and North American battery industries.
Nevertheless, the outlook for the global Li-ion battery market remains positive, driven by broad policy support for EVs and renewables and ongoing improvements to battery technology.