Market Sees Declining Lithium Ion Battery Prices, Eyes $400bn Growth

A recent report from IDTechEx projects a significant growth in the lithium-ion battery cell market, estimating it to surpass $400 billion by the year 2035.

The cost dynamics of raw materials like lithium, nickel, cobalt, and graphite are crucial factors influencing the overall cost structure of lithium-ion batteries, as highlighted by Dr. Alex Holland, Research Director at IDTechEx.

These materials serve as fundamental components in battery cell and production, directly impacting battery pricing trends outlined in the report titled "Li-ion Battery Market 2025-2035: Technologies, Players, Applications, Outlooks, and Forecasts."

Continuous technological advancements are enhancing battery performance, with innovations such as solid-state batteries, silicon anodes, optimized cell designs, and advanced battery management systems promising safer, more energy-dense, faster-charging, and longer-lasting batteries, according to Holland.

These developments are expected to strengthen the value proposition of battery-powered electric vehicles (EVs) and stationary energy storage systems, even though achieving cost reductions below current prices poses a significant challenge.

Battery pricing trends are increasingly influenced by material costs and availability, with supply and demand dynamics playing a critical role in determining prices. While lower battery prices benefit consumers, they can pose obstacles for new investments and create a competitive landscape that is particularly challenging for emerging players in the European and North American battery industries.

Challenges in scaling production have been evident for companies like Northvolt in Sweden, while concerns persist among EV manufacturers and governments in Europe and North America regarding the influx of low-cost EVs from China, facilitated by the use of affordable LFP batteries.

In 2022, the lithium market experienced unprecedented price spikes due to surging demand, while nickel and cobalt faced supply chain constraints, leading to cost escalations. However, by 2023, prices began to decline, with the cost of these raw materials contributing significantly less to the overall cost of an NMC 811 battery in 2024.

Supply and demand dynamics play a pivotal role in battery pricing, with LFP-type Li-ion batteries being widely adopted due to their lower costs compared to NMC-based chemistries. However, unexpected increases in LFP cathode prices in 2022, driven by a surge in demand, led to overcapacity issues in subsequent years, resulting in price drops and intensified competition in LFP production.

While low prices benefit consumers, they present challenges for companies aiming to expand market share or enter the industry. New entrants face tough competition against lower price points, especially for those looking to establish production facilities outside of China and Asia.

Despite the obstacles, the medium to long-term outlook for the Li-ion market remains positive, with significant growth opportunities throughout the supply chain. Ongoing policy support for EVs and renewable energy deployment, coupled with regulatory frameworks like the US Inflation Reduction Act and emissions standards in Europe, will sustain demand for EVs and energy storage systems, further driving the adoption of Li-ion battery technology.

For more information, visit www.IDTechEx.com.