The global battery market is undergoing rapid development driven by soaring demand and declining prices. According to the latest report from the International Energy Agency (IEA), 2024 marks a turning point for the battery industry, as demand has surpassed 1 terawatt-hour (TWh) for the first time. At the same time, the average price of batteries for electric vehicles has fallen below $100 per kilowatt-hour, reaching the threshold of cost parity with conventional cars.
China at the Forefront of Global Production
China currently dominates the global battery market, accounting for more than three-quarters of total production. In 2024, average battery prices in China dropped by 30 percent, making them over 30 percent cheaper than in Europe and 20 percent cheaper than in North America. This price decline in recent years has resulted in many electric vehicles in China becoming more affordable than their conventional counterparts.
China’s large-scale production provides a significant competitive advantage, with the country having manufactured more than 70 percent of all electric vehicle batteries ever produced. Its focus has been on cost-effective lithium iron phosphate (LFP) batteries, which now make up half of the global market. Additionally, China boasts a vast number of manufacturers—over 100—which has led to reduced profit margins, highly competitive pricing, a well-developed supply chain ecosystem, and a specialized workforce.
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Challenges for Europe and the U.S.
Unlike China, European battery manufacturers face a series of challenges. Production costs are, on average, 50 percent higher than in China, and many manufacturers are postponing or canceling expansion plans due to uncertain profitability. The bankruptcy of Sweden’s Northvolt—the largest European investment in domestic battery production—highlights the difficulties in competing with Asian manufacturers. However, some South Korean companies have begun investing in LFP battery production in Europe in an effort to narrow the price gap.
In the United States, battery production capacity has doubled since 2022, supported by tax incentives. However, domestic production of battery components remains insufficient. The majority of anodes and cathodes are still imported, limiting the self-sufficiency of the American industry.
While China continues to dominate, Japan and South Korea remain key players with significant investments abroad. Meanwhile, Southeast Asia and Morocco are emerging as new production hubs. Chinese investments in Indonesia have already led to the launch of battery and graphite anode production, while Morocco—home to the world’s largest phosphate reserves—is attracting substantial investments in LFP battery component manufacturing.
Despite China’s current dominance, battery production is expanding rapidly worldwide. South Korean and Japanese manufacturers are expected to continue investing in new technologies, while European and American companies will focus on reducing costs and developing their own production capacities.
Energy Portal
