A recent report by consulting firm Bain & Company indicates that global battery demand is projected to quadruple to 4,100 GWh between 2023 and 2030, driven by continued growth in electric vehicle sales. Consequently, electric vehicle manufacturers must re-evaluate their battery strategies.
The report indicates that in 2023, more than 250,000 electric vehicles were sold globally each week, exceeding the total annual sales of a decade ago. As more people purchase electric vehicles, the demand for batteries from electric vehicle manufacturers continues to grow. It is projected that by 2030, the future growth of the electric vehicle market will drive global battery sales to more than four times the market demand in 2023.
Mahadevan Seetharaman, a partner at Bain & Company’s Advanced Manufacturing Services division in Bangalore, stated, “Batteries are the biggest cost driver for electric vehicle manufacturers and a key factor affecting product performance. However, updates and changes in battery chemistry, especially lithium-ion batteries, are impacting these companies’ product roadmaps. Electric vehicle manufacturers around the world are facing critical choices regarding which type of battery to use and whether to develop them in-house or in partnership with other companies.”
The report identifies five key themes that electric vehicle manufacturers need to focus on for the 2030 electric vehicle battery market:
1. In the foreseeable future, lithium-ion batteries will continue to dominate the global electric vehicle market.
Lithium-ion batteries have consistently dominated the global electric vehicle battery market and will continue to do so. Emerging technologies such as solid-state batteries and high-density sodium-ion batteries are still in the prototype and pilot manufacturing stages, and their global battery market share is expected to remain in the single digits by 2030.
2. NMC and LFP batteries account for over 90% of electric vehicle battery sales.
Studies show that nickel-manganese-cobalt ternary lithium-ion batteries (NMC) and lithium iron phosphate batteries (LFP) currently account for more than 90% of lithium-ion battery sales in electric vehicles.
Driven by strong demand for electric vehicles and a mature supply chain, LFP batteries are gradually gaining dominance in China. Furthermore, the emergence of higher energy density LFP battery variants (such as M3P and LFMP batteries) is further accelerating this process.
In the US and EU electric vehicle markets, LFP batteries have a certain market share, but for various reasons, this share will still be lower than that in China.
First, these countries and regions have virtually no operational LFP battery production plants, and their existing supply chains are not as mature as China's. Therefore, the higher cost of imported LFP batteries will weaken their cost advantage over NMC batteries. This situation is exacerbated by the higher recycling costs of LFP batteries compared to NMC batteries.
In addition, many battery manufacturers are researching the production of cobalt-free or low-cobalt NMC battery variants, which will further reduce the cost advantage of LFP batteries.
Finally, import tariffs and broader geopolitical challenges may make LFP batteries less suitable for European and American electric vehicle manufacturers seeking to build more resilient supply chains.
3. Lithium-ion batteries will continue to reduce costs and improve performance.
Lithium-ion battery technology will undergo significant changes in cathode chemistry, anode chemistry, battery form factor, and battery pack architecture. Electric vehicle manufacturers are closely watching several innovations, such as battery integration into chassis technology, embedding batteries directly into the vehicle structure, adopting dry electrode manufacturing processes to reduce energy consumption and manufacturing costs, and using AI management systems to improve battery life.
4. By 2030, solid-state batteries and sodium-ion batteries will become emerging technologies for commercialization.
Compared to NMC batteries, solid-state batteries offer significantly higher energy density, greater safety, faster charging speeds, and longer battery life. However, after numerous delays, solid-state battery manufacturers have only recently unveiled battery products showcasing their concepts, and commercialization may take three to four years.
Sodium-ion batteries promise to be cheaper and safer than lithium-ion batteries, and can operate at lower temperatures. However, their energy density has historically been low, though progress has been made, with some sodium-ion batteries now achieving energy densities comparable to LFP batteries. Several battery manufacturers have announced plans for mass production by 2025. Bain & Company predicts that sodium-ion batteries for electric vehicles will be commercialized in the first half of 2025.
5. The demand for battery recycling will increase.
As the number of applications increases significantly, the amount of electric vehicle batteries recycled is also expected to rise. Global regulations regarding battery recycling, recirculation, and reuse will become increasingly prevalent.
These regulations will further promote battery recycling. Some battery manufacturers and electric vehicle manufacturers are exploring new business models (such as battery leasing) to retain ownership of the batteries and assume responsibility for their recycling.
