Trends in electric vehicle batteries – Global EV Outlook 2024 – Analysis
In relative terms, the LFP chemistry was most affected by the surge in battery mineral prices in the last two years. Lithium is the only critical mineral in LFP, and its price grew more than that of other minerals, and remained above historical averages for longer. In comparison, NMC batteries were less than 25% more expensive than their LFP equivalents in 2023, down from a premium of 50% in 2021. LFP batteries remain significantly cheaper than NMC, and their price has recently decreased rapidly.
Further innovation-driven improvements are foreseen for both chemistries through recent battery pack configurations, such as cell-to-pack2 (already being adopted for LFP) and cell-to-chassis. In addition, continued innovation in manufacturing is helping to achieve improved battery performance, for example through multi-layer electrodes enabling ultra-fast charging. Efforts to increase the manganese content of both NMC and LFP are also underway, with the aim of either increasing energy density while keeping costs low (LFP) or reducing cost while maintaining high energy density (NMC).
In terms of regional competitiveness, batteries are cheapest in China, followed by North America, Europe and other Asia-Pacific countries. However, battery prices across regions, including both batteries produced locally and imports, have been converging in the past few years, indicating that EV batteries are moving towards becoming a truly globalised product.
Nonetheless, battery manufacturing in Europe and the United States remains more expensive than in China. For example, producing a battery cell in the United States is nearly 20%3 more expensive than in China, even when assuming that material costs do not vary regionally. In reality, Chinese manufacturers are likely to benefit from preferential prices from local material producers and a more integrated supply chain within China, which could mean the manufacturing cost gap is even larger. Moreover, contrary to the United States and Europe, most Chinese batteries are LFP, which is more than 20% cheaper to produce than NMC.
