The global battery market experienced rapid growth in 2024, fueled by a surge in electric vehicle (EV) sales, while the average price of EV battery packs fell below $100 per kilowatt-hour (kWh) for the first time, according to a new analysis by the International Energy Agency (IEA).
“The battery industry has entered a new phase,” the IEA stated, noting that worldwide EV sales climbed by 25% to reach 17 million units in 2024. As a result, global annual battery demand surpassed one terawatt-hour (TWh) for the first time. Although this figure includes all types of batteries, EVs accounted for 85% of the total market, making them the primary driver of demand.
Falling Battery Costs and Market Shifts
The IEA study highlighted that the average cost of battery packs for EVs dropped below $100/kWh in 2024, a threshold widely regarded as a key milestone for cost parity with internal combustion engine vehicles. The price decline has been attributed to lower raw material costs, particularly lithium, which has fallen by more than 85% since its 2022 peak. Additionally, advancements in battery technology and manufacturing efficiency have contributed to the reduction in costs.
Global battery production capacity is expected to reach 3 TWh in 2024, a theoretical maximum based on full utilization of current manufacturing facilities. If all announced projects proceed, this capacity could triple within the next five years, according to the IEA.
The report also noted a shift in the structure of the battery market, which has transitioned from being highly regionalized to a global industry with increasing standardization. “Looking ahead, economies of scale, supply chain partnerships, manufacturing efficiency, and rapid innovation deployment will be crucial to maintaining competitiveness,” the IEA stated, predicting increased consolidation within the industry.
China’s Dominance and Global Challenges
China remained the dominant force in the battery sector in 2024, manufacturing more than three-quarters of all batteries sold worldwide. Chinese battery prices fell by nearly 30% last year, making them over 30% cheaper than those produced in Europe and 20% cheaper than those from North America.
According to the IEA, China’s price advantage stems from four key factors: its extensive manufacturing experience—having produced over 70% of all EV batteries to date—deep supply chain integration from mineral extraction to battery production, the widespread adoption of lower-cost lithium iron phosphate (LFP) battery chemistry, and intense domestic competition among nearly 100 battery manufacturers, which has driven aggressive price reductions.
Despite these trends, the IEA predicts that price declines in China will slow as market consolidation grants leading manufacturers greater pricing power. Outside China, the competitive edge of its battery industry presents challenges. “Many battery producers in Europe are delaying or canceling expansion plans due to concerns over future profitability,” the IEA reported, citing Northvolt’s bankruptcy as an example of the difficulties faced by European manufacturers. Higher production costs, weaker supply chain integration, and a shortage of skilled labor have hindered Europe’s ability to compete with Asia-based suppliers.
Europe, Korea, and the U.S. Seek to Close the Gap
Despite challenges, the IEA sees opportunities for Europe to strengthen its battery industry. “A stable policy framework that supports demand growth and reduces investment risks is essential for closing the cost gap with China,” the agency stated. European manufacturers have begun scaling up LFP battery production, and South Korean firms, which have traditionally led Europe’s battery market, have lost nearly a quarter of their market share in the EU over the past two years. Some Korean companies have responded by investing in LFP battery production in Europe. Joint ventures, such as the Stellantis-CATL partnership, could accelerate LFP adoption and bolster Europe’s battery supply chain.
By 2030, the IEA forecasts that Chinese firms will control 38% of Europe’s battery market, with Korean manufacturers holding 21%, EU-based production reaching 27%, U.S. companies at 9%, and other players accounting for 5%.
South Korea and Japan—long-time leaders in nickel-cobalt-manganese (NMC) battery production—are expected to undergo significant transformations as global market dynamics shift. While Korean firms currently lead in overseas battery manufacturing capacity with nearly 400 gigawatt-hours (GWh), compared to Japan’s 60 GWh and China’s 30 GWh, they face increasing pressure from cost-effective LFP batteries.
In the United States, battery production capacity has doubled since 2022, reaching over 200 GWh in 2024, driven by government incentives. An additional 700 GWh of production capacity is under construction. However, progress in building a domestic supply chain for battery components has been slower, leaving the U.S. reliant on imports for key materials such as anodes and cathodes.
Meanwhile, Southeast Asia and Morocco are emerging as new hubs for battery and component manufacturing, potentially reshaping the global supply landscape in the coming years.