Global prices for lithium-ion battery packs dropped 20% in 2024, marking the sharpest decline since 2017, as increased production, intensifying competition, and surging demand reshaped the electric vehicle (EV) battery landscape, according to a new study by the International Energy Agency (IEA).
The price decline is a crucial development for the future of EV affordability, as battery packs remain the most expensive component in electric vehicles. Automakers including Tesla, General Motors, Toyota and Ford have ramped up efforts to localize battery production, with varying levels of success, in a bid to bring costs down and reduce reliance on foreign supply chains.
“Lithium prices, in particular, dropped nearly 20% in 2024, reaching similar prices to those at the end of 2015, despite lithium demand in 2024 being about six times bigger than in 2015,” the IEA report said.
Battery prices declined across all regions, but China saw the most pronounced reductions. The country accounted for 80% of global battery cell production in 2024, a lead enabled by integrated supply chains, a skilled workforce, and intense competition that has driven manufacturing efficiency at the expense of profit margins.
“The faster pace of battery cost reduction and innovation in China has been enabled by fierce competition that has driven down profit margins for most producers (though not all), at the same time as driving up manufacturing efficiency and yields,” the report noted.
China also dominates the market for lithium iron phosphate (LFP) batteries, which are increasingly used in mass-market EVs due to their improved performance and lower costs. In 2024, LFP batteries made up nearly half of the global EV battery market. Adoption rose sharply in the European Union—up 90%—while the United States lagged at just 10%, constrained by tariffs on Chinese imports.
“Market penetration of LFP batteries is moving even faster in other markets,” the IEA wrote. “In Southeast Asia, Brazil and India, the share of electric car batteries using LFP reached more than 50% in 2024.”
Meanwhile, U.S. battery manufacturing capacity grew by nearly 50% last year, surpassing the European Union’s total, largely driven by Korean firms responding to tax incentives. However, future growth remains uncertain. A federal budget bill backed by former President Donald Trump includes provisions to eliminate both EV tax credits and domestic battery manufacturing incentives. The bill has passed the House and is under Senate review.
Despite political uncertainty in the U.S., the global battery sector continues to expand, with hybrid vehicle battery costs now exceeding those for full EVs on a per-kWh basis. “In 2024, the average price of a 20 kWh PHEV battery pack was about the same as a 65 kWh BEV battery pack,” the report said, highlighting the surprising economics behind battery sizing and component costs.
As automakers and governments vie for a place in the energy transition, the sharp fall in battery prices is a promising sign—but it may come with long-term trade-offs. The IEA warned that current mineral price surpluses could discourage future investment, potentially slowing innovation and capacity growth in the years to come.