• CATL rolls out a next-gen battery capable of rapid fast-charging.
• China leads in the tech, shows its dominance in battery manufacturing.

As EV sales surge 25% to 17 million in 2024, battery demand crossed the 1 terawatt-hour mark for the first time. At the same time, the average cost of a battery pack for electric cars fell below $100 per kilowatt-hour – a level many have long seen as the tipping point for cost competitiveness with gas-powered models.

Lower mineral prices have played a big role in this shift. Lithium, in particular, has dropped in price more than 85% from its peak in 2022. However, broader changes in the battery sector are also contributing.

Years of investment have pushed global battery manufacturing capacity to 3 TWh in 2024, and that number could triple in the next five years if current project plans hold. The changes reflect a battery industry that’s scaling up and maturing. What used to be a fragmented, regionally-focused sector is becoming a global system where mass production and standardisation are starting to take hold.

Competitive pressure is more closely aimed at manufacturing efficiency, fast deployment of new technologies, and supply chain partnerships. Industry consolidation is also picking up as governments push to diversify where batteries – and their raw materials – come from.

China continues to dominate the space, now producing more than three-quarters of the world’s batteries. In 2024, battery prices there dropped nearly 30%, making them significantly cheaper than those in Europe and North America. That price gap – over 30% cheaper compared to Europe and more than 20% than the US – is a major reason why many EVs sold in China now undercut combustion-engine cars on price.

Four factors help explain this price advantage. First, China has deep manufacturing experience. The country has produced more than 70% of all EV batteries, allowing major players like CATL and BYD to scale up quickly and maximise their processes.

Second, the country’s battery ecosystem is vertically integrated, from mining and refining to manufacturing equipment and battery assembly, supporting faster development and lower costs. Third, Chinese producers have embraced lithium iron phosphate (LFP) batteries, which are currently roughly 30% cheaper than other mainstream chemistries.

Lastly, fierce competition has kept margins low, forcing manufacturers to reduce prices lower to maintain market share.

But competitive price pressure may not last forever. With margins shrinking, the number of battery manufacturers in China is expected to decline. Larger players will most certainly gain more pricing power, though China is still expected to remain the dominant force in the medium term.

In Europe, high production costs and a less-developed supply chain have led some firms to delay or cancel expansion plans. Battery production in the region is estimated to cost 50% more than in China. Northvolt’s recent bankruptcy has highlighted the problems that smaller firms confront in scaling operations.

However, some Korean manufacturers are beginning to invest in LFP battery production in Europe, aiming to adapt to changing market dynamics and compete with Chinese imports. Meanwhile, Chinese companies are expanding their presence in Europe through joint ventures and local partnerships.

Stellantis’s collaboration with CATL is one example of how LFP battery adoption could be boosted while also reducing the price gap with Chinese competitors. In the middle of all this, CATL has stepped up the pace with a new version of its Shenxing battery. The company says it can deliver over 300 miles of driving range after just five minutes of charging. It’s also designed to handle cold temperatures – a common hurdle for EVs – charging from 5% to 80% in 15 minutes at minus 10 degrees Celsius.

CATL isn’t the only one pushing ultra-fast charging. BYD recently unveiled a system that can deliver 250 miles of range in five minutes, while Tesla’s Superchargers currently offer about 200 miles in 15 minutes. The race for faster charging is seen as important to reducing range anxiety and encouraging more drivers to go electric.

On the other side of the supply chain, South Korea’s LG Energy Solution has pulled out of a major battery investment project in Indonesia. The $8.45 billion venture was originally signed in 2020 as part of the Indonesia Grand Package, aimed at building out the local EV battery supply chain. LG cited market conditions and the investment climate as factors in the decision. While the company will remain involved in an existing joint venture, its broader exit signals a shift in regional investment priorities.

Indonesia, which has some of the world’s richest nickel reserves, remains focused on attracting international investors to help build its battery sector. Local firms have expressed continued interest in collaborating with new partners to meet production goals.