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IEA Report: EV Battery Prices Drop, LFP Surges, Sodium-ion on Horizon
IEA's Global EV Outlook 2024 gives insights into declining EV battery prices, the rise of LFP, and the emergence of sodium-ion technology.
4 Min Read
Recent trends and innovations are making EV batteries more affordable.3alexd/ iStock / Getty Images Plus
The landscape of electric vehicle (EV) battery prices is undergoing a significant transformation, driven by technological advancements and regional production dynamics shifts. The International Energy Agency's (IEA) "Global EV Outlook 2024" provides a comprehensive analysis by highlighting the factors contributing to the decreasing costs of EV batteries. Recent trends and innovations are making EV batteries more affordable, as well as the competitive advantages enjoyed by different regions, particularly China. As EVs become increasingly popular worldwide, understanding these price dynamics is crucial for industry stakeholders and consumers.
According to IEA’s latest report, the price of Lithium Iron Phosphate (LFP) batteries was heavily impacted by the surge in battery mineral prices over the past two years, primarily due to the increased cost of lithium, its critical mineral component. Despite the price growth of lithium outpacing other minerals, LFP batteries remain more affordable compared to Nickel Manganese Cobalt (NMC) batteries. In 2023, the price difference narrowed, with NMC batteries being less than 25% more expensive than their LFP counterparts, down from a 50% premium in 2021.
Average battery price index by selected battery chemistry and region, 2020-2023. Credit: IEA (CC BY 4.0).
The report also highlights that advances in battery pack configurations, such as cell-to-pack technology already being adopted for LFP batteries and cell-to-chassis designs, enhance efficiency and performance. Additionally, manufacturing improvements, including developing multi-layer electrodes for ultra-fast charging, contribute to cost reductions. Efforts to increase the manganese content in both LFP and NMC batteries aim to boost energy density while keeping costs low.
Additionally, IEA states that Chinese batteries, predominantly LFP, are the cheapest, followed by those in North America and Europe. The cost of manufacturing batteries in the US remains nearly 20% higher than in China, even when material costs are assumed equal. This gap is likely larger in reality due to China’s integrated supply chains and preferential local material pricing.
Accelerating battery developments
According to the report, one of the standout developments over the past five years has been the rise of LFP batteries. Once a minor player, LFP now supplies over 40% of global EV demand by capacity as of 2023, a significant increase from its share in 2020. China largely drives this surge, where LFP batteries powered two-thirds of EV sales in 2023. In contrast, Europe and the United States have been slower to adopt LFP, with its share in these markets remaining below 10%, where high-nickel chemistries still dominate.
Share of battery capacity of electric vehicle sales by chemistry and region, 2021-2023. Credit: IEA (CC BY 4.0).
IEA explains that the expiration of core LFP patents in 2022 has sparked global interest and investments, particularly in Morocco. With the world's largest phosphate reserves and free-trade agreements with the US and Europe, Morocco attracted investments totaling $15.3B in 2022, nearly equaling the combined investments of the previous five years.
Share of battery capacity of electric vehicle sales by chemistry and region, 2021-2023. Credit: IEA (CC BY 4.0).
Sodium-ion batteries could further transform the industry by reducing costs and critical mineral reliance. IEA’s report states, “In 2023, leading battery manufacturers announced expansion plans for sodium-ion batteries, such as BYD, Northvolt, and CATL, which initially sought to reach mass production by the end of the same year. If brought to scale, sodium-ion batteries could cost up to 20% less than incumbent technologies.” Despite their promise, lithium prices and supply chain challenges heavily influence the development of sodium-ion batteries, which could impact their near-term scalability.
What does it mean for the EV industry?
The increasing popularity of LFP batteries and the potential of sodium-ion batteries are reshaping the EV industry in several ways:
Cost Reduction: LFP batteries are cheaper to produce than traditional ones, making EVs more affordable and accelerating their adoption. Sodium-ion batteries could further reduce costs, broadening EV accessibility.
Supply Chain Shifts: Diversifying battery materials decreases dependency on critical minerals like cobalt and lithium, stabilizing supply chains. Sodium-ion technology, compatible with existing production lines, enhances flexibility and resilience.
Technological Innovation: Advancements in battery technology, including improved LFP configurations and the emergence of sodium-ion batteries, enhance performance and affordability, driving EV growth.
The evolving dynamics of EV battery prices, driven by technological advancements, shifts in regional production, and the emergence of alternative battery chemistries, hold profound implications for the EV industry. As battery prices decrease and supply chains diversify, the EV market is poised for further growth and innovation, driving the global transition towards a greener, more sustainable transportation future. However, continued investment in research, development, and manufacturing infrastructure will be essential to realize the full potential of these advancements and ensure that EVs become the transportation solution of choice worldwide.
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