IEA's 2024 EV Outlook: Key Trends in the EV Battery Market

The transition to electric vehicles (EVs) represents an essential shift in the automotive industry, and understanding the latest trends is crucial for stakeholders across sectors, including policymakers, industry players, investors, academics, and consumers. The International Energy Agency's (IEA) "Global EV Outlook 2024" report provides comprehensive insights into the evolving landscape of batteries for EVs. In this article, we delve into the key findings of the IEA report, exploring emerging trends, challenges, and opportunities in the battery EV market that are driving the global transition towards greener mobility.

Battery supply and demand

The demand for batteries and critical minerals, driven primarily by EV sales, continues to rise steadily, particularly in the US and Europe. In 2023, IEA reports that the global EV battery demand surpassed 750 GWh, marking a 40% increase from 2022, with EVs contributing to 95% of this growth.

The US and Europe witnessed the fastest growth rates among major EV markets, followed closely by China. Despite this, IEA explains that China remains the largest market, with 415 GWh of battery demand in 2023. Notably, plug-in hybrid electric vehicles (PHEVs) in China constituted about one-third of total EV sales. However, due to their actual size compared to battery electric vehicles (BEVs), they contribute less to overall battery demand.

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Chinese automakers are increasingly promoting extended-range electric vehicles (EREVs), which feature larger batteries capable of longer electric ranges and can utilize internal combustion engines for recharging. In 2023, EREVs accounted for 25% of PHEV sales in China. While negligible EREV sales are observed elsewhere, their rising popularity in China underscores a shift toward more versatile electric vehicle options.

Demand for battery metals

The increasing demand for batteries, driven predominantly by the EV market, demands greater extraction and refining of critical raw materials like lithium, cobalt, and nickel. In 2023, IEA’s report showed that battery demand for lithium reached around 140 kt, accounting for 85% of total lithium demand, while cobalt demand for batteries rose by 15% to 150 kt, representing 70% of the total demand. Battery demand for nickel also surged to nearly 370 kt, up almost 30% from 2022.

Battery demand for nickel stood at almost 370 kt in 2023, up nearly 30% compared to 2022. Credit: IEA (CC BY 4.0).

Despite high levels of investment in mining and refining, resulting in surplus supply in 2023, bringing down prices and battery costs, many companies are now facing challenges due to overcapacity. IEA’s report states, “Compared to just a few years earlier, overcapacity means that many companies are now struggling to stay afloat (see later section on trends in the EV industry). Mining and refining will need to continue growing quickly to meet future demand, to avoid supply chain bottlenecks, and make supply chains more resilient to potential disruptions.” IEA believes that innovative technologies like sodium-ion batteries and alternative battery chemistries with reduced critical mineral requirements, such as lithium iron phosphate (LFP), can potentially mitigate demand for critical minerals.

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Notes: EV = electric vehicle; RoW = Rest of the world. The unit is GWh. Flows represent battery packs produced and sold as EVs. Battery net trade is simulated accounting for the battery needs of each region for each battery manufacturer, and assuming that domestic production is prioritised over imports. Credit: IEA (CC BY 4.0).

Domestic and international battery production

Battery production is strategically located close to demand centers, and international collaborations drive global expansion. China still leads as the largest EV battery exporter, with around 12% of its EV batteries exported. “In Europe, the largest battery producers are Poland, which accounted for about 60% of all EV batteries produced in the region in 2023, and Hungary (almost 30%).”

Different chemistries necessitate diverse supply chains, with China dominating lithium iron phosphate (LFP) production and other nickel-based chemistries. At the same time, Korea and Japan have significant shares in cathode active material manufacturing—Korea at 9% and Japan at 3%. Despite China's leading role, overcapacity poses challenges, with unused cell output and excess manufacturing capacities.

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“China’s current leading role in battery production, however, comes at the cost of high levels of overcapacity. In 2023, excluding portable electronics, China used less than 40% of its maximum cell output, and cathode and anode active material installed manufacturing capacity was almost 4 and 9 times greater than global EV cell demand in 2023.”

Notes: RoW = Rest of the world. Lithium-ion battery manufacturing capacity in China, Europe, United States, Japan, Korea, and other countries sorted as a function of the company headquarters location. Installed manufacturing capacity refers to EV-batteries only. Credit: IEA (CC BY 4.0).

However, to mitigate this, the IEA’s report explains that China capitalizes on exports, even at the expense of reduced producer margins. International cooperation and trade remain pivotal, with foreign companies, primarily Asian, leading announcements for additional manufacturing capacity. Korean companies hold a significant share of European manufacturing capacity, while China's capacity is more dispersed among various producers. IEA’s report states, “Announcements for additional EV battery manufacturing capacity in Europe and the United States are primarily made by foreign companies headquartered in Asia.” This trend is expected to continue, with international partnerships continuing to drive EV market expansion alongside capacity expansions in major EV markets.

The demand for EVs continues to surge worldwide, fueled by environmental concerns and technological advancements. Stakeholders must remain vigilant in understanding and adapting to emerging trends. From the increasing demand for battery metals to the strategic localization of battery production, IEA’s report illuminates challenges and opportunities shaping the future of sustainable mobility. The industry can navigate toward a greener, more resilient future by leveraging innovative technologies, fostering international collaborations, and addressing supply chain complexities.