EV battery deployment reached 1.2 TWh in 2025, up almost 30% from the prior year and more than seven times the 2020 level, according to the International Energy Agency's Global EV Outlook 2026. Electric vehicles remained the largest single source of global battery demand, accounting for more than 70% of all battery deployment.
The number that matters for manufacturers is the chemistry mix. Lithium iron phosphate (LFP) batteries accounted for over 55% of EV batteries deployed globally in 2025, up from nearly 50% the year before. Deployment remains heavily concentrated in China, but uptake is expanding fast in other emerging markets, where LFP now powers two-thirds of all electric car sales.
The IEA report, published in 2026, frames the shift as a cost story as much as a technology story. Average battery prices fell 8% in 2025, helped by manufacturing efficiency gains and a shift toward cheaper chemistries. LFP packs were more than 40% cheaper per kWh than lithium nickel manganese cobalt oxide (NMC) alternatives.
Lithium prices are climbing again
Lithium prices at the start of 2026 were more than twice as high as in the same period in 2025, even though they sit around 70% below their 2022 peak. The IEA attributes the rise to faster-than-expected demand growth, particularly from battery energy storage, alongside low inventories in China and temporary supply disruptions such as the suspension of operations at CATL's Jianxiawo lithium mine.
If these price trends hold, they could push lithium-ion battery costs upward and reinforce momentum behind sodium-ion batteries, which do not rely on lithium but offer lower energy density. Existing long-term lithium supply contracts and vertical integration among major producers could soften the blow. The report does not predict which effect wins out.
Cobalt prices also doubled over the past year, largely because the Democratic Republic of the Congo imposed a temporary export ban in late February 2025 that converted into export quotas from October 16, 2025. The DRC accounts for almost two-thirds of global cobalt supply. The effect on EV battery costs is smaller than it once was, since high-nickel chemistries use relatively small amounts of cobalt and LFP contains none.
China's grip on the supply chain
LFP cathode material production remains almost entirely concentrated in China, which holds the manufacturing capacity and technical expertise. The IEA calls this a critical constraint and says changing it will require substantial investment and stronger international cooperation across the whole battery value chain.
There are early diversification moves. Korean and Japanese producers are investing in LFP technology, and an LFP production base is being built in Indonesia. In the United States, more than 50 GWh of battery manufacturing capacity belonging to companies such as LG Energy Solution and Ford was reallocated toward LFP production in 2025, largely targeting the battery energy storage market.
The US LFP share in EV batteries almost halved in 2025 from an already low base, reflecting higher tariffs on Chinese imports and stricter sourcing rules tied to the EV tax credit that existed until the third quarter of 2025. Battery stationary storage accounted for one-third of US battery deployment in 2025, and its role is growing as deployments expand across power grids and data centers.
Profit margins split the industry
Among major global battery manufacturers, Korean producers have faced sustained profitability pressure, with SK On reporting recurring operating losses. CATL, the world's largest battery producer, recorded operating margins of 10 to 15% each year between 2020 and 2024, and 18% in 2025. Panasonic's battery business reached 14% in 2025, though its overall volumes are significantly lower.
CATL's revenues were roughly 40% larger than the combined revenues of LG Energy Solution, Samsung SDI, SK On, and Panasonic Energy in 2025, and continued to grow rapidly in the first quarter of 2026. CATL also reported that almost 35% of revenue came from overseas activity in its 2025 interim report, up from 30% the year before.
Record low LFP prices carry their own risk. Many cathode active material producers are currently operating at a loss while continuing to expand capacity, raising the risk of market consolidation. Either consolidation or a recovery in producer pricing power would put upward pressure on battery production costs.
Regional price gaps are widening
Battery pack prices in China were 30% lower than in North America and 35% lower than in Europe in 2025, compared with 20% and 25% in 2022. The gap reflects both chemistry mix and manufacturing scale, and it is not clear it will narrow soon.
For a closer look at how the IEA frames the broader outlook, see the Global EV Outlook 2026 report.
The IEA also warns that LFP batteries can reduce EV production costs, but their deployment stays mainly concentrated in China, where Chinese companies lead in LFP battery and materials production. Efforts to onshore LFP in the United States target energy storage first, not passenger cars.
Recycling and the long road ahead
The IEA expects recycling to remain dominated by production scrap until end-of-life batteries take the lead in the mid-2030s. That timing matters because the current generation of EVs is only now reaching retirement age, and the collection and sorting infrastructure is still being built. Recycling capacity refers to material recovery, and the gap between installed capacity and actual feedstock is wide.
Sodium-ion is the other chemistry to watch. It offers lower ranges but does not rely on lithium, which makes it attractive if lithium prices stay elevated. Whether it gains meaningful share depends on energy density improvements and on automakers accepting the trade-off in vehicle range. The IEA does not forecast a crossover point.
For more battery coverage, see our battery tech category.
The next question is whether sodium-ion can gain ground if lithium prices stay elevated, and whether Indonesian and Korean LFP capacity comes online fast enough to dent China's share. Both will be settled by late 2027 at the latest, and neither depends on a single policy decision. Either way, the 2025 numbers show the battery market has already chosen its direction.