EV battery prices dropped 8% in 2025, reaching their lowest average since lithium-ion packs first went into mass production. The International Energy Agency reports deployment hit 1.2 terawatt-hours, up almost 30% from 2024. That growth comes at a time when lithium and cobalt prices are rising again, making the cost drop even more notable.
The average battery pack now costs less per kilowatt-hour in China than anywhere else. Chinese packs were 30% cheaper than North American equivalents and 35% below European prices in 2025, widening gaps that were 20% and 25% back in 2022. Reuters has tracked similar regional splits in recent quarters.
Why the Cost Drop Matters Now
This isn't a slow drift. Battery prices have fallen for years, but the speed picked up again in 2025 because of a chemistry shift, not just scale. Lithium iron phosphate (LFP) batteries now make up over 55% of all EV battery deployment globally, up from nearly 50% in 2024. That's a real structural change, not a temporary discount.
LFP packs are more than 40% cheaper per kWh than lithium nickel manganese cobalt oxide (NMC) alternatives on average. The gap partly reflects lower energy density, since stationary storage uses a lot of LFP, but EV makers are also switching. In China, LFP powers two-thirds of all electric car sales. In other emerging markets and developing economies, it's doubled its share since 2023.
The price pressure isn't going to vanish overnight. Lithium prices at the start of 2026 were more than twice as high as in the same period of 2025. Cobalt doubled after the Democratic Republic of the Congo's export restrictions. These jumps could push costs back up once existing low-price stockpiles drain. If that happens, LFP's cost advantage becomes even more important for buyers.
Electric Trucks and the New Demand
Light-duty vehicles still dominate, making up more than 85% of EV battery deployment. But electric trucks are where the fastest growth lives. Battery demand for trucks more than doubled in 2025, and trucks now account for about 8% of global EV battery deployment, up from under 5% in 2024. The acceleration came mainly from China, where one in four trucks sold in 2025 was electric.
That shift changes how factories plan capacity. Global lithium-ion manufacturing capacity hit over 4 TWh at the end of 2025, up roughly 30% from 2024. Growth was faster in Europe and the US (about 50%) than in China (just over 25%). Capacity outside the largest regions nearly doubled, driven by new plants in the UK and Southeast Asia.
Indonesia is part of that Southeast Asia push. LBM Energy is building an LFP cathode material factory in Batang, and other producers are investing in the country. The supply chain isn't fully local yet — most cathode active materials still come from China — but the footprint is growing. EV market coverage tracks these developments closely.
The Profit Problem Behind the Price
Low prices don't always mean healthy companies. The IEA notes that many cathode active material producers have operated at a loss since 2023. LFP producers in China are feeling it too, except for Hunan Yuneng, the largest supplier. CATL, the biggest battery maker, kept operating margins at 18% in 2025, but Korean producers like SK On have reported recurring losses.
The risk is consolidation. If weak producers exit, remaining suppliers could raise prices. That change could be quick, given how concentrated the market is. Chinese producers supply almost 75% of batteries installed in EVs sold globally, and over half of the European market.
For buyers, the message is mixed. Cars are cheaper to build. Battery packs are cheaper to buy. But the supply chain is narrow, and mineral price swings could reverse some of those gains. It's not clear this will hold.
Indonesia's EV market, led by brands like Wuling and BYD, relies heavily on LFP-equipped models. If battery prices stay low, those vehicles become more competitive against conventional cars. If prices reverse, the cost gap narrows. The government has pushed for local manufacturing and charging infrastructure, but the battery chemistry trend — LFP dominance — is being decided in China, not Jakarta.
The real test is whether low prices survive rising lithium and cobalt costs, tighter sourcing rules, and the consolidation that comes with them. For now, the numbers say buyers win. For how long, nobody knows.
What's Next for Buyers
The 2026 outlook depends on supply contracts and whether LFP producers can stay competitive while making money again. Existing long-term contracts will buffer some of the lithium price rise, and vertical integration at CATL and others helps. But the market is fragile. If consolidation hits, prices could climb faster than they fell.
For Indonesian consumers, that means the affordable EVs on the market today — Wuling Air EV, BYD Atto 3, and others — face a cost environment that's favorable now but uncertain. Charging infrastructure is expanding, but the battery chemistry trend is global, not local. The price drop is real. The question is whether it's durable.
The IEA's data is clear, and the direction is downward. What isn't clear is how long the floor holds before mineral costs and market consolidation pull it back up. Buyers should enjoy the discount while it lasts, because the supply chain doesn't stay cheap forever.
Battery Chemistry Evolution
The shift to LFP chemistry represents a major change in the battery supply chain. Chinese manufacturers have led the way with LFP adoption, accounting for nearly 75% of battery cells installed in EVs globally in 2025. This dominance stems from LFP's inherent safety, longer cycle life, and lower material costs compared to NMC chemistries.
Japanese and Korean producers have been slower to adopt LFP, maintaining strong positions with NMC and NCA chemistries. However, even they are seeing LFP demand grow in stationary storage applications, where energy density is less critical and cost savings are more valuable.
This chemistry shift affects vehicle design too. LFP's flatter discharge curve requires different battery management systems, and the prismatic cell format favored by Chinese producers simplifies pack assembly. Automakers adapting to LFP must redesign thermal management systems and battery enclosures to accommodate the different cell shapes.
Market Concentration and Supply Risks
While prices are falling, market concentration remains a major concern. China supplies over 80% of global battery manufacturing capacity, and Chinese producers control nearly 75% of battery cell production. This concentration creates vulnerability to policy changes, trade restrictions, or supply chain disruptions.
For example, Indonesia's LBM Energy factory in Batang represents a rare diversification effort outside China. The facility aims to produce cathode materials for LFP batteries, which could help reduce reliance on imported components. However, building a complete supply chain from raw materials to finished cells takes years, and current capacity remains small compared to Chinese giants.
Consumer Implications
For Indonesian consumers, the falling battery prices mean EVs are becoming more affordable. Wuling's Air EV, priced at around Rp155-307 million, and BYD's Atto 3 at Rp199-245 million, are examples of models that benefit from lower battery costs. These price points are competitive with conventional cars in the Indonesian market.
However, the sustainability of these prices depends on continued supply chain stability. If lithium and cobalt prices remain elevated or if Chinese battery exports face restrictions, the cost advantage could disappear quickly. The market is in a delicate balance between falling costs and rising input prices.
Future Outlook
Looking ahead to 2026 and beyond, several factors will determine the trajectory of EV battery prices. Continued improvements in manufacturing efficiency, especially in China, could keep prices low. But if lithium prices remain high due to supply constraints, or if emerging markets see increased demand that outpaces supply, prices could rise again.
The IEA warns that without significant new investments in battery manufacturing outside China, the global supply chain could face bottlenecks. Europe and the US are accelerating local production efforts, with the US Inflation Reduction Act providing incentives for domestic battery production. Indonesia's own battery initiatives could play a role in diversifying the market.
Conclusion
EV battery prices have fallen 8% in 2025, driven by LFP chemistry adoption and manufacturing scale. While the cost reduction is real and beneficial for consumers, the market faces challenges from mineral price volatility and supply chain concentration. The coming year will test whether these lower prices are sustainable or merely a temporary dip in an otherwise volatile market. For Indonesian consumers considering an EV purchase, the present moment offers a compelling value proposition, but the long-term outlook remains uncertain.