Lithium prices at the start of 2026 sit at more than twice their level a year earlier, and lithium iron phosphate (LFP) batteries now account for over 55% of all EV batteries deployed worldwide. Those are the two headline numbers in the International Energy Agency's Global EV Outlook 2026, released this week, and together they frame a battery market that is cheaper on average but increasingly exposed to a handful of supply chokepoints.
EV battery deployment reached 1.2 TWh in 2025, up roughly 30% from 2024 and more than seven times the level of 2020. Electric vehicles still took more than 70% of global battery deployment, though that share slipped from nearly 80% in 2024 as stationary storage grew. Electric trucks were the fastest-growing segment: battery demand for them more than doubled, driven largely by a surge in sales in China, and they rose to about 8% of global EV battery deployment from under 5% a year earlier.
The nut graf, plain: battery costs kept falling in 2025, but the inputs behind them are getting harder and more expensive to secure, and the cheap-chemistry advantage is concentrating in China. That matters now because stockpiles bought at lower prices are draining, and any sustained rise in lithium or cobalt feeds straight into cell prices.
Prices fell in 2025, but the inputs did not
Average battery pack prices declined 8% in 2025, helped by manufacturing efficiency gains, chemistry shifts, and intensifying competition. Relatively low critical mineral prices added downward pressure, though lithium and cobalt both posted notable increases during the year.
Lithium's climb is the sharper of the two. Prices at the start of 2026 were more than double the same point in 2025, even though they remain around 70% below their 2022 peak. The IEA attributes the rise to faster-than-anticipated demand, particularly from battery energy storage, low inventories in China, and temporary supply disruptions including the suspension of operations at CATL's Jianxiawo lithium mine. If the upward trend persists, it could push lithium-ion battery prices up and reinforce interest in sodium-ion batteries, which do not use lithium but deliver lower range. Long-term supply contracts and vertical integration at major producers could soften that effect.
Cobalt doubled over the past year, mainly after the Democratic Republic of the Congo imposed a temporary export ban in late February 2025, later converted to export quotas starting October 16, 2025. The DRC supplies close to two-thirds of global cobalt. Even so, the IEA notes the effect on overall EV battery costs is far smaller than it would have been a decade ago: high-nickel chemistries use relatively little cobalt, and LFP uses none, and together those chemistries dominate today's market.
LFP is now the default chemistry
LFP batteries accounted for over 55% of EV batteries deployed globally in 2025, up from nearly 50% in 2024. Deployment remains heavily concentrated in China, but uptake is expanding fast in other emerging markets, where LFP now powers two-thirds of electric car sales, double the share in 2023, largely through imports of Chinese-made vehicles and batteries.
In 2025, LFP packs were more than 40% cheaper on average than NMC alternatives per kWh. Part of that gap reflects lower energy density requirements in stationary storage, which is dominated by LFP. The IEA flags a sustainability question behind the headline: many cathode active material producers are running at a loss while still expanding capacity, raising the risk of market consolidation. Either consolidation or pricing power at cathode producers would put upward pressure on production costs.
Regionally, the picture splits. The EU sourced nearly all of its LFP batteries from China in 2025, either directly (30%) or embedded in LFP-equipped EVs (nearly 70%), and the LFP share held near 10% of EU battery demand. The US went the other way: the 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 ran until the third quarter of 2025. Over 50 GWh of US manufacturing capacity, including plants belonging to LG Energy Solution and Ford, was reallocated toward LFP production, mostly aimed at the stationary storage market, which accounted for one-third of US battery deployment in 2025.
Onshoring is a first step, not a fix
Efforts to onshore LFP production are an important first step toward diversifying supply, but the underlying chain stays concentrated. Production of LFP cathode materials and their precursors remains almost entirely in China, which holds the capacity and the technical expertise. Korean and Japanese producers are investing in the technology, and an LFP production base is being built in Indonesia, but shifting that imbalance will take substantial investment and stronger international cooperation across the whole value chain.
Profitability is splitting the industry
Among major global battery makers, Korean producers have faced sustained profitability pressure, with SK On reporting recurring operating losses. CATL, the world's largest producer, recorded an 18% operating margin in 2025, up from 10-15% each year between 2020 and 2024, and roughly 35% of its revenue came from overseas activity, up from 30% a year earlier. Panasonic's battery business reached a 14% margin in 2025, though on significantly lower volumes. CATL's revenues were about 40% larger than the combined revenues of LG Energy Solution, Samsung SDI, SK On and Panasonic Energy in 2025, and kept growing rapidly into the first quarter of 2026.
Regional price gaps widened too. In 2025, battery pack prices in China were 30% lower than in North America and 35% lower than in Europe, compared with 20% and 25% gaps in 2022.
What to watch next
The IEA's data point to two risks worth tracking through the rest of 2026. First, whether lithium and cobalt price increases hold; if they do, expect upward pressure on cell prices and faster interest in sodium-ion, even if long-term contracts delay the pass-through. Second, whether LFP cathode producers can stop selling at a loss without giving up the cost edge that made LFP dominant in the first place. The first question is a supply story, the second is a margin story, and neither is settled by the current data.
For broader context on the EV transition, see Reuters coverage of electric vehicles. Internal background on this beat lives at our battery tech archive.
Image credits and data: International Energy Agency, Global EV Outlook 2026, IEA, Paris. Licence: CC BY 4.0.