IEA: How the Lithium Battery Market Grew Sixfold Since 2020

Since 2020, the global deployment of lithium-ion batteries has increased six times over, propelling the market’s value to US$150bn. 

Behind this headline, however, is a more complex reality about the technology that is fast reshaping the worlds of transport and energy the world over.

According to a new study by the International Energy Agency (IEA), the growth in the battery market has largely been down to the boom in demand for electric vehicles, accounting for more than 70% of deployment.

In fact, a quarter of all the cars sold around the world last year ran on batteries.

Elsewhere, grid-scale battery storage claimed around 15% of the market, underlining how these devices have evolved from consumer gadgets into critical infrastructure for power systems.

That evolution is borne out in the data on portable electronics.

A decade ago, devices like laptops, tablets and smartphones accounted for nearly half of global battery production.

Now, that share has collapsed to below 5%.

The price war nobody can win

So, what factors contributed to the surge in battery production last year?

Falling costs certainly turbocharged adoption but also revealed some uncomfortable truths about the overall sustainability of the market.

In 2025, the average price of batteries dropped by 8%, pushed down by efficient manufacturing and stiff competition between producers.

The price of grid storage systems fell to a third of the levels they were at in 2020, which made batteries just as competitive as gas peaker plants in some markets.

Nevertheless, these gains have come with some obvious geographical strings attached.

The IEA has found that Chinese battery packs sold for around 30% less than their American equivalents and were 35% cheaper than prices in Europe.

Meanwhile, lithium iron phosphate (LFP) batteries saw prices fall by more than 15%, compared with less than 5% for nickel-rich alternatives.

The result is that LFP batteries now cost 40% less than nickel-manganese-cobalt options and command more than half of the EV market, as well as more than 90% of grid storage globally.

While this is good news for procurement teams around the world, the IEA does warn that these low prices will be unlikely to last, with many producers haemorrhaging money.

A supply chain with one dominant player

The data exposes an uncomfortable dependency that policymakers are only beginning to reckon with.

China manufactured considerably more than 80% of all batteries in 2025, while Chinese, Korean and Japanese firms accounted for virtually all global cell production last year.

The EU and US contributed modestly to the remainder, but both import most of their battery components from China, showing that dependence runs deep.

Right now, nearly every battery powering electricity grids relies on China for at least one critical supply chain step.

The IEA says that 70% of the EVs built outside of China contain batteries or components sourced from Chinese suppliers, while more than 90% of battery storage systems worldwide depend on LFP cells produced in China.

Beijing's export controls on key battery components – first introduced in 2023 – have begun to expose these vulnerabilities by targeting the weakest links in non-Chinese supply chains.

Elsewhere, Korean producers are racing to build LFP production lines as an alternative, but they are up against punishing competition from established Chinese manufacturers in an oversupplied market.

The 50% cost problem

That said, production capabilities in Europe and the US have been increasing.

Both territories have courted investments in the battery sector recently, using the booming EV sector to guarantee demand.

Still, the IEA finds that production costs in the EU and US can run as much as 50% higher than in China.

Matching the efficiency of Chinese manufacturing, where yields routinely exceed 90%, will require years of concerted investments.

This is because new producers typically waste far more material than established ones which makes achieving a profit difficult until operations fully mature.

The IEA notes that regions lacking industrial foundations will need patient capital and partnerships with experienced manufacturers as they look to become competitive on the global stage.