The global battery market endured a difficult year in 2024, with weaker-than-expected electric vehicle (EV) demand, overcapacity, intense competition among different battery technologies and geopolitical tensions fuelled by US tariff increases on China. So what does the future hold for EV batteries in 2025? On pricing, the global average EV battery price could reach US$90 per kilowatt-hour (kWh) in 2025, down from US$111 per kWh at the end of 2024, according to Nikhil Bhandari, co-head of Asia-Pacific natural resources and clean energy research at Goldman Sachs. By 2026, it could fall to US$82 per kWh, nearly 50 per cent lower than US$149 per kWh in 2023, which would bring the cost of owning a battery-powered car on par with petrol-powered cars in the US on an unsubsidised basis, according to the investment bank’s estimates. Technological innovation and falling prices of key battery metals are two main drivers of the trend, Bhandari said. Many new battery products launched recently have about 30 per cent higher energy density and cost less, he said. More than 40 per cent of the decline in global average battery prices from 2023 to 2030 will come from lower commodity costs, Goldman said. Battery metals account for nearly 60 per cent of the cost of a battery. In 2024, some key battery metals – particularly lithium – faced oversupply issues driven by ramped-up production, shifts in battery technology and demand. Analysts say this trend will continue in 2025. The global lithium supply is expected to increase by 12 to 28 per cent from 2025 to 2026, driven by a rise in output from Australia and Africa, according to Daiwa Capital Markets. Global demand growth for EV batteries is expected to fall 15 to 17 per cent in 2026 from a year earlier, down from 35 per cent in 2023, Daiwa said. And demand growth for energy storage systems (ESS) batteries is expected to slow to 31 to 34 per cent in 2026 from a year earlier, from 42 per cent in 2023. This slowdown, combined with rising supply, suggests lithium prices will struggle in 2025, Dennis Ip, an analyst at Daiwa wrote in a note last month. Workers produce lithium batteries at a plant in Qinyang, China. Photo: Xinhua “In our view, only a production suspension by some major players will materially improve the market’s expectations for lithium prices and lead to a recovery in [average selling prices],” Ip said. “However, we have so far observed minimal volume-cut plans from large manufacturers.” Which battery types will dominate in 2025? Two main types of lithium-based batteries – lithium iron phosphate (LFP) batteries, and NCMs, which use nickel, cobalt and manganese – are expected to each take more than 40 per cent of the global EV battery market this year, according to Goldman Sachs. Sodium-ion batteries, which are more sustainable and do not require lithium, are still far away from mass production, analysts say, though great progress on this front has been made in past years. One thing worth monitoring is the development of solid-state batteries, which use solid electrolytes instead of liquid or gel electrolytes. Also, they are safer and have higher energy density. “In terms of the solid-state batteries, I would be very clear here – this is the only battery technology that we believe Europe, America, and Japan could leapfrog what has already been happening in the lithium-ion technologies,” said Shirley Meng, a professor of molecular engineering at the University of Chicago. Despite a slowdown in growth for EV and ESS batteries, China will continue to drive the global market. By the end of 2025, 85 million EVs – including cars, buses, and trucks – are expected to be on the road globally, up from 64 million units in 2024, according to Gartner. China is expected to account for 58 per cent of the world’s EV sales this year, while Europe will have 24 per cent, it estimated. The ESS market is expected to drive demand for lithium batteries, as renewable power will require reliable energy storage, according to Rystad Energy. BYD electric cars at a port in Suzhou, China. Photo: AFP “2025 could be a breakout year for energy storage systems,” said Jarand Rystad, CEO and founder of Rystad Energy. The think tank estimated that 90 per cent of the power consumption growth in 2025 will come from renewables, while nuclear and gas will account for the remaining 10 per cent. On the other hand, China has set targets to boost its non-pumped hydro energy storage capacity, led by lithium-ion batteries and other new technologies, to around 100 gigawatts (GW) by 2030 from just 2.2GW in 2020. On the geopolitical front, president-elect Donald Trump’s return to the White House will have an impact on the global battery market. He has promised to repeal President Joe Biden’s EV adoption policies, which could hurt US domestic demand. Trump also said during his presidential campaign that he would impose a 60 per cent tariff on all products imported from China. Under Biden, Chinese EVs and batteries faced tariff rates of 100 per cent and 25 per cent, respectively. According to London-based consultancy Rho Motion, imported batteries from China could still be cheaper than US-made products after the 25 per cent tariff, but a more than 60 per cent tariff would significantly impact battery prices.