How the EV battery segment is evolving with an eye on lithium supply

Sales of electric vehicles worldwide continue to grow, along with the battery industry that supports them.

According to market intelligence company IDTechEx, lithium-ion (Li-ion) batteries remain the core technology enabling the electrification of the automotive sector.

Reflecting this, EV Li-ion demand is forecast to exceed 4,500 GWh in 2036 in a market set to grow from $170 billion this year to $320 billion by 2036, representing a CAGR of 6.5%.

The World Economic Forum (WEF) previously predicted that up to 350 million EVs could be on roads worldwide by 2030 under the net zero by 2050 scenario. By the close of 2021, 16.5 million were operating, and the International Energy Agency (IEA) suggested EVs would represent more than 60% of vehicles sold by 2030.

The IEA also cited the need for a “surge” in charger installations and last year warned of potential mineral shortages ahead. Meanwhile, other battery technologies are gaining traction. 

Matching supply with demand

The market for Li-ion batteries is driven predominantly by growth in battery electric (BEV) cars, especially in China, and there is increasing adoption in Europe, says IDTechEx report ‘Li-ion Batteries and Battery Management Systems for Electric Vehicles 2026-2036’.

The US is experiencing a sales slowdown due to policy changes, but electrification efforts are expected to pick up again in the next decade.

Lower cost of ownership is also expected to drive commercial vehicle demand, alongside the dominant EV car segment.

The IEA says there is no “immediate, absolute physical depletion of minerals”, but supply chain concentration, geopolitical constraints, and rapid demand growth for lithium, cobalt, nickel, and graphite could create a “high risk” of shortages. And this, particularly shortages of battery-grade refined materials, could potentially increase costs and slow the transition to EVs.

The Union of Concerned Scientists previously said that to meet projected EV adoption by 2035, the industry may need hundreds of new mines, each with long development times.

Battery industry evolution

Rising costs have driven investments in battery recycling by major vehicle manufacturers such as Volkswagen and Renault, as well as innovations in battery chemistry, such as lithium iron phosphate (LFP) and sodium-ion, that reduce reliance on critical minerals.

IDTechEx highlighted cell chemistry trends, notably the growing share for LFP and early deployments of LMFP (lithium manganese iron phosphate) and Li-Mn-rich options.

“There are a large range of cell chemistries that fall under the Li-ion umbrella, offering different electrochemical profiles,” explained technology analyst Daniel Parr. “Chemistry and form factor choices are highly dependent on application area.”

For example, IDTechEx reports the electric car segment shifting towards LFP cathodes, enabling lower costs and higher cycle life, although also exhibiting limited energy density compared to ternary oxide cells such as nickel manganese cobalt (NMC) and nickel cobalt aluminium oxide (NCA), making NMC/NCA better positioned for premium BEVs.

Outside of the passenger vehicle market, IDTechEx said NMC technology offers higher power and gravimetric energy density, which is important for heavy-duty applications.

“However, cycle life is especially important for commercial vehicles,” said Parr. “In cars, a cycle life of ~1,000 cycles is generally acceptable; however, for commercial vehicles, 3,000-5,000 cycles are required.”

Some estimates suggest deploying as many as 450 million chargers by 2040 to keep pace with the growth in EVs.

How policies impact battery progress

Regulations and incentives, such as tax credits and government subsidies, have and can greatly influence EV sales and, by extension, the battery market.

This has been the case in China, where the EV sector has grown rapidly, while European EV adoption has been largely encouraged by increasing carbon-emissions regulations.

Sales have slowed in the US due to the expiry of EV tax credits and tailpipe emissions mandates, although the medium- and long-term outlook is growth.

Battery supply is increasingly localising in the US as tariffs on Chinese battery cells and continued support of American production through the 45X credit take effect.