Electric Vehicle Battery Market Trends

Market Driver - Declining Costs of Lithium-Ion Batteries, Enabling Affordable EVs

The declining costs of lithium-ion batteries has been one of the biggest drivers for the electric vehicle market in recent years. The costs of battery packs, which make up a large portion of an electric vehicle's overall costs, have decreased significantly over the past decade. This reduction in battery costs of over 85% has been transformational for the electric vehicle industry.

It is these lower battery costs that have finally made electric vehicles economically feasible for a mass market, as battery packs used to add tens of thousands of dollars to vehicle costs, making EVs too expensive for most consumers. Now as battery costs continue to decline, automakers are able to price electric vehicles more competitively without having to sell them at a loss just to push adoption.

With battery costs projected to fall below $100 per kWh within the next few years, price parity or even an economic advantage over gasoline vehicles is expected for a wider range of EVs. Lower upfront vehicle costs will be key in driving the electric vehicle battery market globally.

Market Driver - Increased Global Adoption of Zero-Emission Vehicles Driven by Government Incentives and Regulations

Growth in global government policies promoting zero-emission vehicles has also been an important driver of increased adoption of electric vehicles. This eventually influences sales of electric vehicle batteries. Many national and local governments have implemented purchase incentives and subsidies for electric vehicles buyers, as well as other initiatives like preferential access to HOV or carpool lanes, exemptions from tolls or road usage fees.

On the regulatory side, some countries and states/provinces have set future dates to phase out petrol and diesel-powered vehicle sales entirely. While others have implemented zero or low emission vehicle quotas that auto manufacturers must meet gradually over time.

Compliance will drive up automaker investment and production of electric vehicles, helping to make more models available to customers. Strict policies are making electric cars and trucks an increasingly mass market reality in those locations. This is expected to boost growth of the electric vehicle battery market.

Market Challenge - Potential Shortages in Raw Materials like Lithium and Cobalt

One of the major challenges faced by the electric vehicle battery market is the potential shortages in key raw materials required for lithium-ion batteries. Lithium and cobalt are two crucial materials used in current lithium-ion battery technologies and there are concerns about sustainable supplies of these materials as electric vehicle sales continue to rise sharply. Lithium reserves worldwide may not be adequate to meet the projected demand from electric vehicle batteries in the long run if battery chemistries and material efficiencies do not improve.

The heavy dependence on few countries and regions for these raw materials exposes the electric vehicle battery market to supply disruption risks. Higher material costs from potential shortages also threaten the target cost points required for mass adoption of electric vehicle batteries. Overall, uncertainty around long term availability of lithium and cobalt at affordable prices poses a significant challenge for the growth of the electric vehicle battery market.

Market Opportunity - Advances in Battery Technologies

The electric vehicle battery market is poised to benefit tremendously from ongoing advances in battery technologies. One such promising development is solid-state batteries which have the potential to replace liquid lithium-ion batteries currently used in most electric vehicles. Solid-state batteries offer higher energy density, better safety, and lower costs of production compared to liquid lithium-ion batteries.

Ongoing battery R&D is also working on improvements to lithium-ion battery chemistries using alternative anode and cathode materials to boost energy density while lowering dependency on costly raw materials like cobalt. Such advances in electric vehicle battery technologies have the potential to overcome challenges around raw material availability. It also accelerates the mass adoption of electric vehicles. This provides a huge opportunity for companies in the electric vehicle battery market to invest and capitalize on these new battery solutions.