How Lithium-ion Battery Market Are Fuelling the Electric Vehicle Revolution

The lithium-ion battery market is on the verge of a revolution, much of which is underpinned by the global shift towards electrification and decarbonization.

In a world where governments, automakers, and customers are increasingly coming together on the same electrification page, lithium-ion batteries are gearing up to become the ubiquitous powerhouse of future mobility.

Driving Range: Lithium-Ion Batteries and the EV Revolution

Central to the growing adoption of electric vehicles (EVs) is the need for efficient, lightweight, and high-capacity batteries, which are critical for an EV to offer performance and range on par with, or better than, gas-powered counterparts.

After a decade of evaluation and iteration, lithium-ion batteries have emerged as the most promising solution, given their high energy density, fast charging speed, longer lifespan, and a steadily reducing price point, compared to all other battery technologies.

Market analysts project the lithium-ion battery market size to breach the USD 60.3 billion by 2030, riding on a growth rate of over 20.3% CAGR. The growth momentum is directly propelling off the EV market, which is witnessing exponential growth in global sales. By 2024, EV sales are expected to cross the 18-million-unit threshold, representing over 20% of the global auto sales, an increase by a factor of 10 in the last 10 years.

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Market Drivers

To get a sense of the scale, below are some of the key market drivers and tailwinds pushing for the adoption of the lithium-ion battery market.

1. Government Incentives

Across the world, countries are coming down heavily in favor of electric vehicles. Emission targets, subsidies and tax incentives, emission regulations and ZEV mandates are just some of the popular policy interventions aimed at promoting EV adoption and discouraging carbon-heavy combustion vehicles.

The availability of subsidies, easier loan terms, exemptions from registration charges, and other state-led incentives are creating a domino effect across the EV value chain.

2. Automaker Investments

Automakers like Tesla, Ford, GM, Volkswagen, Stellantis, BYD, and others are on a massive all-electric charging spree, with many pledging to convert their entire lineup to electric within the next 10 to 15 years.

The companies are re-investing some of their EV revenues in gigafactories and R&D, to secure their own lithium-ion battery supply chain and make further advancements in range and charging times.

3. Rapid Advancements

Technological advancements in the lithium-ion battery market are opening new avenues for energy density and fast-charging while addressing safety and ethical sourcing concerns.

New battery chemistries such as lithium iron phosphate (LFP) and the rise of solid-state batteries are just two ways in which the industry is focusing on lower battery costs and expanded vehicle range.

4. Battery Price Reduction

As the scale of production ramps up, battery pack costs have dropped by over 85% since 2010, enabling automakers to price their EVs more competitively. With the help of falling battery costs and improved cost efficiency of electric drivetrains, lithium-ion battery prices are anticipated to fall below $100/kWh, the long-anticipated tipping point for EVs to reach cost parity with gasoline-powered cars.

Charging Ahead: Infrastructure, Sustainability, and Beyond

Building lithium-ion battery supply chains is only half the job done. There are a number of infrastructural and second-life applications on which the industry is concurrently focusing. Developing both residential and high-speed public charging networks and battery recycling plants is essential for the large-scale adoption of lithium-ion batteries.

The continuous addition of charging points and faster charging speeds are eroding range anxiety, which was a previous sticking point in the global EV rollout.

However, there are sustainability and ethical sourcing concerns when it comes to raw materials like lithium, cobalt, and nickel. Extracting these materials are typically an expensive and polluting process with its own geopolitical baggage.

Automakers and battery manufacturers are working on end-to-end battery solutions and closed-loop recycling facilities, with a vision to work towards a circular battery ecosystem.

Scope for Diversification

EVs are just the tip of the proverbial iceberg. As electric mobility finds more takers across the world, there is going to be a significant need for electrified buses, trucks, 2-wheelers, and even aircraft. Urban public transportation and freight are also likely to electrify at scale, driving the lithium-ion battery market potential even further.

In parallel, batteries are also being increasingly deployed in the renewable energy space to store and regulate energy from solar and wind.

Wrapping Up

The lithium-ion battery market has the potential to do more than just give cars a new electric lease of life. As the technology matures, reduces in price and becomes more sustainable, lithium-ion batteries are set to power more efficient, clean, and affordable electric vehicles on a scale never before seen.

Lithium-ion batteries are very likely to become the standard drive train for the majority of new vehicles. This means that the lithium-ion battery market will almost single-handedly power the shift to a decarbonized future.

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