By Pritu Makan
One of the most significant enablers of commercial electric vehicle (EV) adoption has been the dramatic decline in battery costs. Over the past three decades, lithium-ion battery prices have fallen drastically, dropping from around $9 200 per kilowatt-hour (kWh) in 1991 to roughly $74 per kWh, with even more competitive prices observed in specific regions. This decline has transformed the economics of EVs, reducing the cost of a typical EV battery pack from well over $20 000 a decade ago to around $5 000 today, making EVs increasingly affordable for the mass market.
Importantly, EV battery cell prices have now remained below the critical $100/kWh threshold for two consecutive years, a level widely considered necessary for price parity with internal combustion engine (ICE) vehicles.
Persistent overcapacity and fierce competition pushed battery pack prices lower across all major regions in 2025- China (-13%), Europe (-8%) and North America (-4%). Europe's drop largely reflected intensified price competition as Chinese manufacturers redirected exports from the United States (US) due to new tariffs and trade tensions.
Other key factors driving the ongoing cost reduction include:
Energy density has more than tripled since the 1990s, enabling longer driving ranges and more efficient vehicles at lower battery costs. For producers, the cost trajectory is not without risks. Battery metal prices increased in 2025, but this did not translate into increases in the prices for cells or packs. The battery industry absorbed the impact and showed resilience through a combination of greater LFP adoption, long-term contracts and other hedging strategies. In the near term, producers can absorb some of these cost increases to stay competitive, particularly under long-term contracts and amid continued oversupply. If elevated metal (lithium, nickel and cobalt) prices persist, it will likely exert pressure on battery manufacturers' margins and show up in short-term battery pricing. Nonetheless, the industry has shown increasing resilience to such shocks, adapting through chemistry shifts and supply-chain optimisation.
Overall, battery prices across sectors have converged during recent years, which is an indication of the industry's maturity and growth. Price differences in sectors are driven by order volumes, technology maturity and design requirements, and we expect these gaps to continue narrowing.
Battery supply chains, global competition and technology
The EV revolution is reshaping global industrial dynamics, with battery production emerging as a strategic sector. According to the International Energy Association (IEA), EVs remained the primary source of global battery deployment, accounting for more than 70% of the total in 2025 (2024: ~80%). In 2025, EV battery deployment reached ~1.2 terawatt-hours (TWh), up almost 30% year-on-year (y/y), and more than seven times greater than in 2020.
Geographically, China dominates the industry with over 80% of global battery cell production and nearly 75% of EV manufacturing. This concentration reflects deep integration across the supply chain, from raw materials to finished vehicles. The dominance of Chinese manufacturers extends to key technologies such as LFP batteries, which now represent over 55% of global EV battery deployment. These batteries offer lower costs and reduced exposure to volatile minerals like cobalt, making them particularly attractive for mass-market vehicles. At the same time, new chemistries such as sodium-ion batteries are emerging, potentially further reducing costs and diversifying supply chains.
The US and Europe are investing heavily in domestic battery production, while emerging economies such as Indonesia and Morocco are developing their own manufacturing capabilities as well. However, high capital costs, technological complexity, and entrenched incumbents present structural headwinds. More so, heavy reliance on a limited number of regions for critical materials and components increases exposure to geopolitical risks and trade disruptions. Recent export controls and policy changes highlight the urgency of diversifying supply sources.
Advances in charging technology are making EVs increasingly convenient while helping to address potential pressures on electricity networks. Innovations in power electronics, battery chemistries and battery pack design are enabling more efficient, higher-voltage charging systems capable of delivering significantly faster charging speeds. The first 1 000-volt EV models were launched in 2025, and manufacturers continue to push the boundaries of charging performance, with several announcing charging times of less than ten minutes in 2026.
Although fewer than 5% of EVs currently support charging rates above 250 kilowatts (kW), adoption is increasing alongside the rollout of ultra-fast and megawatt-scale charging infrastructure. As EV penetration accelerates and charging speeds improve, grid capacity constraints may become more evident in certain markets. Under current policy trajectories, electricity demand from EVs is expected to exceed 1 500 TWh by 2035, approximately six times higher than 2025 levels. However, this would increase total global electricity demand by only around 4% - while manageable at a global level, this shift will require significant grid upgrades and smarter charging solutions to avoid local bottlenecks, with regional impacts varying considerably. In Europe, EV adoption could raise electricity demand by more than 10% by 2035, compared with less than 6% in China.
To help manage these challenges, solutions such as smart charging and vehicle-to-grid (V2G) technology are gaining attention. Smart charging can reduce peak demand by shifting charging to off-peak periods, while V2G systems allow EV batteries to feed electricity back into the grid, providing additional system flexibility. The first commercial V2G offerings for private EV owners were introduced in 2025, although wider adoption remains constrained by limited model availability, fragmented regulations and evolving technical standards. Looking ahead, innovation across the battery sector is expected to remain robust, with battery-related technologies accounting for nearly half of all energy-sector patents, highlighting their central role in the ongoing energy transition.
The environmental impact of EVs has also been a hot topic, with some of the most recent headlines focusing on global oil demand. In 2025 alone, EVs avoided the consumption of approximately 1.7 million barrels of oil per day (primarily in countries that have implemented fuel economy and CO2 standards, such as China and the EU, a figure projected to triple by 2030 according to the IEA. Electric cars generally have lower running costs than ICE vehicles, mainly due to their higher efficiency. This reduction enhances energy security, particularly for countries that rely heavily on oil imports. It also contributes to climate goals by reducing greenhouse gas emissions from the transport sector, which accounts for a significant share of global emissions.
Investing in the global battery theme
CATL is the clear global leader by market cap at $262 billion, dominating EV battery supply chains worldwide. BYD leads on revenue at $110 billion, though it is a diversified EV and battery manufacturer rather than a pure-play battery company. The sector is heavily concentrated in China and South Korea, with Japan's Panasonic (also a diversified company) being the only major Japanese player.
In terms of the strategic differentiation between these companies:
Samsung SDI stands out with the highest implied upside of 73.4%, reflecting strong analyst conviction that the stock is materially undervalued at current levels. LG Energy Solution follows closely with ~50.7% implied upside, suggesting significant recovery potential, likely tied to an anticipated rebound in EV battery demand. CATL carries the strongest analyst rating score with ~42.8% implied upside, underpinned by its dominant global market share and continued capacity expansion. BYD offers comparable implied upside (~42.5%) but with a slightly less unanimous consensus, reflecting some caution around margin pressure and intensifying domestic competition. Panasonic Holdings trails the group with the lowest implied upside at ~22.5% and the weakest analyst rating, suggesting a more cautious outlook, likely reflecting its narrower battery exposure and slower strategic repositioning relative to pure-play peers.
Looking ahead
While the industry must navigate supply chain risks, policy shifts, and profitability challenges, the underlying trajectory is clear, EVs are on course to become the dominant mode of road transport, supported by continued innovation and expanding global demand. As battery costs continue to decline and adoption spreads across regions and vehicle segments, the transition to electric mobility will play a defining role in the global shift toward a cleaner, more resilient energy system.
Sources: BloombergNEF, IEA, PwC, Nomura, Our World in Data, Forbes Africa
