In recent years, the demand for electric vehicle (EV) batteries has surged, driven by a significant increase in electric car sales. In 2023, the global demand for EV batteries reached over 750 GWh, a 40% increase compared to 2022. Although this growth rate was slightly slower than in previous years, electric cars were responsible for 95% of this increase. The rise in battery demand is largely due to higher EV sales and, to a lesser extent, larger average battery sizes as more SUVs become electrified.
The United States and Europe saw the fastest growth in EV battery demand among major markets, with over 40% year-on-year increases. China followed closely with around 35% growth. Despite this rapid growth, the U.S. remains the smallest market among the three, with about 100 GWh in 2023, compared to 185 GWh in Europe and 415 GWh in China. Other regions also experienced significant growth, with battery demand increasing by over 70% in 2023 compared to 2022.
In China, plug-in hybrid electric vehicles (PHEVs) made up about one-third of total electric car sales in 2023, accounting for 18% of battery demand. This is up from 17% in 2021. PHEV batteries are generally smaller than those used in battery electric vehicles (BEVs), thus contributing less to overall battery demand. Chinese carmakers have also been promoting extended-range EVs (EREVs), which use an electric motor and a combustion engine to recharge the battery. These vehicles typically have larger batteries than PHEVs and can achieve ranges of around 1,000 km when needed. In 2023, EREVs accounted for 25% of PHEV sales in China, a significant increase from previous years.
The rising demand for EV batteries is also driving up the need for critical raw materials like lithium, cobalt, and nickel. In 2023, battery demand for lithium reached around 140 kt, 85% of total lithium demand, and increased by over 30% compared to 2022. Cobalt demand for batteries rose by 15% to 150 kt, making up 70% of total cobalt demand. Nickel demand for batteries was about 370 kt in 2023, up nearly 30% from the previous year. Investments in mining and refining over the past five years have ensured that global supply can meet current demand. However, continued growth in mining and refining will be necessary to prevent supply chain bottlenecks in the future.
Battery production is primarily located near demand centers, with international partnerships playing a crucial role in global expansion. Most battery demand in China, Europe, and the United States is met by domestic or regional production. However, Europe and the U.S. still rely on imports for a significant portion of their EV battery needs. China is the largest exporter of EV batteries, with around 12% of its production being exported.
In 2023, the installed battery cell manufacturing capacity in China and the United States increased by more than 45% compared to 2022, while Europe saw a nearly 25% increase. If these trends continue, the U.S. capacity could surpass Europe’s by the end of 2024. International cooperation and trade in battery technologies will remain essential for the growth of the EV market.
Stabilizing prices for critical minerals has led to a decrease in battery pack prices. In 2023, the price of key battery metals such as cobalt, graphite, and manganese fell below their 2015-2020 averages, resulting in an almost 14% drop in battery pack prices compared to 2022. Innovations in battery chemistries, like sodium-ion batteries and lithium iron phosphate (LFP) batteries, are expected to further reduce costs and reliance on critical minerals.
LFP batteries, in particular, have become more popular, especially in China, where they accounted for more than 40% of EV demand by capacity in 2023. Sodium-ion batteries also hold promise for future cost reductions and could be suitable for urban EVs and stationary power storage. Overall, the EV battery industry is rapidly evolving, with ongoing efforts to develop more affordable chemistries and innovative designs to meet the growing global demand.
