Innovation Powers The Future Of Global Battery Markets And Supply Chain Resilience – IEA

The global battery industry is undergoing rapid transformation, driven by innovation, rising demand, and evolving supply chains. Between 2010 and 2024, global battery demand surged more than forty times, while prices dropped by over 90%. The market, valued at around USD 130 billion in 2024, has now become larger than the combined net oil imports of Germany, France, and Italy. This shift marks a decisive move from portable electronics to large-scale applications. Electric vehicles account for around 75% of global battery demand, battery energy storage systems about 15%, while portable devices represent just 5%. This change has been powered by continuous innovation in battery chemistry, design, and manufacturing efficiency.

The global market is currently dominated by two main chemistries: lithium iron phosphate (LFP) and lithium nickel cobalt manganese oxide (NMC). Each holds roughly half the market share. LFP has become the fastest-growing segment due to its lower cost and longer life, making it a preferred choice for energy storage systems. However, both chemistries face the challenge of concentrated supply chains, mostly limited to specific regions, which raises concerns about long-term security of supply and market dependence.

Innovation is seen as a critical solution to this challenge. Continuous research is improving existing technologies and exploring new ones that could reshape global battery supply chains. Sodium-ion batteries are one of the most promising alternatives. They replace lithium with the more abundant sodium, offering potential cost advantages, especially when lithium prices rise. In China, sodium-ion batteries entered the EV market in late 2023, and large-scale grid-connected projects followed in 2024. However, with China expected to hold 95% of global sodium-ion production capacity by 2030, this technology may not provide a strong competitive opening for new market entrants.

While breakthroughs in battery chemistry are essential, experts caution that innovation alone is not enough. Commercial success depends on industrial scale-up and a competitive manufacturing ecosystem. Many next-generation battery technologies, such as solid-state and sodium-ion batteries, still account for a small portion of global production capacity. Currently, 95% of manufacturing capacity is allocated to lithium-ion technologies. This limited base, combined with higher initial costs and lower readiness, means that emerging battery types are unlikely to overtake lithium-ion dominance before the mid-2030s.

Nevertheless, the global battery market continues to expand rapidly. Demand is expected to triple by 2030 and increase fivefold by 2035. Even a small market share of such a fast-growing industry offers significant potential. China remains the key driver of innovation, with companies like CATL investing over USD 2.5 billion in research and employing more than 20,000 researchers in 2024 alone.

For start-ups, however, funding challenges persist. Equity investments in battery start-ups have fallen from USD 7 billion in 2021 to around USD 2 billion in 2024, making it harder for new entrants to compete. The next generation of battery leaders will need not only technical innovation but also efficient manufacturing, strong supply chains, and a skilled workforce.

As the world transitions to cleaner energy systems, innovation will remain the foundation of the battery industry. It will continue to improve performance, lower costs, and open access to new markets. While lithium-ion technologies will dominate in the near term, emerging solutions being developed today will play a key role in securing future competitiveness and ensuring resilient global battery supply chains.