1. EV growth continues—but becomes regionally fragmented

Electric mobility remains the backbone of battery demand, yet 2025 and the first half of 2026 highlighted pronounced regional divergence:

• China surpassed a watershed moment, with more than half of new car sales electrified.
• Europe saw modest recovery after a weak prior year.
• The United States lagged behind, constrained by cost, infrastructure gaps, and policy uncertainty.

These differences have real technical implications. Battery developers must now design region-specific solutions, balancing cost, energy density, and lifecycle requirements depending on local market maturity.

Notably, plug-in hybrid vehicles (PHEVs) have declined in key markets, reinforcing the steady march towards full electrification, albeit with transitional technologies still playing a role.

2. The quiet giant: grid storage emerges as a dominant force

If EVs remain the public face of batteries, battery energy storage systems (BESS) are increasingly their industrial backbone.

In 2025, global stationary storage installations exceeded 100 GW—an extraordinary figure that underscores the role of batteries as enabling infrastructure for renewable energy and digital economies.

Several drivers converged:

• Falling battery costs
• Growing renewable energy penetration
• Increased electricity demand from AI and data centres
• Supportive policy frameworks

Crucially, BESS has also served as a relief valve for excess production capacity, especially in China. This interplay between supply surplus and new demand channels is likely to remain a defining dynamic.

3. Prices fall—science meets ruthless economics

Battery pack prices reached historic lows in 2025:

• Global average: ~$108/kWh
• China (LFP): ~$84/kWh

While this represents a triumph of materials science, process engineering, and scale manufacturing, it creates a more challenging industrial environment. Lower prices accelerate adoption but compress margins—pushing the industry towards:

• Vertical integration
• Automation and yield optimisation
• Aggressive cost engineering
• Consolidation forcing weaker players out of the market (in China an elsewhere)

Interestingly, significant regional price disparities persist, reflecting differences in labour costs, energy prices, and industrial maturity.

4. Chemistry reality check: the rise—and reign—of LFP

Perhaps the most striking scientific shift is the dominance of lithium iron phosphate (LFP) chemistry.

Once considered a lower-performance alternative to nickel-rich systems, LFP now leads across both EVs and stationary storage due to:

• Lower cost
• Superior safety profile
• Long cycle life
• Supply chain robustness

Innovation has not stood still. Advances in compaction density, fast charging, and system integration have allowed LFP to encroach upon application domains previously reserved for high-nickel chemistries.

The result is a more nuanced, application-specific landscape:

• LFP for cost-sensitive deployment
• High-nickel chemistries for performance-critical niches
• Sodium-ion emerging for stationary applications

As a consequence, there is a drive to retool existing battery factories or those under construction from high-nickel to LFP chemistry.

5. Beyond lithium: incremental innovation wins the race

Despite significant attention, next-generation technologies are progressing with cautious pragmatism.

• Sodium-ion batteries reached early commercial deployment, particularly in battery energy stationary storage (BESS) in grids, benefitting from abundant raw materials and cost advantages.
• Solid-state batteries advanced to pilot-scale production, with automotive deployment targeted for 2027–2030.

6. Artificial intelligence: from optional tool to industrial necessity

Artificial intelligence has quietly become indispensable across the battery value chain.

Applications include:

• Manufacturing quality control and yield optimisation
• Predictive maintenance
• Materials discovery and design

Moreover, AI indirectly drives demand for batteries in BESS systems through energy-hungry data centres—further strengthening the link between digital infrastructure and electrochemical storage.

In a low-margin environment, AI is no longer a differentiator but a baseline requirement.

7. Capital discipline replaces speculative growth

The investment landscape in 2025 reflected a broader maturation than previous years:

• Decline in venture capital for early-stage battery companies
• Growth in infrastructure-focused investment (>$100 billion in climate funds)
• Stronger performance of established Asian manufacturers relative to Western start-ups

This shift emphasises bankable, proven technologies—particularly in energy storage—over speculative manufacturing expansion.

Reference

Volta Foundation, 2025 Annual Battery Report, https://volta.foundation/battery-report-2025/