Lithium iron-phosphate (LFP) batteries are the powerhouse of the EV battery market, capturing nearly half of the market share in 2025. LFP batteries account for a sizable majority (60-70%) all of Chinese EV production.
Because LFP batteries have more cost-efficient manufacturing processes, LFP batteries are approximately 30% cheaper than their nickel-manganese-cobalt competitors. As a result, LFP batteries’ market share will grow from 38% in 2022 to 41% by 2030, while NMC batteries’ market share is expected to shrink from 51% in 2022 to 42% by 2030.
Main LFP battery producers and competitors
Many of the leading LFP battery producers are Chinese. Chinese firm Contemporary Amperex Technology Co (CATL) is the world’s largest EV battery producer, and provides batteries to EV manufacturers Tesla and BMW, among others. With nearly 38% of the market share, CATL has battery production bases in China, Hungary, and Germany.
BYD, which stands for “Build Your Dreams,” holds a 15.8% market share, with a capacity to build batteries generating 135 gigawatts per year across 15 factories. The Shenzen-based company also pioneered the Blade Battery, with a lifespan of 1.2 million kilometres. It surpassed South Korea’s LG Energy Solution for second place in 2023.
LG Energy Solution now holds third place in top battery producers, with a 13.6% market share. Based in Seoul, its major clients include GM, Hyundai, and Siemens, and it produces a global capacity of 120 GWh per year.
The top three battery makers produce around two-thirds of the world’s batteries every year.
Other battery makers include Japanese electronics company Panasonic, with a roughly 8% market share, and South Korea’s Samsung, with a roughly 5% market share.
The size of the EV battery market, which was US$49 billion in 2022, is expected to reach US$98 billion by 2029.
Demand capacity by 2030 is expected to hit 4.7 GWh, McKinsey & Company projected, growing 30% year-on-year.
Challenges in Scaling LFP Battery Production
Raw materials will always remain the primary challenge in scaling up LFP battery production. These batteries require substantial amounts of lithium. This year, global production of lithium reached nearly 1.2 million tonnes, led by Australia, Chile, and China, and the supply likely to be able to meet demand for the moment.
However, demand will balloon in the coming years, with some analysts predicting a supply crunch as early as 2029. This supply imbalance is also projected to worsen, as battery production continues to increase and mining operations struggle to keep up.
On the manufacturing front, battery factories require substantial investment and technical expertise to perfect the chemical and mechanical processes required. These factories need substantial capital to get up and running.
For instance, three companies – Ford, SK On, and EcoPro BM – committed in 2023 to build a $1.2 billion plant in Quebec, while in December 2024 automaker Stellantis and CATL said they would invest up to €1.4 billion to build a large-scale LFP battery plant in Spain.
The specifications for these factories are also incredibly detailed.
“Modern batteries must be manufactured to geometric tolerances on the order of a few microns, while avoiding a host of similarly-sized particle contaminants,” Peter M. Attia, Eric Moch, and Patrick K. Herring wrote in Nature in January.
“Ensuring that each cell meets these specifications while being manufactured at high rates across multiple production lines that are continuously modified, maintained, and upgraded is a colossal task.”
On top of this, factories need to be built close to key markets to minimize the impact of storage and transportation on the end-stage batteries, as they are prone to fires. Workers need to be specially trained to handle them, which is true across all stages of the transportation supply chain.
Battery packaging is also complex, requiring research into custom solutions that can handle the size, weight, and chemical requirements to manage batteries without a problem.
All these demands require significant capital and research, which provides a substantial barrier for new entrants to the sector.
Supply chain risks
Beyond the bottlenecking of lithium supplies – when supply outstrips demand – there are a host of other potential risks to the supply chain for LFP batteries.
Lithium supply is one issue. Processing lithium is another.
Processing of the world’s lightest metal continues to be dominated by China, which holds its industrial secrets tight to its chest. China accounts for 65% of the total global market of processed lithium.
While other nations – notably the United States and Australia – are working now to catch up, China has plans to triple its lithium processing capacity, ensuring that China will remain the market leader for this commodity for some time.
China also possesses a 90% global share in the materials to make LFP cathodes. The Chinese government recently signalled that it would impose new restrictions on exports for these valuable materials, making it even more difficult for non-Chinese businesses to produce these critical LFP battery parts.
Despite the clear dominance of China in LFP battery production, international cooperation in production will be integral to more widespread manufacturing and adoption of LFP batteries, the International Energy Agency said in a March 5 note.
“Many individual markets might not be sufficiently large to justify the necessary investments in the manufacturing of batteries and their components, and so may require closer collaboration with other EV and battery markets,” the IEA said.
Capital constraints may also require nations to work more closely with lithium-producing nations in South America, Africa, and elsewhere, the IEA added.
