Material Insights · Understanding the Material World

Electric and hybrid vehicles and Lithium iron phosphate batteries

LFP became the most used EV battery chemistry in 2025 because it is the cheapest per kWh, which is what makes low-priced electric cars possible. Almost all of it is made in China, so EV growth in other countries leans on Chinese cells and cathodes.

Electric and hybrid vehicles (energy) and Lithium iron phosphate batteries (energy): 4 relationships.

How they are linked

1. LFP packs in EVs

Physical flow · Strong · LFP batteries to electric vehicles

Carmakers fit LFP packs in mass-market and mid-range models because the cells cost less per kWh and last many cycles, accepting lower energy per kilogram than nickel cells.

  • over 55% LFP share of EV batteries deployed worldwide, 2025
  • more than 10% LFP share of EV battery demand in the EU, 2025

LFP rose from nearly half of EV batteries in 2024 to over 55% in 2025, driven mainly by China. Outside China almost 80% of EV batteries still used nickel chemistries in 2025, and in the United States the LFP share almost halved, so the shift is regional rather than universal. The flow also runs back the other way on a small scale: retired EV packs can be reused in stationary storage.

Sources: IEA

2. Pack cost sets car price

Cost and price · Strong · Cheaper LFP packs lower EV prices

The battery pack is a large part of what an electric car costs to build, so a chemistry that is much cheaper per kWh lets carmakers reach lower sticker prices.

  • USD 81 per kWh average LFP pack price across all segments, 2025
  • USD 99 per kWh average BEV pack price, 2025
  • more than 40% LFP packs cheaper than NMC on average, 2025

Pack prices fell 8% in 2025 and were lowest in China at about USD 84 per kWh, with North America and Europe 44% and 56% higher. Part of the LFP discount reflects cheaper stationary storage packs, which are mostly LFP, so the gap within cars is smaller than the averages suggest; the regional gap still gives carmakers buying Chinese packs a cost head start.

Sources: IEA; BloombergNEF

3. China makes the cells

Shared risk · Strong · Chinese factories to EV makers everywhere

LFP cathode and cell making grew up in China, so carmakers elsewhere that want cheap LFP packs mostly buy Chinese cells or license Chinese technology.

  • over 80% China's share of world battery production, 2025

The IEA reports that production of LFP cathode materials and their precursors is still almost entirely in China. Tariffs or export controls on cells, cathodes or LFP technology would therefore raise costs for EV makers in Europe, the United States and India far more than for Chinese brands.

Sources: IEA

4. Price link: main customer

Cost and price · Weak · Both ways

Electric cars and buses are the largest market for LFP cells, but the site's vehicle proxy is a general US car price index, so the data show almost no link.

  • 0.06 monthly change correlation
  • 0.04 12-month change correlation
  • 1.95 fitted elasticity

Car prices move with wages, financing and model mix, and EVs are only part of the index, so falling battery costs do not show up in it. The weak figure says the proxy is poor, not that battery costs do not matter to EV prices.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. LFP passed 55% of EV batteries in 2025, so the volume of the EV market now sits mostly with the cheapest chemistry rather than the highest-range one.
  2. With LFP packs averaging about USD 81 per kWh against USD 128 for NMC across all segments in 2025, chemistry choice is a main lever for EV pricing and margins.
  3. With over 80% of battery production in China, trade policy on cells and cathodes is a direct risk to EV makers outside China.

What to track

  • LFP share of EV battery deployment by region: A rising share outside China signals cheaper EV models and lower nickel demand (Yearly · IEA Global EV Outlook)
  • Average battery pack price by chemistry: Further falls widen the price advantage of LFP-based EVs (Yearly (December) · BloombergNEF battery price survey)
  • Tariffs and export controls on Chinese cells and LFP technology: Tighter rules raise pack costs for non-Chinese EV makers (As announced · US, EU, Indian and Chinese trade ministries)

For policymakers

Key learnings

  1. Cheap LFP packs are what make low-priced EVs possible, so access to them shapes how fast EV targets can be met.
  2. Dependence on China for LFP cathodes and cells is near total, so local cell plants still need a cathode and precursor supply plan.
  3. By March 2026 only about 1 GWh of India's 50 GWh cell incentive target was installed, all at Ola Electric, so imported cells will supply Indian EVs for some years.

What to track

  • Domestic cell capacity commissioned under the ACC PLI scheme: Shows how fast import dependence for EV cells can fall (Quarterly · Ministry of Heavy Industries; IEEFA reviews)
  • Imports of lithium-ion cells by origin: A falling Chinese share indicates real diversification (Monthly · Ministry of Commerce export-import data bank)

India

India still depends on imports for close to 100% of its battery cells, and by March 2026 only about 1 GWh of its 50 GWh cell incentive target was installed (IEEFA counted 1.4 GWh by October 2025), all at Ola Electric; Reliance's planned plant is listed as LFP.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Global EV Outlook 2026: Electric vehicle batteries, IEA (2026)
  3. Lithium-ion battery pack prices fall to $108 per kilowatt-hour despite rising metal prices, BloombergNEF (2025)
  4. Assessing India's ACC PLI scheme, IEEFA and JMK Research (2026)
  5. Rajya Sabha unstarred question 3908: PLI scheme for ACC battery storage, Ministry of Heavy Industries, Government of India (2026)