Motoring along: how Chinese EV production is powering the battery sector

Electric vehicles (EVs) are the main driver of the battery sector. Including plug-in hybrid electric vehicles, this year, EVs are set to account for around 22% - or 20 million - of all vehicle sales globally. Despite the disruption of recent years, electrification persists. 

At Wood Mackenzie’s LME Forum, our metals and mining analysts presented their views on the EV market and what global developments are likely to mean for the battery supply chain. Fill in the form to download complimentary slides from the event, with detailed charts, and read on for an outline of the presentation. 

China rules the EV roost 

The electrification of the road transport sector is largely a China story and its lead in the battery supply chain continues to be underestimated. So far this year, there have been four months in which Chinese EV sales have outpaced sales of internal combustion engine (ICE) vehicles. In a market of more than 30 million vehicle sales annually, that is significant. 

Chinese consumers can choose from hundreds of EV models. The market offers the latest technology and plentiful charging infrastructure, dynamic incentives and, crucially, affordability. Its EV success, therefore, should not come as a surprise. Wood Mackenzie expects some market consolidation over the next few years, but EV sales will continue to soar, with market penetration likely to reach 70% by 2030. 

Europe is sluggish and the US is trailing 

In Europe, EV growth has been uninspiring. High prices and inconsistent subsidies have resulted in penetration stagnating around 20‒30%. Still, more countries are now approaching, or have exceeded, the 50% penetration mark. Norway reached an unprecedented 98% this year and we expect ICE-only passenger vehicle sales there to be phased out completely next year.  

Europe as a whole, meanwhile, will be close to 50% uptake by the end of the decade. In the UK, Chinese imports are surging, and the expansion of the dealership network is aiding consumer acceptance. The EU’s countervailing duties have constrained this trend in on the continent, although plug-in hybrid EVs are exempt and becoming increasingly popular.  

Overall, China's share of European EVs is edging up. We expect this to gather pace, but it will very much depend on Chinese EV manufacturing build-out in the region. BYD, for example, whose vehicles are subject to a 27% EU tariff, is planning to produce all of its EVs for the European market in Europe, and there are others looking to do the same. 

In the US, in contrast, the share of EV sales has hovered below 10% for the past three years. Ironically, US President Donald Trump’s move to end the EV mandate was the thing that finally pushed sales above the 10% mark. Near term, however, we have lowered our forecast for the US, cutting out around 1 million annual EV sales by 2030. That would leave US EV penetration at 24% in 2030, down from our previous 30% forecast, lagging the rest of the world. 

LFP is the dominant technology 

A big part of EVs becoming more affordable is the resurgence of lithium iron phosphate (LFP) batteries, predominantly thanks to China, where incremental production in the year to date is 30% higher than the rest of the world total production combined. The rate at which China is building out cells continues to put pressure on prices. This year, more than 80% of batteries installed in Chinese EVs have been LFP, and most major automakers outside China are now incorporating the chemistry into their roadmaps. 

We are also beginning to see some capacity being built outside of China, primarily in Europe and the US, but there are few local companies able to compete. In Europe, most incremental capacity to 2030 is coming from Chinese companies.  

The US, meanwhile, is becoming more reliant on Korean battery makers. The Koreans, however, are very much playing catch-up when it comes to LFP technology. They may struggle to supply the latest generation of batteries to North American automakers, but even if they do, they will have to ramp up cathode production of LFP to unprecedented levels. As it stands, therefore, nearly all LFP cathode active material production by 2030 will still be happening in China. 

Conclusion and outlook 

Technologically, next-generation LFP is here, the boundaries of high nickel continue to be pushed, and 2026 should see the start of large-scale sodium ion being rolled out in EVs. After years of delay, nearly all major battery makers are hoping to bring some form of solid-state, semi-solid-state or anode-free battery to the market within the next few years.  

We are cautiously optimistic on new technologies. In our base case, we expect EV sales to approach 40 million by the end of the decade and see battery demand nearly doubling by 2030. We expect energy storage systems (ESS) to play a role but still expect EV demand to remain the main driver of battery growth.  

Learn more 

To download the full presentation deck from our LME event, complete with more detailed insights, data and charts, please fill out the form at the top of the page.  

Plus, find out more about Lens Metals & Mining; the tool that gives you a sharpened view on the entire battery materials ecosystem - not just mines, but smelters, refiners, and the flow of critical minerals from source to end use. By mapping asset-to-asset material flows and blending technical, economic, geopolitical, and environmental data, the platform helps you peer into the battery supply chain powering the EV and grid transition.