The global lithium-ion battery market is poised for significant expansion between 2025 and 2040, driven by the accelerating energy transition, policy support, and technological advancements. This growth will be unevenly distributed across regions and sectors, with Asia-Pacific maintaining dominance, while North America and Europe ramp up production to meet local demand. Key applications such as electric vehicles, grid-scale energy storage, and consumer electronics will fuel this expansion, supported by cost reductions and government incentives.

Regional demand variations will be pronounced. Asia-Pacific, led by China, South Korea, and Japan, will remain the largest market due to established supply chains, strong manufacturing bases, and domestic policy support. China alone accounts for over half of global lithium-ion battery production, with projections indicating it will maintain this position through 2040. South Korea and Japan continue to lead in high-energy-density battery technologies, catering to premium EV and electronics markets. India is expected to emerge as a significant player, driven by its push for localized battery manufacturing and EV adoption.

North America is projected to experience rapid growth, particularly from 2030 onward, as the United States and Canada scale up domestic production to reduce reliance on Asian imports. The U.S. Inflation Reduction Act and other policy measures are incentivizing local cell manufacturing and raw material sourcing. By 2040, North America could capture 20-25% of global production capacity, up from around 10% in 2025. Europe follows a similar trajectory, with the European Union’s Green Deal and stringent emissions regulations accelerating battery demand. Germany, France, and Sweden are investing heavily in gigafactories, aiming for supply chain resilience.

Electric vehicles represent the largest and fastest-growing segment for lithium-ion batteries. Global EV adoption is expected to surge, with EVs accounting for over 60% of new car sales by 2040 in major markets. Battery demand from EVs could grow at a compound annual growth rate of approximately 15-20% during this period. China remains the largest EV market, but Europe and North America are closing the gap as automakers phase out internal combustion engines. Commercial vehicles, including buses and trucks, will also contribute significantly, particularly in regions with strong urban electrification policies.

Grid-scale energy storage is another critical sector, driven by renewable energy integration and the need for grid stability. Lithium-ion batteries dominate this space due to declining costs and improving performance. By 2040, grid storage installations could require battery capacity exceeding 2,000 GWh annually, up from around 200 GWh in 2025. The U.S. and China lead in deployments, but Europe and Australia are rapidly expanding their storage fleets. Frequency regulation, peak shaving, and renewable firming are key applications.

Consumer electronics growth will be more modest but steady, with smartphones, laptops, and wearable devices continuing to rely on lithium-ion technology. Emerging applications like electric tools, drones, and IoT devices will add incremental demand. Asia-Pacific dominates electronics manufacturing, ensuring sustained battery consumption in this sector.

Several factors underpin this growth. Policy incentives are critical, with governments worldwide implementing subsidies, tax credits, and mandates to boost battery adoption. The U.S. Inflation Reduction Act, EU Battery Directive, and China’s New Energy Vehicle Industrial Development Plan are shaping market dynamics. Cost reductions are equally important, with lithium-ion battery pack prices expected to fall below $80 per kWh by 2030 and approach $60 per kWh by 2040, making EVs and storage systems more competitive. Economies of scale, improved manufacturing efficiency, and material innovations contribute to these cost declines.

The energy transition is the overarching driver, as countries pursue decarbonization targets. Renewable energy expansion necessitates large-scale storage, while electrification of transport and industry increases battery demand. Raw material availability and supply chain resilience will influence growth patterns, with recycling playing a growing role in meeting material needs by 2040.

Challenges persist, including geopolitical risks, supply chain bottlenecks, and environmental concerns related to mining. However, the lithium-ion battery market is on a clear upward trajectory, supported by technological, economic, and policy tailwinds. By 2040, it will be a cornerstone of the global energy landscape, enabling the transition to a more sustainable and electrified future.