LFP Lithium-Ion Batteries Expected to Dominate EV Drive Battery Market by 2040

Growing demand for affordable electrified vehicles is expected to reshape the global battery landscape over the next two decades. On July 10, Fuji Keizai Co Ltd announced the findings of its latest market investigation covering lithium-ion batteries (LIBs) used as drive batteries in electric vehicles (EVs), hybrid electric vehicles (HEVs), and other electrified vehicles. The research forecasts a significant shift toward lower-cost battery technologies, with LFP lithium-ion batteries expected to account for more than 60% of the total market by 2040.

Fuji Keizai Forecast Highlights Growing Adoption of LFP Batteries

The study evaluated the market for liquid-electrolyte lithium-ion batteries and assessed both the current industry landscape and long-term market trends. According to the report, liquid-electrolyte LIBs remained the dominant battery technology for electrified vehicle drive applications in 2024. Their widespread deployment across multiple vehicle categories reflects their established position within the automotive industry.

Projected Cathode Material Trends for Electrified Vehicles

The report explains that cathode chemistry continues to play a key role in determining battery performance and market positioning. During 2024, ternary lithium-ion batteries, known for their high energy density, represented the largest share of the market and were primarily installed in premium-priced electric vehicles. However, changing consumer demand and increasing production of affordable EVs are expected to gradually alter this balance.

Expected Evolution of Battery Technologies

As shipments of mass-market electric vehicles continue to expand, the report projects that lower-cost and longer-life LFP lithium-ion batteries will experience strong adoption. By 2040, these batteries are expected to account for more than 60% of the overall drive battery market. In addition, lithium manganese-rich (LMR) battery technology is anticipated to see increasing adoption beginning around 2028, adding another cathode option for future electrified vehicle applications.

Forecast of Cathode Material Adoption

The findings indicate that the transition toward more affordable electrified vehicles is likely to drive broader adoption of cost-efficient battery chemistries without changing the current dominance of liquid-electrolyte lithium-ion technology. As vehicle manufacturers expand offerings for mainstream buyers, battery selection is expected to increasingly favor solutions that balance cost, durability, and long-term scalability across global markets, including Japan.

Frequently Asked Questions

Why are LFP lithium-ion batteries expected to dominate the EV battery market by 2040?
LFP lithium-ion batteries are forecast to capture more than 60% of the drive battery market because they offer lower costs and longer operational life than many alternative chemistries. According to Fuji Keizai's market investigation, growing shipments of mass-market electric vehicles will significantly increase demand for these batteries. At the same time, premium EVs are expected to continue using high-energy-density ternary batteries, while lithium manganese-rich battery technology is projected to gain adoption from around 2028.