AUTONEWS

Mapping trade-offs to help build better EV batteries

Battery production has scaled at an extraordinary speed, supported by rising demand for electric vehicles and stationary storage, with demand for lithium-ion phosphate batteries totaling almost 1.6 terawatt-hours in 2025. This scale-up has delivered one of clean technology’s most dramatic cost reductions: Utility-scale battery storage costs have fallen by about 93 percent since 2010, driven by growing industrial scale, deepening supplier ecosystems, and relentless factory learning. Battery production is highly concentrated in Asia, which produces more than three-quarters of advanced batteries. As decarbonization efforts continue and battery costs continue to come down, demand for batteries is likely to more than double by 2030 to 4.2 terawatt-hours and quadruple by 2035 to 6.8 terawatt-hours, according to analysis by McKinsey Battery Insights.

This investment case is one of ten used in the research for the McKinsey Global Institute’s report, Catalyzing competitiveness: Where investment happens and why. The report examines how variations in the basic economics of comparable projects influence investment decisions in different regions globally and the impact those decisions can have on the future of competitiveness and growth across the world.

A battery gigafactory is an at-scale plant that produces lithium-ion cells using a standardized manufacturing process to produce fundamental battery components, such as electrodes, and to assemble battery cells that go into battery packs for electric vehicles and stationary energy storage. A 50 gigawatt-hour facility, the scale analyzed here, is typically organized in three to five building blocks, 12 to 20 production lines, and three consecutive manufacturing steps: preparing coated electrodes, assembling cells, and finishing cells through aging and testing.

This analysis focuses on a specific battery chemistry, lithium iron phosphate (LFP). Due to its lower cost and great thermal stability, LFP is commonly used in low- and mid-market passenger electric vehicles (EVs), commercial EVs, and battery energy storage systems. LFP chemistries are projected to account for roughly 60 percent of battery market volume in 2035. The same tools and processes are used for other battery chemistries, for instance, nickel manganese cobalt (NMC), which are commonly used in mid- and upmarket EVs. NMC and related nickel-based chemistries are projected to account for roughly 38 percent of battery market volume in 2035, with other battery chemistries making up the remainder. Some gigafactories process LFP and NMC batteries at the same plant, and the conclusions here therefore broadly apply to both types of batteries.

The battery value chain begins upstream with mining and refining the required raw materials. Lithium, nickel, cobalt, manganese, iron, phosphate, aluminum, copper, and graphite are extracted and then chemically processed into battery-grade inputs. Advanced chemistry turns them into active materials for cathodes and anodes and ensures purity and consistency. Advanced petrochemical processes are applied to manufacture materials for electrolytes and separators. These are then assembled into battery cells. Scale and supplier depth matter at every stage because high volumes and expertise lower unit costs and shorten lead times.

This part of the EV supply chain today is highly concentrated in Asia, especially in China, home to most of the global capacity in lithium refining and a dominant share of LFP and NMC battery cathode materials and graphite anodes. That concentration reduces input prices, logistics, and working capital needs for Chinese battery cell makers, while regions with smaller upstream footprints often pay more for the same materials once transportation, tariffs, and compliance are included.

A new framework has been developed to help stakeholders—from battery and vehicle manufacturers to drivers to battery recyclers—better understand, anticipate and prepare for the entire life cycle of a battery, allowing them to anticipate trade-offs and consequences and make decisions and set priorities.

The research team, which was led by the Center for Sustainable Systems (CSS), housed in the University of Michigan School for Environment and Sustainability (SEAS), worked with car companies, battery developers and policy makers to develop the framework, and assessed economic, environmental and social trade-offs and outlooks from the perspective of stakeholders across the entire battery life cycle.

“I think of it as a break-out story. How do we break out of this complex puzzle where we’re trying to benefit the environment, to help the industry compete and to be cost-effective for consumers?” said Greg Keoleian, a professor at SEAS. Keoleian, who is also the co-director of CSS, is the senior author of the new study.

The assessments also underscored the various challenges facing EVs from various perspectives, including an oil industry with federal support and a vested interest in internal combustion engine vehicles. Still, Keoleian says he is optimistic the framework can help accelerate EV transition.

Working with car companies, battery developers and policy makers, University of Michigan researchers have developed a framework to help stakeholders navigate toward a future with better, more affordable and more sustainable electric vehicles. 

"I think of it as a break-out story. How do we break out of this complex puzzle where we're trying to benefit the environment, to help the industry compete and to be cost-effective for consumers?" said Greg Keoleian, a professor at the U-M School for Environment and Sustainability, or SEAS. Keoleian, who is also the co-director of the U-M Center for Sustainable Systems, or CSS, is the senior author of a new study published in the Journal of Energy Storage detailing the framework.

"You have all of these interested parties that can have different goals and objectives, so how do you align those?" Keoleian said. "Our framework helps stakeholders consider a holistic set of factors to achieve better outcomes for batteries and electric vehicles."

With input from experts in academia, industry and government, Keoleian and colleagues assessed economic, environmental and social trade-offs and outlooks from the perspective of stakeholders across the entire battery life cycle. This enabled the team to create a framework that stakeholders—from battery and vehicle manufacturers, to drivers, to battery recyclers—can use to better understand, anticipate and prepare for trade-offs and consequences as they make decisions and set priorities.The assessments also underscored the various challenges facing EVs from various perspectives. That includes an oil industry with federal support and a vested interest in internal combustion engine vehicles that also have more mature cradle-to-grave infrastructure, Keoleian said. But he is still optimistic the framework can help accelerate EV transition.

"There are multiple problems that need to be addressed in this journey, but ultimately these vehicles outperform internal combustion engine vehicles," Keoleian said. "They are quieter. They don't have tailpipe pollution and they're better for the environment. You get better acceleration, you have less maintenance costs, lower operating costs and the lowest total cost of ownership. We know that they are the future."

Trade-offs and chemistry case studies...Looking at the different battery chemistries that are being used and developed for EVs helps provide concrete examples of the types of trade-offs highlighted by the framework. In China, where more than 60% of new car sales are electric, EV manufacturers have come to rely on a battery chemistry using lithium iron phosphate, abbreviated LFP. Compared with another popular battery chemistry known as NMC for its nickel, manganese and cobalt components, LFP batteries are less expensive.

"EV adoption is really influenced by cost and the battery is about 30% of the cost of an electric vehicle," Keoleian said. "LFP is less costly because of the chemistry—it doesn't have the cobalt and the nickel."

But LFPs require more battery mass to achieve the same level of charge storage as NMCs. That translates to less range for an LFP vehicle. And because cobalt and nickel are valuable, there's more incentive to recycle these batteries, which would let battery makers create them more sustainably, by mining less new materials for each new battery.

American automakers, including Ford and General Motors, are also developing what are called LMR batteries, or lithium manganese-rich batteries, that have potential to marry the low cost of LFPs with the longer range of NMCs. Their durability, however, is a work in progress."There are a lot of different trade-offs and this framework helps elucidate what they are from different stakeholder perspectives," Keoleian said. "If you have blinders on, you can think you're really improving sustainability and performance, but you may actually be  causing problems somewhere upstream or downstream."

The research was funded by the Responsible Battery Coalition, and the research team also included Christian Hitt, a CSS research area specialist; Elliot Busta, a research assistant with the CSS and the U-M Electric Vehicle Center; Timothy Wallington, a CSS research specialist; and Hyung Chul Kim, a research scientist with Ford Motor Co. Experts with GM, Ford, Toyota, Dow Chemicals, the U.S. EPA, the U.S. Geological Service and Clarios, a leader in manufacturing batteries for the automotive industry, were consulted on this study.