A series of fires and slowing sales could drive focus toward standards.

The race to produce ever cheaper batteries for electric vehicles is entering a new stage as a series of fires and slowing EV sales put the focus on a new metric: safety.

Bringing down battery prices has been a major priority for automakers looking to make EVs more attractive to buyers. Some 30–40% of the cost of an electric car comes from the battery.

But there is a limit to how low prices can go, according to engineer Kazuo Yajima, who led battery development at Nissan Motor and is now CEO of Blue Sky Technology, a Japanese consultancy specializing in electrification technology.

“The cost of a battery is made up of the material cost, processing cost and margin,” Yajima told Nikkei Asia. “Manufacturers have been working to reduce processing costs, but there’s a limit to what they can do. Battery prices can’t drop below the material cost.”

There is still some room for costs to fall. The average battery price per kilowatt-hour is expected to decrease to USD 111 by the end of this year, down 40% from the 2019 level, according to Goldman Sachs Research in October. With further innovation, the price could drop toward USD 82 by 2026, which would put owning an EV, without subsidies, on par with gasoline-fueled cars in the US.

Achieving cost parity without subsidies is set to be increasingly important with the return of Donald Trump as US president, as he campaigned on promises of, among other things, gutting incentives for EV purchases. He is also an open proponent of protectionist trade policies.

The intense focus on price has helped China emerge as the global battery leader, according to Sanshiro Fukao, executive fellow at Itochu Research Institute. He said: “Automakers’ focus was on making EVs prevail, so they wanted cheap batteries. Chinese makers have the upper hand because most of the battery supply chain is in China.”

China’s CATL holds a leading 36% of the global market, according to a 2023 ranking by SNE Research, followed by domestic rival BYD at 16% and South Korea’s LG Energy Solution with 15%. SK On and Samsung SDI, also of South Korea, round out the top five.

But the recent emphasis on safety, Fukao argues, could give other makers an opening.

The South Korean government is already taking steps to keep its fast-growing EV industry on track. It recently began requiring all EV makers to disclose information on the batteries they use, and it will make safety certification of batteries used for EVs sold in the country mandatory from February 2025.

The changes follow an incident in August, when a Mercedes-Benz EV equipped with Chinese batteries caused a huge fire in the underground parking lot of an apartment complex in Incheon.

The focus on safety is also growing in China. In May, the Ministry of Industry and Information Technology proposed further improvements to power battery safety, raising “thermal runaway” standards from requiring an alarm five minutes before a fire or explosion occurs to ensuring that no fire or explosion happens at all. Thermal runaway refers to a chemical reaction in a battery cell that results in uncontrollable temperature increases. The proposal is expected to be implemented from July 1, 2026.

CATL chairman Robin Zeng has called on the industry to set aside competition and prioritize consumer interests, especially safety. “Many battery products claim a failure rate of one in a million, but in reality, the failure rate is closer to one in a thousand,” he said at an industry event in Sichuan province in September.

“With more than 25 million EVs on the road in China and billions of battery cells in use, when you multiply this by the failure rate, the safety risks become clear. There must be an absolute standard for safety,” Zeng said.

CATL’s nonthermal propagation (NP) technology is aimed at preventing issues with an individual cell from impacting the entire battery. The company hopes that upcoming versions of the tech will allow a battery to continue operating even if a single cell experiences thermal runaway.

Rival BYD has filed a series of patents on battery safety this year, according to the China National Intellectual Property Administration, though the carmaker told Nikkei Asia that it cannot share any information about its latest battery safety moves.

EV batteries currently on the market can be classified into two types depending on the chemistry they use.

The battery that is suspected to have caused the fire in Incheon was based on nickel chemistry, according to local police. This type allows for relatively high energy density, meaning they can run longer per charge but can be challenging to manage safety. They are also expensive since they use rare minerals, as battery names like NMC (nickel manganese cobalt) and NCA (nickel cobalt aluminum) suggest.

The other type are known as LFP (lithium iron phosphate) batteries and are based on iron chemistry. Iron phosphate exists in abundance, which helps keep costs lower than nickel-based batteries. This type has a relatively low energy density, which limits driving range but makes safety risks more manageable.

Experts agree both types are suitable for use in EVs. Automakers choose which to use according to the needs of the vehicles they are making.

While choosing the right battery is important, so is using it correctly, said Yajima, the engineer who was involved in developing batteries for the Leaf—Nissan’s first mass-produced EV. “Any type of battery, expensive or not, can burn if you don’t use it properly.” Exposing an EV to extreme temperatures for long periods or overcharging it could disrupt the battery’s chemistry and cause a fire, he said.

Some of the responsibility for correct use falls on automakers, he added. “Carmakers need to understand more about how batteries need to be managed, and design a system that balances safety and performance.” The ultimate example of such understanding, he said, is BYD, which was initially a battery maker that evolved into one of two bestsellers of EVs globally.

Other automakers are starting to realize the same thing. Hyundai Motor is developing its own battery management system that “not only checks [battery cells] during driving and charging, but also wakes up periodically when the car is parked to closely monitor battery cells for abnormalities,” Kim Chang-hwan, head of the company’s battery development center, said at an investor relations event in August.

Mitsutaka Fujita, marketing director of Tokyo-based marketing consultancy Techno Systems Research, said the slowdown in EV sales this year is a good opportunity for car companies to rethink how they make electric cars.

“Automakers were in a rush to make EVs, and they thought they could make them by simply replacing engine parts with batteries and motors,” Fujita said. But this did not work out, as the different power sources have different impacts on vehicle performance. A gasoline powered car, for example, becomes lighter as it uses up its fuel, while an EV remains just as heavy as its battery drains.

“The issue for battery makers going forward is to seek more accessible alternatives for materials that they currently use and ensure safety, but the real focus will be on automakers,” he said.

Fukao of Itochu acknowledges that the dominance of Chinese and South Korean battery makers will be hard to break. “But increased focus on safety could be an opportunity for other players like the Japanese to step up their business.”

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