The electric vehicle revolution is accelerating, with demand for EVs and their powering batteries reaching unprecedented levels. In 2025, electric vehicles constituted over a quarter of all new vehicle sales globally, a significant leap from less than 5% in 2020. This surge is even more pronounced in certain regions; China saw more than 50% of its new vehicle sales last year comprise battery electric or plug-in hybrid models. Europe experienced a notable milestone in December, with purely electric vehicles outselling their gasoline-powered counterparts for the first time. The United States, however, presents a contrasting picture, with a slight sales decline in 2025 compared to the previous year, thus moderating the global average. As EVs become increasingly ubiquitous on our roads, the battery industry is undergoing a parallel expansion, with promising advancements on the horizon, including the potential wider adoption of new battery chemistries offering lower costs and enhanced performance. Concurrently, the geopolitical landscape of battery production is shifting, and policy frameworks are evolving. Here’s a glimpse into what the future holds for EV batteries in 2026 and beyond.

A Significant Opportunity for Sodium-Ion Batteries

While lithium-ion batteries currently reign supreme across EVs, personal electronics, and grid-scale energy storage, a challenging economic climate in some markets, particularly the US, is fueling a growing interest in more affordable alternatives. Automakers are increasingly prioritizing battery cost over performance enhancements. Kara Rodby, a technical principal at Volta Energy Technologies, a venture capital firm specializing in energy storage, notes that the primary concern for many manufacturers today is the bottom line cost of batteries.

Sodium-ion cells have long been heralded as a potentially more economical substitute for lithium-based batteries. A key limitation of sodium-ion technology is its lower energy density, which translates to a shorter driving range compared to lithium-ion batteries. However, the greater abundance of sodium offers a pathway to reduced manufacturing costs.

The widespread success of lithium-based batteries has historically hindered the advancement of sodium-ion technology. Shirley Meng, a professor of molecular engineering at the University of Chicago, explains that the cost of lithium-ion battery cells experienced a dramatic decline, falling from $568 per kilowatt-hour in 2013 to a mere $74 per kilowatt-hour by 2025. This rapid cost reduction presented a moving target for alternative battery chemistries aiming to compete on price.

Currently, sodium-ion batteries command an average cost of approximately $59 per kilowatt-hour, making them less expensive than the average lithium-ion battery. However, when considering lithium iron phosphate (LFP) cells, a more budget-friendly variant of lithium-ion technology, which averages $52 per kilowatt-hour, sodium-ion batteries remain the more expensive option today.

Despite this, an opening for sodium-ion batteries is emerging. Recent months have seen an uptick in lithium prices, a trend that could potentially slow or even reverse the consistent downward trajectory of lithium-based battery costs.

Sodium-ion batteries are already making their way into commercial applications, predominantly for stationary energy storage on the grid. However, their integration into vehicles is gaining momentum. Chinese companies such as Yadea, JMEV, and HiNa Battery have commenced limited production of sodium-ion batteries for EVs. These are primarily being deployed in smaller, short-range vehicles and electric scooters that do not necessitate batteries with high energy density. CATL, the world’s largest battery manufacturer based in China, has announced the commencement of sodium-ion cell production and plans to introduce its first EV featuring this chemistry by mid-2026.

Currently, both the production and demand for sodium-ion batteries are heavily concentrated in China. This dominance is expected to persist, especially in light of recent reductions in tax credits and other financial incentives for the battery and EV industries in the United States. Natron, a prominent US-based sodium-battery company, ceased operations last year due to funding challenges, highlighting the difficulties faced by domestic players.

Further advancements in sodium-ion research are also anticipated. Meng indicates that companies and researchers are actively developing novel materials for various battery components, including electrolytes and electrodes. These innovations aim to improve the energy density of sodium-ion cells, bringing them closer to parity with lower-end lithium-ion cells.

Major Tests for Solid-State Batteries

As the latter half of this decade unfolds, the battery industry is keenly observing the significant promises and claims surrounding solid-state batteries. These batteries have the potential to pack more energy into a smaller volume by eliminating the liquid electrolyte, the medium through which ions travel during charging and discharging. This increased energy density could pave the way for EVs with extended driving ranges.

The development of solid-state batteries has been a long-standing endeavor, with companies making substantial claims for years. Toyota, for instance, had initially planned to integrate these batteries into vehicles by 2020. While this timeline has been revised multiple times, the company now projects a launch of new solid-state cells in vehicles by 2027 or 2028.

Historically, battery manufacturers have grappled with scaling the production of solid-state batteries to meet commercially viable supply levels for EVs. However, progress in manufacturing techniques is being made, and companies may soon fulfill their commitments, according to Meng.

Factorial Energy, a US-based solid-state battery developer, equipped a Mercedes test vehicle with its cells, enabling it to travel over 745 miles on a single charge during a real-world test in September. The company aims to bring its technology to market as early as 2027. Quantumscape, another significant US player in the solid-state battery arena, is currently testing its cells with automotive partners and intends to achieve commercial production later this decade.

Before the widespread adoption of fully solid-state batteries, we may witness the emergence of hybrid technologies, often referred to as semi-solid-state batteries. These typically incorporate materials like gel electrolytes, reducing the amount of liquid within the cells without entirely eliminating it. Evelina Stoikou, head of battery technologies and supply chains at BloombergNEF, an energy consultancy, notes that many Chinese companies are focusing on developing semi-solid-state batteries before transitioning to fully solid-state technology.

A Global Patchwork

The trajectory of the EV industry in the near future presents a varied landscape, significantly influenced by geographical location.

Last year, China surpassed Japan to become the country with the highest global auto sales. Furthermore, over one-third of all EVs manufactured in 2025 were equipped with batteries from CATL, underscoring China’s dominant position in the global battery industry, a status unlikely to change in the foreseeable future.

China’s influence beyond its domestic market is expanding rapidly. CATL is slated to commence production at its second European facility this year. This $8.2 billion project in Hungary will supply batteries to major automakers such as BMW and the Mercedes-Benz group. Canada has recently entered into an agreement to reduce import taxes on Chinese EVs from 100% to approximately 6%, effectively opening its market to Chinese electric vehicles.

Countries that have not historically been major EV markets could emerge as significant players in the latter half of the decade. Annual EV sales in Thailand and Vietnam, where the market was virtually non-existent just a few years ago, exceeded 100,000 units in 2025. Brazil, in particular, is poised for substantial growth, with new EV sales expected to more than double in 2026 as major automakers, including Volkswagen and BYD, establish or expand their production facilities in the country.

Conversely, the US faces a critical juncture for EVs in 2026, marking the first full calendar year after the expiration of federal tax credits designed to incentivize EV purchases. With these incentives phased out, continued lagging sales growth is anticipated.

A positive development for batteries in the US lies outside the EV sector. Battery manufacturers are beginning to produce cost-effective LFP batteries domestically, primarily for energy storage applications. LG opened a large-scale LFP battery factory in Michigan in mid-2025, and Korean battery company SK On plans to initiate LFP battery production at its Georgia facility later this year. These plants could offer a significant return on investment for battery companies as the US EV market navigates considerable headwinds.

Despite the challenges in the US, the global electrification of transportation is undeniable. By 2030, it is projected that 40% of all new vehicles sold worldwide will be electric. As we approach this milestone, the market is expected to witness the rise of more global players, an expanded selection of EV models, and an even broader array of battery technologies to power them.