Executive Summary
Battery Technology Evolution
Battery technology has evolved beyond recognition since the first commercial lead-acid batteries were introduced over 100 years ago. Over time, the energy density of batteries has consistently improved as new chemistries and new production methods have been developed. The discovery of the lithium-ion battery effectively doubled the energy density of the nickel-cadmium battery.
In the early 1990's, LiBs had an energy density of 50Wh/kg. Today, the best lithium-ion batteries which are commercially mass manufactured have an energy density at the cell level of up to 350Wh/kg. This is almost an order of magnitude higher than lead-acid batteries which have an energy density of 30-40Wh/kg.
Over the past 30 years annual improvement in energy density has been on average 10Wh/kg per year. This has enabled electric vehicles to transition from niche products with a range of 250 miles to vehicles which can achieve over 600 miles on a single charge.
What Are the Current Limits to Battery Energy Density?
In practice, lithium-ion cells currently achieve only a portion of the energy density implied by the chemical potential of their active materials. The technical limits for existing lithium-ion and lithium-based battery energy density are defined by three constraints: chemical (thermodynamic), engineering (mass efficiency), and operational (stability/safety).
The Engineering Limit
The most immediate technical limit is the ratio of active materials (lithium, cathode powders) to inactive materials (packaging, current collectors, separators, and binders). Mass overhead in modern commercial cells means active materials typically represent only 30–40% of the total weight. The cathode accounts for 20–25% of pack weight, while the anode is 5–10%. Inactive components like the electrolyte, separator, and casing add the remaining 65–70%.
The Operational Limit
Even if the battery chemistry allows for high energy, the materials must survive the electrical and mechanical stress of charging. The voltage window (ESW) is limited by the Electrochemical Stabilization Window of the electrolyte. Liquid carbonate electrolytes typically become unstable above 4.5V, preventing the use of higher-voltage cathodes.
The Chemical Limit
The ultimate technical limit for "Lithium-Ion" batteries is the physical space available in the cathode host. We are reaching the point where we cannot jam more ions into the host material without structural failure. Moving to anode-free or silicon nanowire designs represents the current "state-of-the-art" path to bypass these limits—energy density can jump by 40–50% instantly.
Solid State Batteries
The next paradigm shift in battery technology is solid state batteries. While LiBs have improved dramatically over the past 30 years, they are approaching their technical limits in terms of energy density (400Wh/kg) and are unlikely to decrease significantly in costs beyond what is planned through to 2025. Moreover, they also have safety issues which arise out of using a liquid electrolyte which is made of flammable material.
To achieve a higher energy density (500Wh/kg), solid state batteries are designed with a solid electrolyte (which also acts as a separator) and a Li-ion metal anode which replaces the graphite anode. Lithium metal has a high theoretical specific capacity of 3860mAh g-1, versus the conventionally used graphite anode at 372mAh g-1. This means that lithium metal can store 10 times more energy than graphite.
We believe the arrival of solid-state batteries will be as significant to the battery industry as the arrival of the iPhone was for the smartphone industry. The transition to all-solid-state batteries should deliver a 50-100% jump in energy density over current premium NMC benchmarks. Companies such as CATL, Samsung SDI are targeting an energy density of 500 Wh/kg, theoretically enabling vehicle ranges of 800 miles for the same battery pack weight that currently offers 500 miles.
"The arrival of solid-state batteries will be as significant to the battery industry as the arrival of the iPhone was for the smartphone industry."
Fast Charging Batteries
Over the past five years there has been a rapid improvement in charging speed of leading EV models from 5km to >30km per minute. This should eradicate range anxiety. Just a few years ago, 2C (full charge in 30 mins) was the standard. Today charging speed has improved to 12C (full charge in 5 mins).
The verified overall record for an integrated EV battery pack is held by the UK startup Nyobolt, which demonstrated a 10% to 80% charge in 4 minutes and 37 seconds (effectively a sustained 12C+ rate) in late 2024. In 2025, CATL unveiled the 2nd-Gen Shenxing Fast Charging Battery which can deliver 520km of range on a 5-minute charge (12C at peak).
Beyond China, Toyota is leading the commercialization of solid-state batteries, which promise to further revolutionize charging speeds. Their technology aims to replenish 500km of range in just 5 minutes (or 100km per minute). Toyota's first solid-state battery is expected to deliver over 1,000km of driving range with a fast charging time of 10 minutes or less for a state of charge increase from 10% to 80%.
| Ticker | Rating | Currency | Price | Target | TTM Perf. |
|---|---|---|---|---|---|
| 300750.CH (CATL) | O | CNY | 348.98 | 530.00 | (2.1)% |
| 3750.HK (CATL) | M | HKD | 486.60 | 530.00 | NA |
| 051910.KS (LG Chem) | M | KRW | 298,500 | 310,000 | (12.2)% |
| 373220.KS (LGES) | M | KRW | 385,000 | 363,000 | (28.5)% |
| 006400.KS (Samsung SDI) | M | KRW | 383,000 | 310,000 | +27.5% |
Batteries Are Getting Cheaper
Lithium-ion battery costs have fallen a staggering 96% since 1991, which is an incredible 10% CAGR cost reduction over 30 years. Large battery cells, which were only introduced to the market in volumes in the last 10 years have seen an even more dramatic cost decline with prices falling 19% CAGR over the last 10 years as the less mature large cell battery costs catch up with small cells, which are close to parity on a pack basis today.
We attribute this cost reduction to (1) 'Wrights Law' and the production levels reaching economies of scale in large factories and (2) the relentless improvement in energy density which drives down costs. Last year spot price reached the bottom in the middle of 2025, US $93/kWh for NMC pack and US$69/kWh for LFP pack. While prices have recovered with the rise in material costs, the long-term direction of lower battery cost as energy density improves looks unstoppable.
Na-ion technology could well unleash the US$50/kWh battery. As manufacturing continues to scale up and energy density continues to improve, we believe that costs will continue to fall.
Applications for Advanced Batteries
Better batteries will lead to greater demand. We expect cheaper, fast charging, and higher energy density batteries to open-up new applications which will be accretive to battery demand beyond conventional electric vehicles.
- Ultra-long-range EVs & Supercars: At 500 Wh/kg, electric vehicles can achieve 800+ miles of range on a single charge. This density is also targeted for performance supercars where maintaining a low vehicle weight is critical for handling.
- Commercial and offroad vehicles: The decline in battery costs coupled with improvements in energy density have opened the commercial vehicle market. Roughly 20% of all heavy-duty truck sales are battery electric in China.
- Regional passenger jets: Technical analysis suggests that 500 Wh/kg is the minimum threshold required for a 90-seat regional aircraft to achieve a mission range of 800-1,000 km. This range covers approximately 50% of all scheduled passenger flights globally.
- eVTOL & Air taxis: Advanced urban air mobility (UAM) platforms require 400–600 Wh/kg to provide meaningful reserves and multi-hop range without recharging.
- Maritime Transport: Battery adoption has moved beyond the "pilot ferry" phase to become a significant market. The sector is currently focusing on full-electric for short-sea and river transit (up to 1,000km).
- Humanoid Robots: High-energy density batteries are the "missing link" required to transition robotics from tethered laboratory prototypes to untethered, commercially viable industrial tools. Batteries must exceed 400–600 Wh/kg to avoid the "weight penalty."
| Application | 2023 Demand (GWh) | 2050E Demand (GWh) | Growth |
|---|---|---|---|
| EVs | 660 | 7,296 | 11x |
| Commercial Vehicles | 43 | 1,852 | 43x |
| Two-wheelers | 37 | 468 | 13x |
| E-VTOL & Aviation | 0 | 250 | New |
| Ships (<10k tons) | 0 | 128 | New |
| Humanoid Robots | 0 | 250 | New |
| Energy Storage | 185 | 3,319 | 18x |
| Data Center | 3 | 541 | 180x |
| Total | 928 | 14,105 | 15x |
Investment Conclusion
Batteries have improved beyond recognition over the past 30 years. Energy density has improved 7x to 350Wh/kg. Charging speed has moved from 1C to 12C which means a battery can be changed in 5 mins with over 400km of range. The number of cycles has improved from 1,000 to 15,000 and up 20,000 for sodium ion batteries giving a life of 20 years for ESS.
Finally, all this has been done while the costs of a battery have been lowered by 95% from over US$1,000/kWh to less than US$70/kWh for LFP last year. With cheaper, better batteries more applications will open. Today battery demand is dominated by EV's and ESS. In the future, demand will likely come from heavy-duty commercial vehicles, shipping, aviation and robotics.
While batteries have come a long way, energy density could potentially double from currently with solid-state to 700Wh/kg and double again to over 1,200Wh/kg with lithium-air and lithium sulfur. This would take batteries to 50% of the useful energy density of gasoline, but with costs which are much lower.
For companies at the forefront of battery technology, this continued technology ladder should offer a competitive moat, which is why we continue to favor CATL as our top pick in the industry.
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