Sodium-ion battery costs plummet, poised to challenge LFP market

Overview

This report notes that sodium-ion batteries (SIB) are rapidly becoming an important technology option in the energy storage system (ESS) sector. Due to their rapidly declining costs and improving performance, sodium-ion batteries are expected to pose a significant threat to the traditional lithium iron phosphate (LFP) battery market in the coming years. In particular, with mass production and technological breakthroughs from companies like CATL, sodium-ion batteries have broad application prospects.

Core views

The cost of sodium-ion batteries has declined significantly over the past year, with a 24% drop in 2025, currently at $57/kWh. It is expected that by the end of 2026, costs will reach parity with LFP batteries, and in the future, there will be a cost advantage of $15-20 per kWh. Additionally, the energy density and cycle life of sodium-ion batteries continue to improve, currently reaching 175Wh/kg energy density and over 10,000 cycle life. As an industry leader, CATL has begun large-scale mass production of sodium-ion batteries and secured orders of up to 60GWh from HyperStrong. Sodium-ion batteries are not only suitable for energy storage systems but also have broad application potential in electric vehicles and micro-mobility sectors. For example, Changan Automobile's sodium-ion battery version Nevo A06 has significant cost advantages compared to the LFP battery version.

Analysis framework

The report assesses the cost trends of sodium-ion batteries by analyzing key raw material prices, manufacturing process improvements, and market supply and demand conditions. At the same time, by tracking the technological progress and capacity expansion of major manufacturers, it assesses the commercialization progress of sodium-ion batteries. The report also incorporates demand analysis for different application scenarios to predict the penetration rate of sodium-ion batteries in future markets.

Methodology notes

• Supply-Demand FrameworkSupply-demand framework

  Cost decline and supply increase of sodium-ion batteries

  The report uses the supply-demand framework to analyze the development trends of the sodium-ion battery market, focusing on supply increase and demand growth driven by cost decline.

• Valuation MethodologyDCF Discounted Cash Flow

  Using DCF model for company valuation

  The report uses DCF discounted cash flow model to value companies such as CATL, considering free cash flow forecasts and terminal value estimates to derive target prices.

• Industry Analysis FrameworkVolume-Price Breakdown

  Analyzing price and sales volume changes of sodium-ion batteries

  The report uses volume-price breakdown method to analyze changes in sodium-ion battery prices and sales volumes, thereby forecasting future market demand and development potential.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CATL (300750.CH)

  Sodium-ion battery technology leader with largest capacity and orders

  Strengths

  Technology leadership, rapid capacity expansion, sufficient orders

  Weaknesses

  Intensifying market competition, need for continuous technological innovation

  Comparison

  Compared to other manufacturers, CATL has absolute advantages in technology and capacity

  Risks

  Oversupply risk, technology iteration risk

Key data

• Sodium-ion battery cost$57/kWh24% YoY decline in 2025
• Sodium-ion battery energy density175Wh/kgCATL's latest generation product
• Sodium-ion battery cycle lifeOver 10,000 cyclesSignificantly improved compared to early products
• Sodium-ion battery shipments9GWh100% YoY growth in 2025
• Sodium-ion battery orders60GWhThree-year agreement between CATL and HyperStrong

Impact & implications

The rapid development of sodium-ion batteries will have a major impact on the existing lithium-ion battery supply chain, particularly in energy storage systems and electric vehicle sectors. Due to their low cost and high performance, sodium-ion batteries are expected to replace LFP batteries in multiple application areas. Additionally, with more companies joining and technological advancements, the market share of sodium-ion batteries will further expand, driving transformation across the entire industry.

Risks

• Sodium-ion battery technology is still in development stage, with uncertainties
• Intense market competition may lead to margin decline
• Raw material price fluctuations may impact cost advantages

What to watch

• Sodium-ion battery capacity expansion progress of CATL and other manufacturers
• Progress of sodium-ion battery applications in electric vehicle sector
• Impact of raw material price changes on sodium-ion battery costs