The global battery industry is entering a phase of differentiated growth: ESS, AI data centers, and robot batteries are becoming new sources of value

Overview

This report examines structural changes in the global battery industry amid slowing EV growth, accelerating ESS demand, expansion of AI data center power infrastructure, and advancing robot commercialization. It argues that the industry is no longer driven by a single EV volume-growth logic, but is entering a new phase differentiated by application scenarios, regional policies, and technology pathways. China continues to lead in EV and ESS battery scale, LFP costs, and supply chain completeness; South Korea is leveraging US and European localization requirements to enter higher-value ESS and premium EV markets; Japan is avoiding mass-market battery competition and focusing instead on high-precision, high-ROIC applications such as AIDC server backup batteries.

Core views

The core views are as follows: first, ESS is the most attractive source of incremental demand over the next few years, with global ESS battery demand expected to grow at a 17% CAGR in 2026-30F, faster than EV batteries. Second, the power reliability and energy storage needs driven by AI data centers will become a new growth engine for the battery industry. Third, although robot batteries are far smaller than EV and ESS in GWh terms, their requirements for high rate capability, high power density, light weight, and thermal management give them higher unit prices and profit potential. Fourth, China will continue to dominate the global battery volume race, while South Korea and Japan seek differentiated opportunities in premium niches such as US ESS, localized supply chains, high-nickel, 4680, silicon anodes, and AIDC BBU. Fifth, lithium, nickel, and cobalt markets are shifting from oversupply concerns toward a more balanced state, and moderate raw material price recovery may affect the cost curve.

Analysis framework

The report combines top-down global EV/PHEV sales forecasts, EV and ESS battery demand estimates, regional policy analysis, technology pathway assessment, and company competitiveness comparisons. On the demand side, it covers EV, ESS, AI data centers, robots, and replacement demand; on the supply side, it analyzes the capacity, costs, localization, and technological advantages of Chinese, South Korean, and Japanese manufacturers; on the policy side, it focuses on the impact of the EU’s TCA, IAA, and CRMA, as well as US clean energy tax credits, local content rules, and PFE regulations, on supply chain restructuring.

Methodology notes

• Demand forecastingEV/ESS battery demand model

  Estimate GWh demand based on EV/PHEV sales, penetration rates, battery capacity per vehicle, ESS installations, and application mix.

  The report links EV battery demand to vehicle sales and battery pack capacity, and breaks ESS demand into scenarios such as grid storage, renewable energy integration, and backup power for AI data centers, thereby comparing growth rates and value pools across applications.

• Industry competitionRegional division of labor and localization barrier analysis

  Compare the different positioning of China, South Korea, and Japan in terms of cost, scale, policy access, and premium applications.

  China maintains global share through LFP, scale, and supply chain integration; South Korea benefits from localization requirements in the US and Europe; Japan sees AIDC server rack BBUs as a key growth direction.

• Policy analysisTCA / IAA / CRMA / US tax credit framework

  Assess the impact of Western policies on battery materials, component sourcing, local manufacturing, and non-China supply chains.

  EU rules raise local content and European manufacturing requirements, while US MACR/PFE rules and 45Y, 48E, and 45X tax credits enhance the relative competitiveness of non-China supply chains, though they do not fully exclude Chinese manufacturers from participation.

• Technology pathwayBattery chemistry comparison

  Compare the suitability of LFP, high-nickel NCM/NCA, sodium-ion, semi-solid-state, and all-solid-state batteries across different applications.

  LFP has become the main mass-production route for EV and ESS; high-nickel chemistries are better suited to high-performance EVs and early robot batteries; sodium-ion batteries have cost potential in ESS; and commercialization of all-solid-state batteries may still be delayed.

Asset mapping & comparison

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

• CATL (300750 CH)

  A leading Chinese battery maker and one of the report’s preferred Buy names.

  Strengths

  Global scale, profitability, LFP supply chain advantages, and sodium-ion battery positioning in both EV and ESS.

  Weaknesses

  Faces regulatory restrictions and trade barriers in the US and Europe, as well as a temporary slowdown in domestic EV demand in China.

  Comparison

  Compared with South Korean and Japanese manufacturers, CATL is stronger in cost, scale, and supply chain integration, but may face policy constraints in some US localization projects.

  Risks

  Restricted overseas market access, raw material price volatility, tighter regulation on capacity expansion, and weaker-than-expected global EV demand.

• Samsung SDI (006400 KS)

  A South Korean battery manufacturer and one of the report’s preferred Buy names.

  Strengths

  Benefiting from US ESS localization, AIDC BBU demand, and premium EV battery applications; ESS business is expected to drive earnings improvement in 2H26F.

  Weaknesses

  Outside North America and South Korea, its cost competitiveness is weaker than that of Chinese manufacturers.

  Comparison

  Compared with Chinese manufacturers, Samsung SDI has higher costs but stronger advantages in policy compliance and local supply chains.

  Risks

  AMPC subsidy step-down after 2033, insufficient cost reductions, and uncertainty around the pace of US ESS projects and policy.

• L&F

  A cathode materials company and one of the report’s Top Buys.

  Strengths

  Stable EV customer supply and expansion into LFP chemistries, helping improve the business outlook.

  Weaknesses

  Affected by downstream EV demand, customer concentration, and material price fluctuations.

  Comparison

  Compared with battery pack manufacturers, L&F is more directly exposed to cathode material prices, technology pathway shifts, and customer order changes.

  Risks

  New contract wins below expectations, slower-than-expected LFP mass-production progress, and volatility in high-nickel demand.

• Panasonic (6752 JP)

  A Japanese battery manufacturer rated Neutral.

  Strengths

  Focused on high-precision battery systems such as AIDC server rack BBUs, where the report estimates it has a 60-70% share of the relevant global market.

  Weaknesses

  Its competitiveness and growth elasticity in mass-market batteries are relatively limited, and the risk-reward is already fairly reflected.

  Comparison

  Unlike the large-scale EV/ESS strategies of Chinese and South Korean manufacturers, Panasonic is more focused on dedicated AIDC applications.

  Risks

  AIDC demand materializing below expectations, customer concentration, and profit erosion from technology iteration or price competition.

• EVE Energy (300014 CH)

  A Chinese battery manufacturer that the report believes has share gain opportunities in ESS and the 4680 market.

  Strengths

  New capacity plans, ESS and 4680 positioning, and Chinese supply chain advantages.

  Weaknesses

  Still affected by industry overcapacity at the low end and weak domestic EV demand.

  Comparison

  Smaller in scale than CATL, but with growth elasticity in specific ESS and cylindrical battery applications.

  Risks

  Capacity ramp-up, price competition, and tighter government approval for new capacity.

• LG Energy Solution (373220 KS)

  A South Korean battery manufacturer benefiting from the US ESS localization trend.

  Strengths

  US localized capacity, supply chain compliance advantages in South Korea, and ESS market opportunities.

  Weaknesses

  Costs are higher than Chinese imported batteries and it relies on subsidies and further cost reductions.

  Comparison

  Under US policy barriers, it has greater compliance advantages than Chinese imports, but its global cost competitiveness still needs improvement.

  Risks

  Subsidy changes, project delays, and US demand and inventory adjustments.

Key data

• Global ESS battery demand growth2026-30F CAGR 17%; 2026-35F CAGR 11%Expected to reach 1.3TWh by 2035F, mainly driven by grid, renewable energy, and AIDC demand.
• Global ESS battery demand scale2030F 926GWh; 2035F 1.3TWhESS demand in 2030F is about half of EV battery demand in the same period.
• Global EV battery demand2030F 1.8TWh; 2035F 2.7TWhCAGR of about 9.5% in 2026-35F.
• Global EV/PHEV sales forecast21.1mn/23.7mn/26.3mn units in 2026F/2027F/2028F, respectivelyCorresponding to YoY growth of 6%/12%/11%.
• China global share2026F EV market 65%; battery market 78%; ESS batteries about 80%Share advantages come from LFP, costs, scale, and supply chain integration.
• LFP global battery share61%LFP has become the mainstream chemistry for EV and ESS due to cost, safety, and cycle life.
• Robot battery market2030F 9-16GWh; USD2-4bnSmaller than EV and ESS in volume, but with high unit value, priced at about 3x per kWh of EV batteries.
• China 5M26 battery shipments783GWh, up 48.5% YoYOf which EV batteries were 528GWh, up 35% YoY; ESS batteries were 255GWh, up 88% YoY.
• Europe EV salesUp 26% YoY in January-May 2026Driven by the resumption of German subsidies, higher UK ZEV requirements, and extended corporate vehicle depreciation incentives.
• US ESS cost comparisonChina imports about USD90/kWh; US domestic production about USD150/kWh, about USD95/kWh after subsidiesAMPC of USD45/kWh and an additional 10% Domestic Content ITC can narrow the cost gap between local production and imports.
• South Korea US ESS capacityAbout 67GWh in 2026FCombined capacity of Samsung SDI, LG Energy Solution, and SK On is about 60% of US ESS demand.
• Lithium price forecastLithium carbonate at USD22.0k/24.6k per ton in 2026F/2027FA moderate recovery from USD9.7k per ton in 2025, affected by project delays and supply constraints.

Impact & implications

From an investment perspective, profit opportunities in the battery industry are shifting from simply pursuing EV shipments to pricing based on application value and regional barriers. ESS, AIDC, and robot batteries increase the importance of high-value niche markets, benefiting leading companies with technology, cost, certification, localization, and customer resources. Chinese leaders still benefit from global scale, LFP, and expanding ESS demand; South Korean manufacturers enjoy policy protection and localization advantages in US ESS and premium EVs; Japanese manufacturers can access a profit pool different from mass-market batteries if they maintain high share in AIDC BBUs. Risks include EV demand below expectations, changes in policy and trade frictions, raw material price rebounds, safety incidents, and slower-than-expected commercialization of new technologies.

Risks

• EV demand outside China is weaker than expected, especially in the US and Europe due to subsidy reductions, regulatory rollback, macro uncertainty, and slower charging infrastructure rollout.
• Policy and trade uncertainty, including changes in US incentive policies, higher tariffs on Chinese battery materials and products, technology transfer restrictions, and geopolitical disruptions.
• Safety incidents involving EV or ESS batteries could lead to recalls, project delays, stricter regulation, and higher warranty costs.
• Sharp rebounds in lithium, nickel, cobalt, graphite, copper, or rare earth prices could raise battery production costs and delay cost reductions.
• ESS and AIDC demand growth may fall short of expectations, or utilization of US localized capacity may be lower than expected.
• Commercialization of new technologies such as sodium-ion, semi-solid-state, all-solid-state, high-nickel, 4680, and dry electrode may be slower than expected.

What to watch

• Whether global ESS installations and AI data center-related BBU and UPS demand accelerate as expected in 2026-30F.
• The impact of US MACR/PFE rules, 45Y, 48E, 45X tax credits, and the AMPC phase-down path on the cost competitiveness of local ESS.
• The execution pace of the EU’s TCA, IAA, and CRMA, as well as progress in building local battery, materials, and vehicle supply chains.
• Whether supply-demand and pricing for China’s 314Ah and larger long-life ESS cells continue to tighten, and whether prices around RMB0.30/Wh can be sustained.
• Progress in approvals for new battery capacity in China and the clearing of low-end excess capacity.
• The commercialization pace of robot batteries, the assumption of 2-4kWh battery capacity per unit, and the choice between high-nickel or solid-state pathways.
• Lithium carbonate prices, Indonesian nickel supply policy, DRC cobalt supply restrictions, and the start timing of major mining projects.
• Share changes for CATL, Samsung SDI, L&F, EVE, LG Energy Solution, and Panasonic in ESS, AIDC, and premium EV orders.