Half the Market, None of the Drama

McKinsey projects lithium iron phosphate will reach 47% of North American battery demand by 2030, lifted by cost gains and policy support

30 Mar 2026

Lithium iron phosphate batteries are on course to claim nearly half of the North American battery market by 2030, according to a McKinsey report published in January. The analysis, produced by the firm's Battery Accelerator Team, projects LFP chemistry reaching 47% market share by 2030 and 49% by 2035, reshaping the competitive landscape for electric vehicle makers, grid developers, and battery producers.

McKinsey frames the shift as structural. LFP pack prices are forecast to fall to $55–$65 per kilowatt-hour by 2035, against $75–$90 for nickel manganese cobalt chemistry. Because LFP contains no cobalt or nickel, it avoids the commodity price swings that have repeatedly disrupted battery supply chains, an advantage that carries growing weight as developers and utilities navigate an uncertain trade environment.

US policy is compounding that edge. McKinsey estimates that the Section 45X production tax credit cuts domestic battery cell manufacturing costs by 30 to 50%, giving American LFP producers meaningful support during factory ramp-up. Tightened foreign entity of concern restrictions under the One Big Beautiful Bill Act are reinforcing the trend, steering procurement toward domestically eligible supply.

A chemistry variant is emerging as the next competitive frontier. LMFP, which incorporates manganese into the standard LFP formula, delivers higher energy density while preserving the safety and cost profile that made LFP the default choice for grid storage. McKinsey identifies LMFP as a credible option for compact, longer-range EVs, potentially narrowing the performance gap with NMC in mid-range segments.

The supply chain, however, remains a constraint. The US and EU together account for less than 10% of global cathode precursor and anode graphite production. Whether coordinated investment in domestic refining and processing can close that gap fast enough to support the projected LFP buildout is the question the industry has yet to answer.