Electric vehicle battery tech in the UK 2024

This report was commissioned by the Faraday Battery Challenge Fund.

1. Scope of the report

This report has been commissioned by the UKRI’s Faraday Battery Challenge and delivered by Innovate UK.

1) Provide a data-driven picture of the EV battery VC investment landscape in the UK and globally

2) Provide a data-driven picture of all FBC-funded startups, whether they are UK EV Battery companies or not.

This report builds upon previous research such as “Electric vehicle battery tech in the UK 2023“, commissioned by UKRI’s Faraday Battery Challenge to Dealroom.co. A particular focus will be given to relevant data since 2018, the year the FBC program was initiated.
The Faraday Battery Challenge (FBC), delivered by Innovate UK, is a £610 million UKRI Challenge Fund investment, delivering a mission-led, research and innovation program that covers “Lab to Factory” development, cutting-edge research, and national scale-up infrastructure. The FBC seeks to address market failures in road transport decarbonisation and to attract investors to the UK’s battery industry. By leveraging scientific strength, with our delivery partners Faraday Institution, UK Battery Industrialisation Centre and Innovate UK Business Connect, we are building an ecosystem that supports industry growth and ensures UK prosperity.

» Learn more about the Faraday Battery Challenge (FBC), delivered by Innovate UK.

2. Global overview of the electric vehicle transition

Electrified transport has now become the largest segment of spending within the energy transition, growing by 36% in 2023 to reach $634 billion, according to BloombergNEF. This includes spending on electric cars, buses, two- and three-wheelers, and commercial vehicles, as well as the associated infrastructure needed to support this growing demand.

As the world increasingly moves towards electrification, the demand for advanced battery technologies continues to surge. This section introduces the key trends shaping the global EV battery landscape, including market growth, technological advancements, and the evolving dynamics within the industry.

EV sales and regional market growth

2023 marked a key year for the growing and maturing EV battery industry. Despite rising interest rates, EV sales reached nearly 14M globally in 2023, reflecting a 35% growth from 2022. Notably, 70% were full battery electric vehicles (BEVs).

Every major region saw EV sales grow, including Europe, where BHEV sales grew 37% to 2.2M, and whole plug-in hybrid sales remained flat. Q1 2024 has also shown a ~30% growth Y-oY (vs Q1 2023) while being lower than the last two quarters of 2023 due to vehicle sales seasonality trends. Notably, China’s EV sales have now reached 50% of new vehicle sales (BEV and PHEV).

Globally, EV sales are projected to grow in 2024, but at a slower pace. This however differs strongly by country and region. Countries like China, India and France are still growing strongly, while a few markets like Italy and Germany are contracting, and the US is showing slower growth. The UK is showing robust growth, even if less than runner-up markets.

Future projections: In BloombergNEF’s basic scenario, passenger EV sales are expected to grow from 13.9 million in 2023 to over 30 million in 2027. This would mean a 21% average growth, substantially lower than the average of 61% seen between 2020 and 2023. This reflects both a maturing market dynamic and a consequence of macro trends from politics, to supply chain and inflation.

United Kingdom: In the UK, BEV sales reached a record 17.9% share in May 2024 (with PHEV also claiming a record 7.9%), nearly on track for the Zero Emission Vehicle (ZEV) mandate. The mandate requires automakers in the UK to achieve a 22% target in 2024, ramping up to 100% in 2035 (previously, it was deemed to be 2030). There are now over one million electric vehicles on British roads.

EV battery supply and demand

Battery chemical prices fell in 2023 as supply outpaced demand. This has been due to more mining, slower market growth, high inventories in China and a shift towards LFP (Lithium iron phosphate battery) battery chemistry. In particular, the cost of lithium has dropped 80% since its peak in late 2022, contributing (among other factors) to a 16% decrease in cell-level battery prices to $107/kWh. Cell formats trending towards large-format prismatic cells, influenced by continuing LFP adoption.

7 TWh of battery manufacturing capacity has been planned globally before 2030. Nearly 70% of this capacity will be in China. The US and EU have introduced measures to develop domestic battery supply chains, with a particular focus on sourcing critical minerals and battery recycling.

LFP and NMC chemistries currently dominate the market. The Chinese market has been turning to LFP, with BYD now using this battery chemistry exclusively, for instance.
European manufacturers have favoured NMC batteries for the moment, while Tesla opts for a mix of LFP, NMC, and NCA, depending on the model. In 2023, the share of LFP-powered EV sales in Europe and the US was 6% and 7%, respectively, compared to 67% in China. With China being the leading EV and battery producer, this could mean a shift to LFP might also be coming in Europe, but this is not guaranteed due to different cost structures and customer preferences.
The majority of the North American and European upcoming capacity was planned to be on NMC (Nickel Manganese Cobalt) chemistries, but that is now being reassessed in light of LFP prices dropping sharply due to lower raw material costs and Chinese overcapacity. Over the last year, the price for lithium iron phosphate, or LFP, battery cells in China has dropped 51% to an average of $53/kWh.
For instance, Automotive Cells Company (ACC), with its shareholders Stellantis, Mercedes-Benz and TotalEnergies subsidiary Saft, has halted the construction of two of its three planned European gigafactories while it weighs whether to shift to LFP chemistry.

Advanced cell chemistries continue to make progress towards commercialization. Some are spearheaded primarily by industry incumbents such as LMFP, and Na-ion (also showing significant startup activity).
Startups are also developing silicon-rich/silicon-dominant anodes, Li-Sulfur, Li-metal, solid-state chemistries, sodium-batteries among others.

Conclusion

The global EV market remains on an upward trajectory, with Europe and the UK contributing significantly to this growth. Investment opportunities in the UK’s EV battery sector are strong, bolstered by the country’s alignment with European trends and its focus on developing a resilient domestic supply chain. While China continues to lead in global production, the UK’s strategic initiatives and the broader support from EU and US policies create a favourable environment. This positions the UK as a key player in the ongoing EV transition.

3. The Global EV Battery VC investment landscape

This section examines the global venture capital (VC) landscape, analyzing the investment trends driving growth in the electric vehicle (EV) battery sector worldwide. The focus is on understanding the distribution of VC funding across different regions and countries, the key investors in the market, and the specific segments within the EV battery industry that are attracting the most investment.

You can explore Global EV battery startups by segment here.

Overview of Global VC investment in Battery Companies

Global EV battery venture capital funding has grown over 30x in the past decade, with $8B in VC (venture capital) funding in 2023. Funding grew massively in 2021 and remained very strong in 2022-2023. 2024 has started considerably slower for VC funding amount, mostly due to less megarounds.
Looking at the number of rounds, activity started to pick up at earlier stages in 2016 and accelerated massively in 2021-2022; 2024 is still projected to see more activity than any year prior to 2020.

Megarounds started to appear in the space around 2016 and grew to account for nearly 80% of the funding amount in 2019-2023.
The global VC investment market is showing some signs of maturity, with the number of early-stage rounds losing share since 2020 but still showing notable activity. 2024 is, however, showing for now a lower share of megarounds than the last few years, with all megaround YTD being raised by US companies. This reflects a broader trend in the global venture capital market, as higher interest rates have slowed VC capital flows, as well as a constrained exit environment and subdued public-market valuations. This trend may continue if current market conditions persist, indicating a potential “balancing” of the market towards VC investment levels more similar to those pre-pandemic.

VC investment in EV Battery companies by regions

The UK ranks as the 4th largest recipient of EV Battery VC investment since 2018, following the US, China, and Sweden, and showing one of the strongest VC investment growth in recent years. In 2023-2024, the UK moved up to 3rd place.

By number of VC rounds, the UK ranks 2nd globally, indicating a high level of investment activity. 53% of disclosed UK VC rounds since 2018 are pre-seed and seed, 25% Series A, 18% breakout stage and 3% megarounds. However, despite these strong rankings, the number of VC rounds in the UK has declined and currently remains below pre-pandemic levels. In contrast, France and Germany, which had much less activity than the UK pre-pandemic, have seen growth in their number of rounds, and the US has surpassed its pre-pandemic levels.

When viewed through a per capita and per GDP lens, the UK continues to outperform many major economies. The UK ranks 4th per capita VC funding since 2018 and 3rd by number of VC rounds. The UK ranks 4th per VC funding relative to GDP since 2018, and 1st by number of VC rounds. This performance places the UK ahead of major economies like the US, Germany, and France, while it is outranked by Nordics countries and Estonia.

The UK ranks 6th by combined enterprise value of VC-backed EV battery startups, with China (strongly driven by CATL), the US, and Sweden (mostly Northvolt) creating the most value. The UK ranks 8th by per capita and per GDP combined enterprise value among major nations. However, if we exclude unicorns and gigafactories like CATL and Northvolt, the UK ranks 4th, after the US, China, and Canada.This suggests that the UK’s ability to compete on the global stage would be significantly strengthened by building large gigafactories and achieving high-profile successes.

Distribution of VC-backed EV battery startups globally.

EV Battery Proprietary Taxonomy

Global EV battery startups have been classified by segment in this landscape by Dealroom.co.

Dealroom's proprietary taxonomy looks at EV batteries along different lenses, from value chains to technology. A schematic explaining the taxonomy is depicted below.

For example, a startup like UK Nexeon is tagged overall as EV battery and specifically technologically-wise as lithium-ion batteries with silicon anode (in specific silicon composite). From a value chain perspective, it is a "battery material provider"since it provides a drop-in silicon replacement for graphite in anodes and offers that to cell manufacturers.
Differently, a startup still focusing on silicon anode like Sila Technologies is tagged as a cell manufacturer and battery assembler since it uses its own developed silicon anode material to manufacture batteries as a vertical integration.

Taking the example of solid-state batteries. A startup like LiNa Energy working on solid-state sodium batteries is tagged both as "solid-state" and "sodium-based batteries".

Electric vehicle manufacturer companies developing their own battery tech in-house, such as the bankrupted Arrival and Proterra, have been excluded from most statistics since only a fraction of the capital they raised went to finance their battery effort.

Acronyms

FBC=Faraday Battery Challenge
ZEV=Zero Emission Vehicle
EV = Electric Vehicle
BEV = Battery Electric Vehicle
PHEV = Plug-in Hybrid Electric Vehicle
HEV= Hybrid Electric Vehicle
NMC = lithium nickel manganese cobalt oxide
LFP = Lithium iron phosphate
LMFP = lithium manganese iron phosphate
NCA = lithium nickel cobalt aluminium oxide
Na-Ion = sodium-ion batteries
DLE = direct-lithium extraction
VC = Venture capital (VC) is a form of private equity financing provided by firms or funds to startup, early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in terms of number of employees, annual revenue, scale of operations, etc.
CVC = corporate venture capital. Direct investments from corporates in startup companies. The term is here used both in case the corporate has an established CVC arm, but also if the investment is made directly from the corporate balance sheet, if the investment is a minority and in private tech startups.
OEMs = Original equipment manufacturer. Here we refer to automotive OEMs, as what is commonly referred to as "car makers", such as Volkswagen, Tesla, Jaguar.
CO2e - carbon dioxide equivalent
GHG - Greenhouse gas emissions
GWh - gigawatt-hour
IRA - The USA Inflation Reduction Act

VC investment by stage

We break venture capital into three distinct stages:

• Startup stage ($0-15M rounds)
• Breakout stage ($15-100M rounds)
• Scaleup stage ($100M+ rounds).

This provides more consistent and timeless segmentation of the startup & venture capital landscape (more so than self-reported round labeling, which are applied inconsistently, especially between business cycles).

About Dealroom

Dealroom.co is a global provider of data and intelligence on startups and tech ecosystems. Founded in Amsterdam in 2013, we now work with many of the world's most prominent investors, entrepreneurs and government organisations to provide transparency, analysis and insights on venture capital activity. Our mission is to accelerate entrepreneurship & innovation through data for governments, corporates, VCs and founders.

Dealroom products include:

• Online platform access (SaaS)
• API
• Custom research
• Ecosystem platforms

Dealroom’s products are trusted by:

• Investors like Accel, Insight, Balderton, Atomico, EQT, Index Ventures, Lakestar
• Corporates like Google, Stripe, McKinsey, BCG, EY, Deloitte, Amazon
• Public bodies, including 98 cities and regions as their official startup & innovation database

Uniquely relevant research experience

Dealroom is known for its research on tech ecosystems and industry deep-dives. These are widely shared within the tech ecosystem and often quoted by the likes of The Economist, Financial Times, BBC, The New York Times, Sifted, TechCrunch, etc.

For the past number of years, we have been producing research on EV Batteries - tracking startups, technologies and funding in this sector as well as working with teams within Faraday Battery Challenge and the Advanced Propulsion Centre on their reporting to provide data and develop a thorough methodology in order to accelerate their understanding of the space.

In the UK, we have been closely involved in providing insights to organisations such as UKRI, DSIT, DCMS, DBT and Tech Nation.

Why Dealroom is Uniquely Positioned to Conduct this Research:

Expertise in EV Battery Investment Research: Dealroom produced the initial research for FBC and APC, establishing a solid framework for ongoing insights, recommendations, and future-focused analysis.

Data Foundation: With the support of FBC and APC, Dealroom has developed and maintained an industry-grade dataset, investing significant resources in classifying companies and refining data that can now be leveraged to provide both current insights and identify future opportunities.

Experienced Research Team: Led by Lorenzo Chiavarini, whose background includes significant experience in mechanical engineering and innovation consulting with companies like FCA (now Stellantis), CNH, Ferrari, and Marelli, our team ensures high-quality research standards. Lorenzo, supported by innovation analyst Nina Chaloum, who contributed to previous EV Battery reports, will build a solid narrative around data-driven insights, forecasting sector trajectories, and providing actionable conclusions and recommendations for FBC.

Strong Network: Our extensive connections with key investors, founders, and ecosystem stakeholders in the EV battery space enhance our ability to inform the research narrative, conclusions, and recommendations with expert insights.

Data leadership - taxonomy & coverage in this sector:

Dealroom stands out in the market with its proprietary taxonomy for classifying startups and scaleups. In a fast-moving innovation landscape, disruptions can be sudden, and Dealroom augments artificial intelligence with human expertise to create an industry-leading, investment-grade taxonomy trusted by leading VCs, corporations, and governments.

In collaboration with top venture capital firms and global industry experts like UKRI, DSIT, and the European Space Agency, Dealroom’s Intelligence Unit has developed a taxonomy specifically suited to innovative business models. This taxonomy, which includes thousands of descriptive tags, is applied using a combination of machine learning and manual input. This human-led approach enhances the data, uncovers promising companies, and ensures that the taxonomy remains up-to-date with new innovations.

Over the past few years, Dealroom has invested hundreds of hours in applying these methods to classify, segment, and track companies in the EV battery sector. This rigorous approach has enabled us to establish a solid data foundation, providing a clear mapping of the global sector and supply chain—from battery-enabling technologies to EVs.