A pseudo two-dimensional mathematical model is developed for a lithium ion battery, integrating the elementary reaction based solid-electrolyte interphase (SEI) growth model with multiple transport processes. The model is validated using the experimental data. Simulation results indicate that the operating temperature has great effect on the SEI layer generation and growth. Under different charging–discharging rates, it is found that high charging–discharging rate can intensify the battery capacity fading process. Different cooling conditions are then applied and show that enhanced surface convective cooling condition can effectively slow down the battery capacity fading. After that, the effect of electrolyte salt concentration and exchange current density are studied. It is found that raising the electrolyte salt concentration can improve the diffusion property of lithium ions, and stabilize the battery performance under lithium ion consumption induced resistance rising. It also suggests that improving exchange current density could greatly decrease the lithium ion battery capacity fading.