Lithium-ion batteries (LIBs) power electric vehicles through exceptional energy density but pose critical safety risks when mechanically compromised, particularly through nail penetration-induced thermal runaway. This review synthesizes experimental and modeling studies to establish the thermal runaway initiation hierarchy: (1) State-of-charge (SOC) (doubles thermal runaway probability at over 60% SOC), (2) cathode chemistry (thermal runaway propagation of LiNi0.8Co0.1Mn0.1-based batteries is eightfold faster than that of LiFePO4-based batteries), (3) nail properties (the possibility of short-circuit current of steel-based batteries is 40% higher than that of copper-based batteries), and (4) penetration dynamics (depth's impact is more than that of separator thickness in triggering cascading failures). Thermal runaway mechanisms involve synergistic electrochemical–thermal–mechanical coupling, where localized heating (higher than 1 × 10⁴ K/s) initiates separator collapse (80°C–120°C) and electrolyte decomposition (200°C). Mitigation strategies focus on mechanically graded separators (SiO₂/polymer composites: increasing 180% in puncture resistance); shear-thickening adhesives reducing impact forces by 35%–60%; halogen-free electrolytes within a 2 s self-extinguishing time; and solid-state architectures showing 0% thermal runaway incidence in nail penetration tests. Critical gaps persist in standardizing penetration protocols (velocity: 0.1–80 mm/s variations across studies) and modeling micro-short circuits. Emerging solutions prioritize materials-by-design approaches combining sacrificial microstructures with embedded thermal sensors. This analysis provides a roadmap for developing intrinsically safe LIBs that maintain energy density while achieving automotive-grade mechanical robustness (ISO 6469-1 compliance), ultimately advancing collision-resilient electric vehicle battery systems.