Elemental lithium reacts with water in an exothermic reaction:
Since hydrogen is being released and the reaction is exothermic (heat releasing), there’s the possibility of fire.
Li-Ion batteries also have the possibility of thermal runaway where they undergo an exothermic chemical reaction and start to break down, often catching fire in the process. This can result from shorting as @kbraby has mentioned, being crushed, or external heat being applied ala something else catching fire. Once thermal runaway starts it’s self-sustaining unless the temperature within the cell can be dropped as @Raymond has mentioned. Tesla in particular uses thousands of individual cells in their designs which - while more expensive than fewer larger cells - offer individual containment of small quantities of cell innards as well as a greater surface area:volume ratio to help with cooling.
I suspect that much like how we learned how to make liquid-fueled vehicles less of a fire risk over decades of their production, we’ll do the same for electric vehicles. They’re already reasonably safe, but any serious collision and that battery pack is probably going to the recycler even if it checks out OK and works fine afterwards, thus there’s incentive to improve their performance in collisions and developing the ability to validate their safety afterwards.
