Core–shell electrode particle designs offer a route to improved lithium-ion battery performance. However, they are susceptible to mechanical damage such as fracture and debonding, which can significantly reduce their lifetime. Using a coupled finite element model, we explore the impacts of diffusion-induced stresses on the failure mechanisms of an exemplar system with an NMC811 core and an NMC111 shell. In particular, we systematically compare the implications of assuming constant material properties against using Li concentration-dependent diffusion coefficient and partial molar volume. With constant material properties, our results show that smaller cores with thinner shells avoid debonding and fracture regimes. When factoring in a concentration-dependent partial molar volume, the maximum values of tensile hoop stress in the shell are found to be significantly lower than those predicted with constant properties, reducing the likelihood of fracture. Furthermore, with a concentration-dependent diffusion coefficient, significant barriers to full electrode utilisation are observed due to reduced lithium mobility at high states of lithiation. This provides a possible explanation for the reduced accessible capacity observed in experiments. Shell thickness is found to be the dominant factor in precluding structural integrity once the concentration dependency is accounted for. These findings shed new light on the performance and effective design of core–shell electrode particles.