What Tesla’s bet on iron-based batteries means for manufacturers – TechCrunch

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Earlier this week, Elon Musk made his most optimistic statements yet on iron-based batteries, noting that Tesla is making a “long-term shift” to older lithium-iron-phosphate (LFP) cells and cheaper in its energy storage products and some inputs. Level EV.

Tesla’s CEO thought the company’s batteries could eventually be roughly two-thirds iron-based and one-third nickel-based across all of its products. “And that’s actually a good thing because there’s a lot of iron in the world,” he added.

Musk’s comments reflect a shift that is already underway in the automotive sector, primarily in China. Battery chemicals outside of China are mostly nickel-based, particularly nickel-manganese-cobalt (NMC) and nickel-cobalt-aluminum (NCA). These new chemistries have become attractive to automakers due to their higher energy density, allowing original equipment manufacturers (OEMs) to improve the range of their batteries.

If Musk’s optimism heralds real change in the electric vehicle industry, the question is whether battery makers outside of China will be able to keep up.

Musk isn’t the only auto executive to signal a return to the LFP formula. Earlier this year, Ford CEO Jim Farley said the company would use LFP batteries in some utility vehicles. Meanwhile, Volkswagen CEO Herbert Diess announced at the company’s inaugural Battery Day presentation that the LFP would be used in some VW entry-level electric vehicles.

On the energy storage front, Musk’s comments on the use of LFP-based chemicals in Powerwall and Megapack are consistent with other stationary energy storage companies advocating iron-based formulas. . “The stationary storage industry wants to switch to LFP because it’s cheaper,” Sam Jaffe, who runs battery research firm Cairn Energy Research Advisors, told TechCrunch.

LFP battery cells are attractive for several different reasons. On the one hand, they do not depend on ultra-scarce raw materials whose prices are volatile such as cobalt and nickel. (Cobalt, which comes primarily from the Democratic Republic of Congo, has come under additional scrutiny due to inhumane mining conditions.) And although they are less energy-dense than chemicals based on nickel, LFP batteries are much cheaper. This is good news for those looking to spur the shift to electric vehicles, as reducing the cost per vehicle will likely be key to greater adoption of electric vehicles.

Musk clearly sees a major future for iron-based chemicals at Tesla, and his comments have helped put the LFP back in the spotlight. But there is one place where they have remained the star of the show: China.

China’s monopoly on the LFP

“LFP is practically only produced in China,” Caspar Rawles, head of pricing and data valuations at research firm Benchmark Mineral Intelligence, explained in a recent interview with TechCrunch.

China’s dominance in LFP battery production is partly tied to a series of key LFP patents, which are managed by a consortium of universities and research institutes. This consortium reached an agreement with Chinese battery manufacturers a decade ago under which manufacturers would not be charged licensing fees provided LFP batteries were only used in Chinese markets.

Consequently, China cornered the LFP market.

Battery makers in China could benefit the most from a potential tectonic shift toward LFP — particularly BYD and CATL, the latter of which already manufactures LFP batteries for Tesla vehicles built and sold in China. (Volkswagen, meanwhile, has a substantial stake in Chinese LFP maker Gotion High-Tech.) These bBattery makers aren’t slowing down: In January, CATL and Shenzhen Dynanonic signed an agreement with a local Chinese province to build an LFP cathode factory at a cost of $280 million over three years.

LFP patents due to expire in 2022, industry analyst Roskill explains, which could give battery makers outside of China time to start shifting some of their production to iron-based formulas. However, all of the planned battery factories in Europe and North America, many of which are joint ventures with South Korean industry giants like LG Chem or SK Innovation, still focus on nickel-based chemicals.

“For the United States to take advantage of LFP’s strengths, North American manufacturing will be required,” Jaffe explained. “Anyone building a gigafactory in the United States today plans to manufacture high-nickel chemicals. There is a huge unmet need for locally made LFP batteries.

Rawles said he expects some LFP capability in North America and Europe in the coming years, especially after the patents expire. He pointed out that CATL and SVOLT, another battery manufacturer, have made strides in Germany – but both of these companies are Chinese, which leaves open the question of whether other Asian or Western companies can compete in the LFP market. . (Stellantis has chosen SVOLT as one of its battery suppliers from 2025.)

On the energy storage front, Jaffe said he thinks “it’s inevitable that most stationary storage systems will eventually be LFPs.”

However, all is not lost for domestic manufacturing in the United States. “The good news for building local manufacturing of LFPs is that the supply chain is simple: outside of lithium, it’s iron and phosphoric acid, two cheap materials already made [in the U.S.] in large quantities,” added Jaffe.

Ultimately, it’s not about one battery chemistry over another. What’s more likely is what we’ve already started to see from automakers, including Tesla: iron-based batteries will mostly be used in entry-level and cheaper vehicles, while cell nickel-based will be used for high-end, high-performance cars. Many consumers will likely settle for a 200-250 mile range vehicle that costs thousands of dollars less than a 300-350 mile range vehicle.

Automakers have also begun to take control of battery supply, whether through vertical manufacturing or joint ventures with established battery companies. This means that increased LFP capacity in North America and Europe is not only likely, but inevitable.

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