JWinsights believes that the return of lithium iron phosphate to the main market is an inevitable trend, for three reasons:
- As the new energy vehicle market enters a phase of large-scale release, the products of various automakers have gradually been validated. Automakers are also becoming more rational in their product development, with range, safety, and reliability being the rigid requirements of both automakers and users regarding new energy vehicles and power lithium batteries.
- The advantages of lithium iron phosphate in terms of cost, safety, and lifespan can precisely address the pain points of car manufacturers, and the global automotive industry chain is increasing its investment in it.
The integration of ternary lithium batteries and lithium iron phosphate batteries allows them to complement each other's weaknesses and synergize their strengths. Some automakers are already trying this, and it is also the future technological direction.
Lithium iron phosphate batteries have surpassed ternary lithium batteries in terms of installed capacity for three consecutive months.
At the end of last year, lithium iron phosphate (LFP) power lithium batteries began a strong comeback, and since the beginning of this year, they have continued to make a comeback, completely surpassing ternary lithium batteries. In May of this year, the installation volume of LFP batteries began to rise, and in July, it surpassed ternary lithium batteries, continuing this upward trend in August and September.
Specifically, data from the my country Automotive Power Lithium Battery Industry Innovation Alliance shows that in May 2021, the installed capacity of lithium iron phosphate batteries increased significantly, totaling 4.5 GWh, up 458.6% year-on-year and 40.9% month-on-month; while ternary lithium batteries saw a slow increase, with a total installed capacity of 5.2 GWh, up 95.3% year-on-year and only 1.0% month-on-month.
July was a "significant milestone" for lithium iron phosphate batteries: their total installed capacity reached 5.8 GWh, accounting for 51.3% of the total installed capacity, exceeding the installed capacity of ternary lithium batteries at 5.5 GWh; while the installed capacity share of ternary lithium batteries also slipped from 54.1% last month to 48.7%.
In August and September, the upward trend of lithium iron phosphate batteries became even stronger. In August, a total of 7.2 GWh of batteries were installed, up 24.4% month-on-month, and in September, the installed volume reached 9.5 GWh, up 32.3% month-on-month. In August, a total of 5.3 GWh of ternary lithium batteries were installed, and their installed volume share continued to fall to 43%. In September, although the installed volume of ternary lithium batteries increased by 15.0% month-on-month, their installed volume share continued to decline, falling below 40%.
Overall, from January to September 2021, the cumulative installed capacity of lithium iron phosphate (LFP) batteries reached 44.8 GWh, accounting for 48.7% of the total installed capacity. These figures clearly demonstrate that LFP has regained its dominance in the new energy vehicle sector, and its installed capacity is expected to further increase throughout the year, ultimately surpassing ternary lithium batteries. Furthermore, based on the market size of new energy vehicles and the technological characteristics of LFP, JWinsights believes that the return of LFP to the mainstream market is an inevitable trend.
Behind the Return of Lithium Iron Phosphate to the Main Battlefield
In fact, the glory days of lithium iron phosphate have long been over, and in the more than ten years of development of new energy vehicles, the development of lithium iron phosphate and ternary lithium batteries has been constantly changing.
At the beginning of 2009, riding the wave of the gradually expanding new energy vehicle market, lithium iron phosphate (LFP) batteries enjoyed unparalleled success. In 2009, the Ministry of Science and Technology, the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Industry and Information Technology jointly launched the "Ten Cities, Thousand Vehicles Energy-Saving and New Energy Vehicle Demonstration and Promotion Project," marking the formal elevation of the new energy vehicle industry to a national strategy. Due to the reserves and applications of LFP batteries by domestic automakers such as BYD, LFP became the most important technological route for the development of new energy vehicles.
However, with the updating of subsidy policy standards and the gradual increase in consumers' requirements for the driving range of new energy vehicles, this trend began to change in 2012. In June 2012, the "Development Plan for Energy-Saving and New Energy Vehicle Industry (2012-2020)" was released. The plan proposed that by 2015, the specific energy of power lithium battery modules should reach more than 150Wh/kg; and by 2020, the specific energy of power lithium battery modules should reach more than 300Wh/kg.
At the time, lithium iron phosphate batteries did not meet the aforementioned requirements given the technological level. Especially between 2016 and 2019, with the deepening of electrification, passenger vehicles gradually became the main force in promoting new energy vehicles, and the subsidy policy for new energy passenger vehicles used battery pack energy density and driving range as important indicators. In pursuit of higher subsidies, new energy vehicle companies gradually abandoned lithium iron phosphate power lithium batteries and switched to ternary lithium batteries.
However, since mid-2019, with the continued reduction of subsidies for new energy vehicles and the support of new technologies in power lithium batteries, the energy density of lithium iron phosphate batteries has continued to improve, its cost advantage has gradually emerged, and its installed capacity has gradually increased. This trend became even more pronounced in 2020. According to data from the my country Automotive Power Lithium Battery Industry Innovation Alliance, from January to December 2020, the installed capacity of ternary lithium batteries accounted for 61.1% of the total installed capacity, a cumulative year-on-year decrease of 4.1%; while the installed capacity of lithium iron phosphate batteries accounted for 38.3% of the total installed capacity, a cumulative year-on-year increase of 20.6%.
Furthermore, in the latest "Recommended Models Catalog for the Promotion and Application of New Energy Vehicles" (Batch 9, 2021), the proportion of lithium iron phosphate used in new energy passenger vehicles has increased from 7% in the first batch in 2019 to nearly half in the ninth batch in 2021.
JWinsights believes this also reflects the maturing of the new energy vehicle market, shifting from "policy-driven" to "market-driven." As new energy vehicles enter a phase of mass production, automakers' products have gradually been validated. Therefore, automakers are becoming more rational in their product development, with range, safety, and reliability being the core requirements for both automakers and users regarding new energy vehicles.
The automotive industry chain is increasing its investment in lithium iron phosphate.
It can be said that the advantages of lithium iron phosphate batteries in terms of cost, safety, and lifespan can precisely meet the pain points of car manufacturers.
JWinsights believes that the resurgence of lithium iron phosphate (LFP) batteries is closely related to their three major performance advantages: First, cost-effectiveness in manufacturing. LFP is a mature system, and its biggest advantage is the absence of rare metals such as cobalt, resulting in a significant cost advantage. Studies have shown that, in terms of cathode materials, LFP can reduce costs by 65% to 72% compared to ternary lithium batteries. Second, safety. LFP has a stable internal structure, with thermal runaway temperatures generally above 500°C, while ternary lithium batteries are below 300°C. Therefore, LFP has a lower risk of spontaneous combustion during high-speed driving and fast charging. Finally, it has a longer cycle life. LFP can withstand approximately 2,000 charge-discharge cycles, while ternary lithium batteries only have about 1,200 cycles.
Currently, both domestic and international automakers are investing heavily in lithium iron phosphate (LFP) batteries. TSLA, a leader in new energy vehicles, is increasingly using LFP batteries. In July of this year, TSLA revealed in its Q2 earnings call that it would be shifting its battery composition, using 2/3 LFP batteries and 1/3 nickel batteries. Furthermore, TSLA's Q3 earnings report shows that the standard range Model 3 and Model Y models worldwide will also switch to LFP batteries.
Besides TSLA, Apple, the tech giant that plans to launch an electric vehicle in 2024, has also loudly proclaimed that it will use lithium iron phosphate batteries, citing safety concerns.
Domestic companies have a higher acceptance of lithium iron phosphate batteries. BYD, which will equip all its models with blade batteries, goes without saying. Xpeng, Li Auto, NIO and other car companies have already used or are about to use lithium iron phosphate batteries.
Increased demand from end-user automakers is prompting power lithium battery suppliers to expand their operations. BYD needs no introduction, and CATL claims it will gradually increase the proportion of lithium iron phosphate (LFP) battery production over the next 3-4 years, while the proportion of ternary lithium battery production will gradually decrease. Furthermore, LG Chem, previously specializing in ternary lithium batteries, is also developing a new type of pouch-pack LFP battery.
The Future of Lithium Iron Phosphate
Regarding the future of lithium iron phosphate batteries, Ouyang Minggao, an academician of the Chinese Academy of Sciences and vice chairman of the my country EV100, made a prediction about the future lithium battery landscape in September this year, stating that the return of lithium iron phosphate batteries is an inevitable trend. "Currently, it's the blade battery; the future will be CTV (Continuous Transmission Television), where the battery is directly integrated with the vehicle body. However, due to the reduced range in winter, ternary lithium batteries also have a market. Ultimately, it may be a combination of ternary lithium batteries and lithium iron phosphate."
JWinsights believes that integrating ternary lithium batteries and lithium iron phosphate batteries allows for complementary strengths and synergistic effects. Moreover, some automakers are already experimenting with this approach. On September 23rd, NIO launched a 75kWh ternary lithium iron phosphate hybrid battery pack to upgrade its 70kWh ternary lithium battery pack, with deliveries expected to begin in November. NIO's method addresses the low-temperature performance degradation issue of lithium iron phosphate batteries through structural and material improvements. Official information from NIO indicates that compared to lithium iron phosphate battery packs, the ternary lithium iron phosphate hybrid battery pack reduces low-temperature range loss by 25%. While NIO is not the first to combine ternary lithium batteries and lithium iron phosphate batteries, its ability to engineer and mass-produce this technology relies heavily on its self-developed control algorithms.
Based on powerful BMS (Battery Management System) algorithms, the hybrid battery system integration model may become a trend in the field of power lithium batteries. In August of this year, CATL announced its next-generation sodium-ion technology. Of particular note is CATL's innovative approach to battery system integration, developing an AB battery system solution. This involves mixing sodium-ion and lithium batteries in a certain proportion and integrating them into the same battery system. The precise BMS algorithm is key to achieving balanced control of different battery systems.
In conclusion
Currently, thanks to innovative technologies, the performance of lithium iron phosphate and ternary lithium batteries continues to improve. JWinsights believes that with "carbon neutrality" becoming a global consensus, the new energy industry has entered a multi-level, multi-type, and diversified development stage, and the increasingly segmented market is placing differentiated demands on batteries. It is expected that in the next few years, these two approaches will continue to advance in parallel, and their respective proportions will continue to change. The emergence of sodium-ion batteries, cobalt-free batteries, and solid-state batteries will powerfully complement these diversified technological approaches, ensuring the healthy and orderly development of the new energy vehicle industry.
