More and more automakers are choosing to use lithium iron phosphate batteries.
TSLA recently stated at its investor conference that the standard range Model 3 and Moderny will globally switch to lithium iron phosphate (LFP) batteries. Furthermore, according to foreign media reports, Apple is seeking LFP batteries for its electric vehicles. Daimler CEO Ola Källenius also stated today that the company will shift to using cheaper but lower-power LFP batteries to curb soaring prices of certain metals in its entry-level models. Mercedes-Benz will begin using LFP batteries in its next-generation models such as the EQA and EQB from 2024 and 2025. BYD announced in April this year that its entire lineup of pure electric passenger vehicles will be equipped with LFP blade batteries.
BYD becomes TSLA's battery supplier?
In the past, TSLA primarily supplied ternary lithium batteries. Currently, TSLA has three battery suppliers: CATL, Panasonic, and LG Chem. CATL began supplying lithium iron phosphate batteries to TSLA's Shanghai plant in July 2020. On June 28th of this year, TSLA signed another agreement with CATL, stipulating that CATL will supply TSLA with lithium-ion power batteries from January 2022 to December 2025.
Besides CATL, BYD is also a major manufacturer of lithium iron phosphate (LFP) batteries. A recent research report from Daiwa Securities indicates that TSLA plans to gradually use LFP batteries in its global models and may be seeking a second LFP battery supplier besides CATL.
"From TSLA's perspective, they will use whichever battery is the cheapest. TSLA doesn't have many battery suppliers, so cooperation with BYD is not out of the question," Wu Hui, General Manager of the Research Department of EVE Economic Research Institute and President of my country's Battery Industry Research Institute, told First Financial Daily.
From a product structure perspective, the domestic power lithium battery market is currently dominated by ternary lithium batteries and lithium iron phosphate batteries. It's worth noting that in recent years, due to subsidy policies (primarily focused on long range and high energy density), ternary lithium batteries have maintained a high market share. However, in 2021, several automakers launched lithium iron phosphate models. The latest data released by the my country Automotive Power Lithium Battery Industry Innovation Alliance shows that in July of this year, the installed capacity of lithium iron phosphate batteries surpassed that of ternary lithium batteries for the first time. In September, the installed capacity of power lithium batteries reached 15.7 GWh, a year-on-year increase of 138.6%, with lithium iron phosphate installations again exceeding ternary batteries. Ternary lithium battery installations reached 6.1 GWh, while lithium iron phosphate battery installations reached 9.5 GWh, a year-on-year increase of 309.3%. Looking at the installed capacity in the first three quarters of this year, ternary lithium batteries still lead in market share, but the gap between the two is gradually narrowing. Specifically, ternary lithium batteries accounted for 51.2% of the total installed capacity, while lithium iron phosphate accounted for 48.7%.
"Automakers are now choosing lithium iron phosphate batteries primarily because of their price advantage. With the significant rise in battery raw material prices, especially the increases in the prices of metals like nickel, cobalt, manganese, and aluminum, the price advantage of lithium iron phosphate batteries is even more pronounced. Their market share in installed capacity may surpass that of ternary lithium batteries this year, next year, and even the year after," Wu Hui told First Financial Daily. He explained that while ternary lithium batteries are more expensive and less stable than lithium iron phosphate batteries, lithium iron phosphate batteries are about 10% cheaper than ternary lithium batteries. However, the price of lithium iron phosphate battery materials is also rising sharply, but because they do not involve precious metals, their cost advantage remains significant.
Will ternary lithium batteries be replaced?
"The supply of lithium iron phosphate cathode materials is currently extremely tight. In the past few years, due to factors such as subsidy policies, battery manufacturers built factories based on small ternary batteries. Fewer large-size lithium iron phosphate factories were built in the last two years, and even fewer material factories were built. Two years ago, many cathode material factories producing lithium iron phosphate were about to go bankrupt due to very poor orders. In the last two years, they have been rapidly expanding production," said Yang Hongxin, Chairman and CEO of Svolt Energy, in an interview with CBN reporters at the end of August this year.
The battery technology choices made by automakers will have some impact on power lithium battery companies, but the impact will be minimal for leading battery companies. BYD and CATL have both investments in lithium iron phosphate and ternary lithium batteries. In automakers' product portfolios, mid-to-high-end models with longer driving ranges will increasingly use ternary lithium batteries. However, the current competition in the power lithium battery field is quite fierce, which has led to some changes in the ranking of battery installation volumes.
In the past, Japanese and South Korean battery companies held a certain advantage, but with the expansion of my country's new energy vehicle market, Chinese battery companies such as CATL have developed rapidly. Since 2017, CATL has risen to the top of the global battery company rankings, while the market share of South Korean battery companies has begun to decline. Data from SNE Research, a South Korean energy market share analysis agency, shows that in the first half of this year, the global installed capacity of automotive lithium-ion batteries totaled 114.1 GWh, a 1.5-fold increase year-on-year. The top three companies were all from China, Japan, and South Korea, with CATL ranking first, followed by LG Energy and Panasonic. These three companies account for nearly 70% of the global market share. Compared to 2020, CATL's market share increased from 22.7% to 29.9%, LG Energy from 23.1% to 24.5%, and Panasonic from 22.4% to 15%. Apart from LG Energy, the market share of the other two South Korean lithium-ion battery companies (Samsung and SKI) is not high, with a significant gap compared to the top three.
To gain a competitive edge, companies like BYD and CATL are innovating in technology. For example, BYD launched its blade battery, and CATL introduced CTP (cell-to-pack) technology. Today, CATL announced that it will license its CTP technology to Mobis and support Mobis's supply of CTP-related battery products in South Korea and globally. This technological cooperation will enhance the international market competitiveness of both companies. CATL told First Financial Daily that CTP technology can be used in both lithium iron phosphate and ternary lithium batteries.
Xiao Chengwei, a researcher at the 18th Research Institute of my country Electronics Technology Group Corporation, stated at the 2021 Global New Energy and Intelligent Vehicle Supply Chain Innovation Conference hosted by the my country EV100 that, based on the energy distribution of battery systems in pure electric passenger vehicles in 2020, low-cost pure electric vehicles mainly use lithium iron phosphate batteries, while high-performance vehicles mainly use ternary lithium batteries. However, some high-end models are now adopting the lithium iron phosphate technology route, and some automakers are exploring the direction of using a combination of ternary lithium and lithium iron phosphate batteries.
"Lithium iron phosphate batteries will occupy a larger market share in the short term, but in the long run, as the energy density of ternary batteries increases and their cost decreases, the advantages of ternary batteries will gradually become apparent," Wu Hui told reporters.
