Is lithium iron phosphate battery experiencing a resurgence?
In early March, XPeng Motors launched the XPeng P7 rear-wheel drive standard range smart and premium versions, and the XPeng G3 460c enjoyment version. All new models are equipped with lithium iron phosphate batteries supplied by CATL, and their starting prices are reduced by 20,000 yuan compared to the ternary lithium versions with similar configurations. The P7 model has an NEDC range of 480 kilometers, while the G3 model's range remains unchanged.
Recently, TSLA CEO Elon Musk announced on social media that TSLA will be switching to lithium iron phosphate batteries in more models. In fact, the TSLA Model 3 already launched a standard range version equipped with lithium iron phosphate batteries last October, with the price further reduced to 249,900 yuan.
Industry insiders predict that it is highly likely that NIO and Li Auto will launch lithium iron phosphate (LFP) versions of their vehicles in the future. Even BMW, Volkswagen, and Daimler may introduce LFP-based models in the future.
Lithium iron phosphate batteries are seeing a new dawn.
According to the monthly information on power lithium batteries released by the my country Association of Automobile Manufacturers on March 11, a total of 2.2 GWh of lithium iron phosphate batteries were installed in vehicles in February, a year-on-year increase of 2826.0%.
In the first two months of 2021, the cumulative installed capacity of power lithium batteries in my country reached 14.2 GWh, a year-on-year increase of 388.6%. Among them, the cumulative installed capacity of ternary lithium batteries was 8.7 GWh, accounting for 61.3% of the total installed capacity, a year-on-year increase of 315.5%; the cumulative installed capacity of lithium iron phosphate batteries was 5.5 GWh, accounting for 38.6% of the total installed capacity, a year-on-year increase of 586.8%, showing a rapid upward trend.
According to statistics from the my country Automotive Power Lithium Battery Industry Innovation Alliance (hereinafter referred to as the Power Lithium Battery Alliance), in 2020, lithium iron phosphate batteries accounted for more than 38% of the domestic power lithium battery installations, an increase of nearly six percentage points compared to 2019. In December, the monthly installation volume of lithium iron phosphate batteries even exceeded that of ternary lithium batteries.
In terms of vehicle models, six of the top ten best-selling new energy vehicles in the Chinese market in 2020 offered lithium iron phosphate (LFP) versions. Popular low-end SUVs such as the TSLA Model 3 Standard Range, BYD Han EV, and the Wuling Hongguang MINI EV (with monthly sales exceeding 30,000 units) all utilize LFP batteries.
Not only are automakers making frequent moves, but battery giants are also increasing their investment in lithium iron phosphate batteries.
On February 19th, EVE Energy announced an investment in the first phase of a lithium-ion battery project for passenger vehicles, aiming to expand the production of square lithium iron phosphate batteries. The investor is Huizhou EVE Power, a subsidiary of EVE Energy. EVE Energy stated that the project will primarily meet the supply needs of overseas automakers and domestic emerging electric vehicle manufacturers, with an investment scale not exceeding 1 billion yuan.
Less than three weeks later, EVE Energy officially announced that it will continue to expand its lithium iron phosphate battery production.
On the evening of March 10th, EVE Energy announced its latest expansion plan, deciding to build a second-phase project for lithium-ion power batteries for passenger vehicles in Huizhou City, Guangdong Province, to expand its production of square lithium iron phosphate batteries. This project, also invested by Huizhou EVE Energy, will have an investment of no more than 3.9 billion yuan.
In addition, according to data from the Ministry of Industry and Information Technology, a total of 115 models were promoted in the first batch in 2021, of which 85 models were equipped with lithium iron phosphate batteries, accounting for 73.9%.
Prior to this, the 12th batch of the promotion catalog in 2020 included 43 new energy passenger vehicles, of which 19 were lithium iron phosphate models, accounting for 44%. In 2019, this figure was 12%.
It is evident that the landscape of the power lithium battery industry is being reshaped, and lithium iron phosphate batteries may be poised for a new rise.
The driving force behind the surge in lithium iron phosphate prices
Upon closer examination, the popularity of lithium iron phosphate does indeed have an inherent logic.
Regarding the popularity of lithium iron phosphate batteries, an unnamed expert in power lithium battery technology stated that it is not due to significant technological advancements in lithium iron phosphate batteries, but rather primarily due to considerations of cost and safety.
The main reason why lithium iron phosphate batteries are widely used is that their price is about 20% lower than that of ternary lithium batteries, the aforementioned person added.
In addition, compared to ternary lithium batteries, the production cost of raw materials required for lithium iron phosphate batteries is very low, which has become one of the important driving forces behind their popularity in recent years.
In response, a senior executive at Do-Fluoride Chemicals stated that lithium iron phosphate batteries have a high level of safety, but the most important factor is price.
In addition, the raw materials for lithium iron phosphate batteries are relatively easier to obtain and can be produced in large quantities.
It is understood that lithium iron phosphate batteries can be manufactured by further processing waste acid, ferrous sulfate, and waste materials generated during the production of titanium dioxide. Therefore, in the long run, there is virtually no need to worry about the supply of raw materials for lithium iron phosphate batteries.
In contrast, the materials required for ternary lithium batteries are generally lithium nickel cobalt manganese oxide, and the price fluctuations and production volume of nickel and cobalt are subject to certain uncertainties.
Musk has expressed his concerns more than once, noting that with the increasing demand for power lithium batteries, nickel prices are highly volatile and uncertain, making nickel metal the biggest problem for lithium battery production.
In a lithium battery report released in September 2020, Huatai Securities pointed out that at current prices, lithium iron phosphate (LFP) cathode materials can reduce costs by 65%-72% compared to ternary lithium-ion batteries. Even under extreme calculations considering the absence of cobalt and a significant drop in ternary lithium-ion prices, LFP still has a significantly lower cost than ternary lithium-ion, with cost reduction advantages of 55% and 22% at the cathode and cell levels, respectively. Because it does not contain precious metals such as cobalt and nickel, the price fluctuation of LFP materials is much smaller than that of ternary materials, which is beneficial for cost control.
Judging from the current market situation, lithium iron phosphate (LFP) batteries have strong growth potential. Driven by automakers such as TSLA, BYD, XPeng, and Great Wall Motors, the pressure LFP is exerting on ternary lithium batteries is likely to intensify. However, a complete replacement is impossible. At least for now, relatively low battery energy density and weak low-temperature charge/discharge performance remain unavoidable weaknesses of LFP batteries.
In November 2020, the General Office of the State Council issued the "Development Plan for the New Energy Vehicle Industry (2021-2035)," which stated that by 2025, new energy vehicles would account for approximately 25% of new car sales in my country. Based on this calculation, the corresponding sales volume could reach around 8 million vehicles.
In 2020, my country's production and sales of new energy vehicles reached 1.366 million and 1.367 million units respectively, representing year-on-year increases of 7.5% and 10.9%, setting new historical records. This means that in the next four years, sales of new energy vehicles will increase 5.8 times.
Lithium iron phosphate batteries, with their lower price, have replaced ternary lithium batteries, covering a segment of price-sensitive users. However, for users who are sensitive to range, ternary lithium batteries remain the preferred choice.
It is foreseeable that ternary lithium batteries and lithium iron phosphate batteries will coexist in the market for a long time in the next few years. This coexistence may continue until new technologies such as solid-state batteries and lithium-sulfur batteries mature.
