By Hyunjoo Jin and Paul Lienert
(Reuters) – Tesla has revealed that nearly half of the vehicles it produced in the first quarter were equipped with lithium iron phosphate (LFP) batteries – a cheaper rival to the nickel- and cobalt-based cells that dominate in the West.
This was the first time Tesla has released such details about the composition of its batteries.
The company sent a strong signal that iron-based cells are finally starting to gain global appeal at a time when nickel supplies are hampered by supply concerns due to Russia’s war in Ukraine and cobalt is contaminated by reports of hazardous conditions at artisanal mines in the Democratic Republic of Congo.
“I think lithium iron phosphate has a new lease of life,” said Mujeeb Ijaz, founder of US battery startup Our Next Energy, which says it is exploring a production site in the United States. “It has a clear, long-term advantage for the electric vehicle industry.”
LFP accounted for just 3% of EV batteries in the US and Canada in 2022 and 6% in the European Union, with nickel-cobalt-manganese (NCM) cells accounting for the remainder, according to data from Benchmark Mineral Intelligence (IMC) .
The race is much fiercer in China, where LFP commands 44% of the EV market versus 56% for NCM.
A near-term concern for these companies, according to BMI data director Caspar Rawles, is their continued reliance on Chinese suppliers for refined materials. LFP cells also contain more lithium than NCM rivals, and industry experts raise concerns that the historic advantage of iron-based batteries of being cheaper is being eroded by rising costs for the metal.
Tesla has been using LFP batteries in some entry-level versions of its Model 3 since 2021, expanding the technology’s use beyond China, where about two years ago it began using LFP batteries made by CATL. But given the historic dominance of nickel- and cobalt-based batteries in the US, the scale of Tesla’s use of LFP cells in the first quarter of 2022 — installed in about 150,000 cars produced — surprised some analysts.
Tesla did not respond to a request for comment.
“It could be that we will see LFP in a larger share of the fleet in the medium term,” Audi Chief Executive Markus Duesmann said in March. “After the war, a new situation will arise; we will adapt to that and choose battery technologies and specifications accordingly.”
Among their advantages, LFP cells tend to pose less fire risk than NCM cells and can be fully charged without losing as much performance over their lifetime.
However, obstacles to widespread adoption of LFP cells include finding solutions to improve energy density – thus reducing size and weight – and dealing with the rising cost of lithium.
(Reporting by Hyunjoo Jin and Paul Lienert)
