September 18, 2021

What manufacturers can learn from Tesla’s gamble on iron-based batteries

3 min read

Elon Musk made his most upbeat comments on iron-centered batteries earlier this week, stating that Tesla is exploring a “long-term shift” favoring older, less expensive LFP (lithium-iron-phosphate) cells in the energy storage products and certain entry-level electric vehicles. Tesla’s CEO speculated that the company’s batteries would someday be two-thirds iron and one-third nickel across all of its products. He went on to say, “And this is fantastic since there has been an abundance of iron in the globe.”

Musk’s remarks reflect a shift that is already taking place in the car industry, particularly in China. Outside of China, nickel-based battery chemistries, such as nickel-cobalt-aluminum (NCA) and nickel-manganese-cobalt (NMC), have dominated (NCA). Because of the higher energy density they possess, these latest chemistries have become popular among automobiles, allowing OEMs to extend the capacity of their batteries. If Musk’s optimism signals a genuine revolution in the EV sector, the question is if battery manufacturers outside of China can keep up.

Musk isn’t the only executive in the auto industry who has hinted at a comeback to the LFP formulation. Ford CEO Jim Farley announced earlier this year that the business would deploy LFP batteries in certain commercial cars. Meanwhile, Volkswagen chief executive officer Herbert Diess said that LFP would be utilized in some of the VW entry-level electric vehicles during the firm’s inaugural battery day presentation.

Musk’s comments regarding Powerwall and Megapack adopting LFP-based chemistries are in accord with the other stationary energy storage firms pushing for iron-based formulae on the energy storage front. “The stationary storage sector wants to migrate to LFP because it’s cheaper,” said Sam Jaffe, Head of Cairn Energy Research Advisors, a battery research group.

LFP battery cells are appealing for a variety of reasons. They aren’t reliant on ultra-rare and price-volatile raw elements like cobalt and nickel, for example. (Cobalt, which is primarily mined in the DRC (Democratic Republic of Congo), has been subjected to increased attention owing to brutal mining practices.) LFP batteries are also substantially less expensive than nickel-based chemistries, despite being less energy-dense. This is great news for those hoping to accelerate the transition to electric vehicles, as lower vehicle costs are likely to be a crucial factor in increased EV adoption.

At Tesla, Musk obviously sees a bright future for iron-based chemistries, and his words have helped to reintroduce LFP. However, there is one country where they have remained the center of attention: China. In a recent interview with TechCrunch, Caspar Rawles, the head in charge of price and data evaluations at the Benchmark Mineral Intelligence, a research firm, revealed that “LFP is pretty much entirely manufactured in China.” China’s supremacy in LFP battery manufacture is partly due to a group of colleges and research institutions that maintain several major LFP patents. A decade ago, this consortium reached a deal with Chinese battery producers, stating that the companies would not be levied a licensing fee if the LFP batteries were only used in Chinese markets. As a result, China has a monopoly on the LFP market.

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