Battery technology common in China is making inroads in the US electric vehicle market, with manufacturers looking for shorter energy storage characteristics to meet lower costs and safety.
Lithium iron phosphate technology accounted for about half of the EV battery capacity sold in China last year, according to research from consultancy Adamas Intelligence. In the US, the technology shows only 9 percent capacity in 2022, from zero the previous year.
But US stocks are about to change. This month a startup called Our Next Energy will begin making lithium iron phosphate, or LFP, batteries in Michigan, expanding next year after opening a new $1.6bn factory. By 2027 ONE aims to supply enough LFP batteries for 200,000 EVs.
Last month Ford announced that it would license the technology to make LFP batteries for its cars from China-based supplier CATL, as it needed to offer customers a cheaper option. A senior General Motors executive said in February that the company is exploring the possibility of using LFPs to reduce costs.
The battery industry “definitely has seen a second wave of LFP in recent years, and the wave is starting to move to the west”, said Ryan Castilloux, founder of Adamas Intelligence.
LFP batteries are a form of lithium ion batteries, the main form of energy storage in electric vehicles. Batteries in electric cars sold in the US until now have mainly contained a combination of nickel with manganese and cobalt (NMC) or manganese and aluminum in the battery cathode.
Batteries like “nickel-like” have a relatively high energy density, which means they can store more electricity per unit weight. This quality allows drivers to travel further on a single charge – a big plus in the sprawling US landscape where journeys tend to take longer. But nickel-rich batteries are more expensive than LFP technology, on an energy basis.
LFP batteries have less energy per pound than nickel-rich batteries but can be recharged more before they break down. This makes them suitable for taxis operating in Chinese megacities with available charging infrastructure. The low energy density of LFP batteries is an issue for cars that weigh less than the trucks and sport utility vehicles favored by US consumers.
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In the US, LFP has been “viewed as a less desirable . . . chemistry”, said Chloe Herrera, principal battery analyst at Lux Research. Range has been considered too important for US drivers to sacrifice for price.
“At [US] battery community, if you talked to anyone four years ago, no one would say you’re getting LFP in a vehicle,” he said.
One factor driving the recent US interest in LFP technology is the higher cost of nickel and cobalt as EV sales increase.
Nickel prices have more than doubled in the past three years, rising a year ago when Russia, a supplier of the metal, attacked Ukraine. The majority of the world’s cobalt is mined in the Democratic Republic of Congo, often in punishing conditions for workers, and prices also rose between 2020 and 2022 before falling again for nearly three years.
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Adding to LFP’s appeal in the US, the technology is also becoming more affordable as its patents expire. And the proliferation of public charging stations — set to accelerate with a boost from federal subsidies — could ease drivers’ worries about dead batteries, said Jeff Chamberlain, who runs Volta Energy Technologies, a venture capital firm that invests in battery companies. LFP batteries are also cheaper than nickel-rich batteries.
A tight supply chain and US efforts to shed dependence on Chinese imports may also boost LFP technology in the US. The Inflation Reduction Act, the flagship US climate law, encourages domestic supply chains for EVs and discourages automakers from using suppliers located in “foreign concerned entities,” such as China.
Subsidies in the law allow new companies to compete with established players in costs because they grow from low volume to high volume operations, said the chief executive of Our Next Energy Mujeeb Ijaz.
“We have many customers who are looking at us, and they are now changing from interested, curious, to, ‘Show me what you can measure and actually sign a supply agreement’,” he said. “It transitions a lot of customer activity from the sidelines.”
Tesla has been at the forefront of bringing LFP technology to North America. The largest US EV producer will start using lithium iron batteries supplied by CATL in 2020 for cars sold in China, and in 2021 for some cars sold in the US. Elon Musk, chief executive of Tesla, told investors on Wednesday that the earth’s mass contains more iron than any other element.
“We will definitely not run out of iron. There is so much iron that it’s crazy,” he said.
US EV sales will total 810,000 in 2022, according to Kelley Blue Book, of which 99,500 will use LFP batteries, according to Adamas Intelligence. Tesla accounts for the “vast majority” of LFP model sales, Castilloux said.
“Tesla’s new power train is compatible with battery chemistry – which will give us great flexibility in battery supply”, said Colin Campbell, head of power train engineering.
No more than 20 percent of announced US battery production capacity is slated for LFP, said Alla Kolesnikova, head of data and analytics for Adamas Intelligence. But the consultancy expects that “all major [carmakers] will gravitate towards LFP for entry-level EV models, raising the share of LFP closer to 30 per cent by the middle of the decade”.
Kore Power, a US battery startup with a $75 million investment led by a subsidiary of Germany’s Siemens, also anticipates growing demand for LFP batteries. A plant Kore plans to open in Arizona at the end of 2024 will have two assembly lines, one for NMC and one for LFP. The second phase of construction will increase LFP capacity “mainly”, a Siemens spokesman said.
Chamberlain, who previously led the battery research program at Argonne National Laboratory, said that automakers will not switch from NMC batteries to LFP overnight. The market is developing fast enough that both will be needed, and with billions invested to build new battery factories, “they have a lot of capital sink”.