Automakers Switch to Lower-Cost Batteries for Electric Vehicles – Fox Business | CarTailz

In the race to build a more affordable electric car, automakers are turning to a lower-cost battery type that could lead to less expensive options but offer less range.

Several major automakers are planning to use lithium iron phosphate batteries, known as LFP, a type widely used in China, the world’s largest electric car market. These iron-based battery cells cost less than the nickel-cobalt combination widely used in North America and Europe.

Tesla Inc., Ford Motor Co., Rivian Automotive Inc. and other automakers say LFP could reduce the cost of electric vehicles by bypassing the use of expensive and scarce minerals like nickel and cobalt. However, the move also requires tackling performance tradeoffs and tricky supply chain issues.

Workers lower an R1T truck body onto a chassis on the assembly line at the Rivian electric vehicle plant April 11, 2022 in Normal, Illinois. (Brian Cassella/Chicago Tribune/Tribune News Service via Getty Images) (Brian Cassella/Chicago Tribune/Tribune News Service via Getty Images/Getty Images)

Lithium iron phosphate battery cells have a lower energy density than nickel-based cells, which means the battery range – the distance an electric vehicle can travel between charges – is shorter. This has prompted automakers to optimize the chemistry and design of LFP battery packs to achieve more range. Also, the supply hub for LFP cells is heavily concentrated in China, making automakers more dependent on Chinese battery supplies at a time when the industry is trying to break away from its dependency on China for EV technology.

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Global automakers are refining their battery strategies while spending billions of dollars to bring more electric vehicles to showrooms. In many cases, they revise plans in relatively short periods of time in response to changes in mineral prices, battery technology and government policies, testing the agility of an industry used to vehicle development cycles that can span many years.

ticker security Last change Change %
TSLA TESLA INC. 180.19 -2.98 -1.63%
f FORD MOTOR CO. 13.99 +0.08 +0.58%
RIVN RIVIAN AUTOMOTIVE INC. 29.48 -0.86 -2.84%

Rivian, for example, is switching to LFP battery cells for some trucks, SUVs and vans after the supply chain hit production earlier this year and cobalt and nickel prices skyrocketed.

“We’re pretty bullish on LFP,” Rivian chief executive RJ Scaringe said on the company’s conference call last Wednesday. He added that the cell type performs well in applications where the driver frequently charges the vehicle and in more spacious models that can accommodate a larger backpack.

A few years ago, analysts and executives anticipated that lithium-iron-phosphate chemistry would be used primarily for low-cost, low-cost electric vehicles in China, where drivers in densely populated cities generally travel shorter distances. In Europe, and particularly North America, the strategy has been to use the more expensive nickel and cobalt based chemicals to provide the longer range needed to cover more dispersed populations.


German Chancellor Olaf Scholz, left, speaks with Elon Musk, CEO of Tesla, at the opening of the Berlin Brandenburg Tesla factory in Gruenheide, Germany, Tuesday, March 22, 2022. The first European factory in Gruenheide, designed for 500,000 vehicles per year ((Patrick Pleul/Pool via AP) / AP Newsroom)

The calculus has since shifted. Auto industry executives said interest in LFP batteries has surged after prices soared last spring after Russia, a major supplier of high-grade nickel used in batteries, invaded Ukraine. While they have retreated from their highs, prices remain high, making iron-based cells a relative bargain.


Cobalt prices have also risen sharply in recent years. And automakers have sought to limit the mineral’s use in response to environmental and human rights abuses in cobalt mining in Congo, where most of the metal is produced.

Changes in how iron-based battery cells are packaged in vehicles have helped increase ranges. These batteries also have a lower risk of fire, analysts say.

Advances in battery cell technology should eventually allow midsize SUVs with iron-based batteries to achieve more than 300 miles of range on a single charge, said Tim Bush, an equity analyst who leads global EV battery research at UBS Group AG.

Lucid car factory

Workers marry the body structure to the battery pack and front and rear subframes while assembling electric vehicles at the Lucid Motors plant in Casa Grande, Arizona, U.S. September 28, 2021. REUTERS/Caitlin O’Hara/File Photo (Reuters photos)

He now expects EVs equipped with LFP batteries to account for 40% of the global market by 2030, up from a previous forecast of 15%.

“We underestimated the LFP use case,” Mr. Bush wrote in an August research note. “Iron batteries will go global.” Adding iron batteries also helps automakers diversify their battery supply chains in the face of potential bottlenecks, he said.

According to research firm Benchmark Mineral Intelligence, the cost of LFP battery cells over the past year is about 30% lower than cells combining nickel, cobalt and manganese. Ford, which announced plans last summer to use China’s Contemporary Amperex Technology Co.’s iron cells to power some Mustang Mach-E SUVs and Lightning pickup trucks, said using the iron cells could reduce an electric vehicle’s overall material cost up to 15%.


Still, the switch to iron-based cells makes automakers more dependent on China, where the supply base for LFP cells is even more concentrated than for other battery types. The recently passed inflation-mitigating law further complicates the switch to iron batteries, as it extends federal consumer subsidies only to electric vehicles with batteries that contain no minerals or parts processed or manufactured in China, according to industry officials’ interpretation of the law.

Cars are waiting for export

New vehicles are parked for export at a shipyard in Yantai, east China’s Shandong province, on October 13, 2022. China’s economic growth accelerated in the most recent quarter but was still among the slowest in decades as the country struggled (AP Newsroom)

“All intellectual property is in China. So this is a really dynamic situation,” Ford chief executive Jim Farley told analysts in October. He said Ford can economically import cells from China for now, but raised the possibility of North American production of iron-based cells in the future. He said iron-based batteries are important to Ford’s plans to offer more affordable electric vehicles.

Tesla has started installing LFP batteries in its vehicles in recent years, coinciding with the start of vehicle production in China. CEO Elon Musk said in October that he expects iron-based batteries to become the dominant chemistry for Tesla, with production potentially doubling that of nickel-based batteries.


Automakers are likely to continue to modify their battery strategies as mineral prices change and new manufacturing techniques emerge, said Ken Hoffman, co-lead of research for EV battery materials at McKinsey & Co.

“We’ve seen how quickly things have changed over the past few years,” Hoffman said. “If I’m an automaker and I buy a long-term contract for, say, nickel or manganese, how do I ride those waves?”

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