Why Lithium iron phosphate battery market share will overtake the ternary lithium battery?

Ternary lithium batteries (NCM/NCA) and lithium iron phosphate battery(LFP) are the two most mainstream technology routes in the field of electric vehicle power batteries at this stage. With the rising price of Lithium, battery raw materials, lithium iron phosphate batteries with cost advantages began to be used by more car companies.

In the first quarter of 2022, the installed capacity of lithium iron phosphate batteries has fully overtaken that of ternary lithium batteries, with a gradually increasing market share.TrendForce predicted in a report that lithium iron phosphate batteries will overtake ternary lithium batteries in terms of market share starting in 2024.

Tesla is the earliest large-scale use of lithium iron phosphate cars companies, the company’s electric vehicles produced in the first quarter 2022 nearly 50% of the use of lithium iron phosphate battery; Ford also plans to launch electric vehicles equipped with lithium iron phosphate models, Volkswagen Group and other companies are also promoting battery models equipped with lithium iron phosphate; there are a number of electric vehicle manufacturers to increase the lithium iron phosphate version of some models, Rivian previously announced the launch of the R1T pickup truck, R1S SUV and EDV vans lithium iron phosphate version.

Lithium iron phosphate battery “comeback”

As the new energy vehicle market continues to heat up, power batteries, as a core component, are also attracting attention. In the development of the power battery industry, the industry chain is constantly pursuing a triangle, that is – superior performance, lower cost, and better safety. The market share of power batteries is basically covered by lithium iron phosphate battery and ternary lithium battery, and the competition pattern of the two has been changing. Ternary lithium battery is the representative of the “performance school”, its energy density is higher, and better low-temperature range, but its safety is poor, and higher cost; on the contrary, the “cost-effective” lithium iron phosphate battery energy density is lower, the low-temperature range is poor, but the cost is lower, safer higher cycle life. cycle life is higher.

Obviously, lithium iron phosphate battery has also made great progress over the years, the original lithium iron phosphate battery electric car range is not more than 200km, and now lithium iron phosphate representative of the BYD blade battery debut model range has reached 605km. In 2021 May, China’s lithium iron phosphate monthly production exceeded the ternary battery for the first time; in September this year, lithium iron phosphate installed 20.4GWh, accounting for the total Loading of 64.5%, an increase of 113.8% year-on-year and 18.5% sequentially, the loading has exceeded the ternary lithium battery for 16 consecutive months, and the gap between the two shows a continuous expansion.

Why lithium iron phosphate batteries can achieve a comeback?

In recent years, with the Lithium Battery technology breakthroughs, energy density continues to improve, higher safety, lower cost and does not contain nickel, cobalt, and other rare metals, representing a green battery in line with the direction of industrial development. Compared to ternary lithium batteries, lithium iron phosphate batteries have stronger safety and better stability, its cathode material is lithium iron phosphate, which can effectively avoid the risks associated with the unstable high-temperature structure of nickel cobalt aluminum. In addition to stability, cost and stable supply of raw materials are important advantages of lithium iron phosphate batteries, which is also an important reason for many models to choose lithium iron phosphate batteries. Ternary lithium battery cathode contains nickel, cobalt, and manganese three elements of the “ternary precursor”, so the battery energy density has performance advantages at the same time, and the impact of rising prices of key materials is also greater.

Lithium iron phosphate batteries do not contain nickel, cobalt, and other rare metals

In recent years, with the rapid development of new energy vehicles, ternary lithium batteries use a large number of nickel and cobalt resources overall in short supply, resulting in the price of raw materials skyrocketing. On the contrary, lithium iron phosphate batteries, lithium resources, and iron phosphate resources are sufficient, so the related costs are relatively low. More stable raw materials, and lower costs, but also let lithium iron phosphate batteries once again become the mainstream of the market. The global cobalt reserves of 7 million tons, in the case of new energy vehicle penetration rate of only 20% to maintain, a year to use up 2% of the global cobalt resources. But in fact, the development rate of new energy vehicles will not be in equal proportion, and the demand for cobalt resources is continuing to grow rapidly. If we achieve 100% penetration of new energy, i.e. full electrification of vehicles, the cobalt reserves for electric vehicles will need 3.4 million tons, and the global cobalt reserves of 7 million tons will not be enough. According to the current acceleration of the promotion and application of new energy vehicles, the global cobalt reserves may be available for less than 10 years if no cobalt intervention is made. Meanwhile, it is estimated that by 2050, the annual consumption of nickel will increase from the current 2.5 million tons to 9.2 million tons. According to this calculation, the global 94 million tons of nickel reserves are only roughly enough to last for 10 years. From the consideration of sustainable development, it is inevitable to remove cobalt and nickel. The face of new energy vehicle penetration rate, soaring prices of cobalt and nickel raw materials, the contradiction between supply and demand intensified and other challenges, more and more industry chain companies to join the ranks of lithium iron phosphate, to get rid of the dependence on non-renewable resources, accelerate the cobalt, nickel, the layout of a safer, more reliable, greener and environmentally friendly battery route.

Solve the mechanical damage problem of lithium iron phosphate batteries

In 2020 the development of ternary lithium batteries gradually slowed down, but lithium iron phosphate battery is surging forward. Low energy density and low-temperature performance, have been the mechanical damage of lithium iron phosphate batteries, electrochemical properties are difficult to change, but can be overcome with auxiliary technology.

CTP (Cell To Pack) technology, in simple terms, this technology is to change the internal layout of the battery pack structure, removing the module that will be directly composed of the cells Pack. the benefits of this module-free structure are that the volume utilization of the battery pack rose by 15-20%, energy density increased by 10-15%, the number of parts was reduced by 40%, and the production efficiency increased by 50%.

Using similar technology, there are also blade batteries, which are very similar to CTP technology in principle, both by removing the battery module and putting down more cells in the limited space of the pack to improve the overall energy density of the Pack.

In addition, for the poor low-temperature performance of lithium iron phosphate battery pain points, the self-heating technology of the battery cell, through the use of BMS control algorithms and the entire vehicle powertrain architecture, can control the battery cell in a short period of time for rapid charging and discharging. Let the battery cell from the internal heating, to achieve the self-heating effect of the battery cell. In addition to the improvement of the battery itself, the improvement of the infrastructure is also an important driver of lithium iron phosphate batteries. Increasingly convenient charging environment, users are also gradually decreasing sensitivity to the range, which is an important opportunity for the emergence of lithium iron phosphate.

The price of lithium iron phosphate battery is the core competitiveness

Lithium iron phosphate battery allows battery manufacturers and car companies to take the initiative to use lithium iron phosphate battery is the most central reason: the price. In October 2020, Tesla for the first time using a battery type other than ternary lithium officially launched the Model 3 with CATL lithium iron phosphate battery version, the standard range version NEDC range from the previous 445km to 468km, but the price has been reduced from 271,500 yuan to 249,900 yuan, further lowering the purchase threshold. From the gradually increasing sales and Model 3 produced in Shanghai Super Factory exported to Europe and Japan market, it can be seen that Tesla has fully recognized the lithium iron phosphate battery from China, but also want to rely on the price advantage of lithium iron phosphate battery, access to more overseas markets.

It can be seen that the rise of lithium iron phosphate, so that the overall BOM cost of electric vehicles has dropped significantly,  also that electric vehicles can reach more consumers who want to try pure electric vehicles at a higher price/performance ratio, and shipments of lithium iron phosphate batteries have also risen sharply.

Future power battery market pattern

With the gradual introduction of the policy, the new energy vehicle industry will also gradually return to the era of market-oriented. After the increasing acceptance of consumers of electric vehicles, lithium iron phosphate battery relies on lower prices, replacing ternary lithium batteries to cover part of the price-sensitive users, but the low battery energy density and weaker low-temperature charging and discharging performance also lithium iron phosphate can not avoid the weak electric scenario, for range-sensitive users ternary is still the optimal choice. Lithium iron phosphate and ternary lithium in this era are not absolutely better or worse, the two are more like complementary products in the face of this diverse market. Just like the fuel car era, those sold to the Middle East models need a larger cooling tank, while the Far East needs a larger PTC heating kit. Batteries also need more extreme value release.

It is worth noting that, although the market share of lithium iron phosphate is increasing, but does not mean that the ternary lithium battery will stumble. At present, the ternary high nickel route still occupies a large market share, and with the diversified development path of the new energy vehicle market, different models, and different prices for power battery demand are destined to be different, there will be no absolute substitution between the two. The use of lithium iron phosphate battery initiative not only in the trend of raw material prices to maintain the price attractiveness of entry-level models, but also to better allocate ternary lithium battery production to high-end long-range models, so as to slow down the supply pressure caused by the shortage of ternary lithium batteries, to further expand the overall production capacity of electric vehicles.　

Under the guidance of market and technology as well as subsidy policy, lithium iron phosphate battery with life, cost, and safety advantages are more often chosen by civilian models, operational models, and commercial vehicles; ternary lithium-ion batteries with high capacity, high energy density and higher fast charging efficiency are mostly chosen by middle and high-end models.