Iron-based Batteries’ Future Looks Bright As Tesla Weighs In

Of late, leading executives in the automotive sector have been indicating a reversion to older, cheaper lithium-iron-phosphate (LFP) batteries in their products. Tesla CEO Elon Musk has recently spoken of such a shift in the company’s energy storage devices and some entry-level EVs. Additionally, Ford CEO Jim Farley has said the company would use LFP batteries in some commercial vehicles, and Volkswagen CEO Herbert Diess has announced that use of LFP in some VW entry-level EVs.

This change is most concentrated in the Chinese automotive industry today. While outside China, nickel-based batteries are largely in use due to their higher energy density that improves battery range, the country’s current monopoly on LFP draws from key patents that are managed by a consortium of academic research institutions. This consortium came to an agreement with Chinese battery makers a decade ago under which the manufacturers would not be charged a licensing fee providing that the LFP batteries were used only in Chinese markets. With the blessings of the Chinese Communist party of course.

In general, LFP battery cells are very lucrative because they are cheap and do not require rare materials like cobalt and nickel. If adopted by the EV market, LFP batteries would go a long way in accelerating its growth by reducing EV costs. An added bonus with avoiding cobalt is avoiding the horrendous supply lines that metal comes through, involving deep exploitation, monopoly miners and worse.

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As Chinese LFP patents will expire in 2022, non-Chinese battery manufacturers are expecting to get an opportunity to shift their production to iron-based formulas. Even though European and North American battery factories are currently focused on nickel-based chemistries, as a result of their partnership with major South Korean auto companies, we can expect some capacity addition in North America in the coming years. The US is fortunate in this regard since iron and phosphoric acid, required for LFP, are locally manufactured in large quantities.

The main point of attraction in LFP batteries is that they dramatically reduce the overall cost of a vehicle. It makes sense then to expect leading automakers like Tesla to use iron-based batteries primarily in the production of entry-level and low-cost vehicles. Higher-end and performance cars, on the other hand, would still come with nickel-based batteries. Regardless, the odds of expanding LFP capacity are stacked in North America and Europe’s favour.

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