Higher energy-dense LFP batteries probably will stay on the market for low-cost, shorter range xEVs.

According to Adamas Intelligence, the year 2019 brought a significant decline of lithium-iron-phosphate (LFP) cathode chemistry in terms of capacity deployed globally in new passenger xEV (BEV, PHEV, HEV) cars.

The market share of LFP (one of the most affordable, but also not an especially energy-dense chemistry) went down from 13% in 2018 to 6% in 2019.

The main reason is that manufacturers are using other chemistries in higher and higher volumes (both in terms of the number of packs and average pack capacity). Additionally, the Chinese market does not subsidize low-range EVs as previously, which affected LFP the most.

"This drop in LFP usage corresponds with growing adoption of higher energy density nickel-cobalt-manganese (“NCM”) cathode chemistries by cell suppliers and automakers in China, such as CATL and BYD, which are favored by the nation’s dual credit policy system that rewards automakers according to the driving range of their EVs and the energy density of their battery packs."

The report says that out of 95.6 GWh of batteries deployed in new passenger xEV in 2019, 90% were NCM or NCA (compared to 83% in 2018).

The highest energy-dense types, like NCM 622, NCM 811 and all NCA, were at 45% share (up from 36% year ago).

The future of LFP

Will LFP will soon fade completely, or maybe find its niche in the EV battery market?

Adamas Intelligence notes that the LFP "remains the dominant cathode of choice for commercial and special purpose vehicle batteries in China due to its low-cost and reliability". Market share in this particular segment amounted to 96% out of 615 MWh deployed in January 2020.

It's not much compared to all the new investment in battery gigafactories, but there are also improvements on the horizon like the cell-to-pack (CTP) technologies. The potential is to achieve an energy density of 160 Wh/kg on a pack level.

"Making a comeback with cell-to-pack

Since the middle of last year, a number of China’s leading cell suppliers have revealed proprietary ‘cell-to-pack’ (“CTP”) battery manufacturing technologies that, simply put, reduce the mass of non-active materials in a battery pack, thereby increasing its energy density. For LFP (with a graphite anode), the CTP approach can increase battery pack energy density to upwards of 160 Wh/kg, enabling it to qualify for the full base subsidy multiplier in China (more on that in a minute).

In August 2019, the leading force behind China’s first generation LFP boom, BYD, unveiled a proprietary CTP technology that purportedly increases volumetric energy density by 50% while reducing manufacturing costs by 30%. Similarly, a month later, cell manufacturer CATL announced its own CTP approach that boosts energy density by 10 to 15%, improves volume utilization by 15 to 20% and reduces the amount of battery pack components by 40%."

There are already EV manufacturers willing to use CTP-made LFP packs in new models, including BAIC (BAIC EU5 EV will be equipped with CATL), Volkswagen (CATL to supply batteries for Volkswagen e-Delivery In Brazil), BYD, and reportedly also Tesla (CATL).

"Shortly after revealing its CTP technology in September 2019, CATL and EV maker BAIC announced that the latter’s market-leading BAIC EU5 EV will use CATL’s CTP-made batteries going forward, offering a major vote of confidence for the cell supplier / pack integrators’ novel new approach.

Similarly, in October 2019 it was revealed that CATL would supply CTP-made LFP packs for Volkswagen e-Delivery trucks in Brazil. According to the announcement, “by adopting the cutting-edge cell–to-pack technology… conventional module parts could be removed to increase integration efficiency from 75% to 90%, and to ultimately achieve a [pack] energy density as high as 160Wh/kg in this brand-new product”.

And most recently (and most prominently), it was revealed by Reuters that Tesla has been in advanced talks with CATL for over a year to use LFP cells in some versions of the former’s China-made Model 3 sedan, a move that would slash battery costs by a “double-digit percent” while still enabling the automaker to qualify for near-term subsidies.

For Tesla, using CTP-made LFP packs from CATL would not only give the Model 3 versions that used them sufficient enough electric range to qualify for base subsidies (> 250 kilometers per charge), but, more importantly, will earn the battery packs used in those versions the energy density multiplier needed for buyers to capture the full base subsidy amount (i.e. a full multiplier of 1.0 is granted for pack energy density ≥ 160 Wh/kg)."

In other words, entry-level, low-cost EVs, with a basic range probably will be equipped with a LFP type of batteries. There is even a potential to reach 190 Wh/kg on a cell level.

"In the passenger EV market, LFP is ideal for low-cost EVs used by urban commuters that prioritize price over driving range, and ongoing research, development and innovation focused on LFP, such as Guoxuan’s industry-leading 190 Wh/kg cell, means it will continue to stay relevant as incumbent chemistries evolve further."

The other EVs (especially long-range) will be equipped with NCM, NCA or other chemistries, which are moving towards 300 Wh/kg or more.