US electric vehicle batteries poised for new lithium iron age

Battery technology prevalent in China is making inroads in the US electric-vehicle market, with manufacturers looking past poorer energy storage characteristics to embrace its cheaper cost and safety.

Lithium iron phosphate technology accounted for about half of the battery capacity of EVs sold in China last year, according to research from consultancy Adamas Intelligence. In the US the technology represented only 9 per cent of capacity in 2022, up from zero the year before.

The US share is about to change, however. This month a start-up named Our Next Energy will begin making lithium iron phosphate, or LFP, batteries in Michigan, expanding next year after opening a new $1.6bn plant. By 2027 ONE intends to supply enough LFP batteries for 200,000 EVs.

Last month Ford announced it would license technology to make LFP batteries for its cars from China-based supplier CATL, citing the need to offer customers a lower-priced 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 “certainly has seen the second coming of LFP in recent years, and that wave is starting to move west”, said Ryan Castilloux, founder of Adamas Intelligence.

LFP batteries are a form of lithium ion battery, the main form of energy storage in electric vehicles. The batteries in electric cars sold in the US to date have primarily contained a combination of nickel with manganese and cobalt (NMC) or manganese and aluminium in a battery’s cathode.

Such “nickel-rich” batteries have relatively high energy density, meaning they can store more electricity per unit of weight. This quality allows drivers to travel farther on a single charge — a big plus in a sprawling US landscape where trips tend to be longer. But nickel-rich batteries cost more than LFP technology, on an energy basis.

LFP batteries hold less energy per pound than nickel-rich batteries but can be recharged more times before they wear out. This made them a good fit for taxis operating in Chinese megacities with widely available charging infrastructure. LFP batteries’ lower energy density was less of a problem for cars that weighed less than the trucks and sport utility vehicles favoured by US consumers.

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In the US, LFP has been “seen as the lesser-wanted . . . chemistry”, said Chloe Herrera, lead battery analyst at Lux Research. Range has been viewed as too important to US drivers to sacrifice in favour of price.

“In the [US] battery community, if you talked to anyone four years ago, no one would have said you’d get LFP in a vehicle,” she said.

One factor driving new US interest in LFP technology is the higher cost of nickel and cobalt as EVs sales grow.

Nickel’s price has more than doubled in the past three years, jumping a year ago when Russia, a supplier of the metal, invaded Ukraine. The majority of the world’s cobalt is mined in the Democratic Republic of Congo, often under punishing conditions for workers, and the price also shot up between 2020 and 2022 before falling back down to roughly where it was three years ago.

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Adding to LFP’s appeal in the US, the technology has also become more affordable as patents on it expire. And the spread of public charging stations — set to accelerate with a boost from federal subsidies — may diminish drivers’ anxieties about dead batteries, said Jeff Chamberlain, who runs Volta Energy Technologies, a venture capital firm that invests in battery companies. LFP batteries are also less likely to catch fire than nickel-rich batteries.

Snarled supply chains and US efforts to loosen reliance on Chinese imports may also boost LFP technology in the US. The Inflation Reduction Act, the flagship US climate law, fosters a domestic supply chain for EVs and discourages carmakers from using suppliers located in “a foreign entity of concern”, such as China.

The subsidies in the law allow new companies to compete with established players on cost as they grow from low-volume to high-volume operations, said Our Next Energy chief executive Mujeeb Ijaz.

“We had a lot of customers that were looking at us, and they’re now changing from interested, curious, to, ‘Show me whether you can scale and actually sign a supply agreement’,” he said. “It’s transitioned 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 began using lithium iron batteries supplied by CATL in 2020 for cars sold in China, expanding that in 2021 to some cars it sold in the US. Elon Musk, Tesla’s chief executive, told investors on Wednesday that Earth’s mass contains more iron than any other element.

“We’re definitely not going to run out of iron. There’s so much iron it’s insane,” he said.

US sales of EVs totalled 810,000 in 2022, according to Kelley Blue Book, of which 99,500 used LFP batteries, according to Adamas Intelligence. Tesla accounted for the “majority” of the LFP model sales, Castilloux said.

Tesla’s “new power train is compatible with any battery chemistry — that will give us great flexibility in battery sourcing”, said Colin Campbell, the company’s head of power train engineering.

No more than 20 per cent of announced battery production capacity in the US is scheduled for LFPs, 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 LFP’s share closer to 30 per cent by mid decade”.

Kore Power, a US battery start-up with a $75mn investment led by a subsidiary of Germany’s Siemens, also anticipates a 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 add “predominantly” LFP capacity, a Siemens spokeswoman said.

Chamberlain, who formerly headed the battery research programme at Argonne National Laboratory, said that carmakers are not going to switch from NMC batteries to LFP overnight. The market is growing rapidly enough that both will be necessary, and with billions invested in building new battery plants, “they have a lot of sunk capital”.