LFP Market Share Drops in 2019 but Expect a Comeback with Cell-to-Pack

Mar. 4, 2020

China’s policies have fueled the industry’s adoption of alternative cathode chemistries

In 2019, the market share of lithium-iron-phosphate (“LFP”) cathode chemistry fell to 6% in global passenger EV batteries by watt-hours deployed (i.e. installed in newly-sold EVs), down from 13% the year prior, according to data from Adamas Intelligence’s EV Battery Capacity and Battery Metals Tracker (subscribe or schedule a live demonstration).

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.

Overall, the combined global market share of ternary cathodes (including NCM and nickel-cobalt-aluminum (“NCA”) varieties) in passenger EV batteries reached 90% in 2019, up from 83% in 2018. More specifically, the combined market share of high-nickel ternary cathodes (including NCM 622, NCM 811 and all flavors of NCA) totaled 45% in 2019, up from 36% the year prior.

LFP is down but not out

Despite the ongoing downturn for LFP in the passenger EV market, it remains the dominant cathode of choice for commercial and special purpose vehicle batteries in China due to its low-cost and reliability. In January 2020, approximately 615 MWh of battery capacity was deployed in new commercial and special purpose electric vehicles in the nation, 96% of that capacity using LFP cells.

But beyond the commercial and special purpose EV markets, research and interest in LFP by the passenger EV industry is still alive-and-well and there are reasons to believe that we will see LFP regain some lost market share by as early as this year.

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%.

Automakers are convinced

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).

LFP vs. high-nickel ternary: Not an either-or proposition

Thus, while we expect to see LFP recapture some market share in passenger EV batteries by as early as this year, we do not view its second coming as a death blow to the momentum behind high-nickel cathodes – rather, we see renewed adoption of LFP as a reflection of the EV market’s diversifying needs.

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.

But for long-range, high-performance EVs and/or space limited applications, cell chemistries using high-nickel ternary cathodes, such as NCM 622, NCM 712, NCM 811 and NCA 80+ will remain the flavor of the day in Asia, Europe and the U.S. Towards that end, some current-generation NCM 811 cells are already pushing 300 Wh/kg and looking forward, companies like CATL are planning to boost that figure to 350 Wh/kg by 2024.

The moral of the message is that with innovation happening on both LFP and ternary fronts, and demand evolving for both low-priced reliable urban EVs as well as long-range high-performance ones, the LFP versus high-nickel ternary discussion is not an either-or proposition. In the near-term the market needs both, the market is calling for both and the market will continue to adopt both.

Additional reading:

95.6 GWh of Passenger EV Battery Capacity Deployed Globally in 2019

Panasonic Responsible for 51% of Global EV Battery Nickel Demand in 2019

Battery Materials Offer a Silver Lining in a Slowing EV Market


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