To Boost Price Competitiveness
Last week, when the three major Korean battery companies announced their earnings on conference calls, all of them stressed they would focus on cobalt-free batteries to respond to the growing preference for relatively cheap Chinese-made lithium iron phosphate (LFP) batteries.
As battery prices soar, global battery companies are ramping up investment in relatively cheap LFP investments. According to Taiwanese market research firm TrendForce, LFP’s global market share stood at 32 percent to 36 percent in 2021. Although ternary batteries made of nickel, cobalt, and manganese still account for more than 60 percent, some experts forecast that LFP batteries will overtake ternary batteries in 2024.
Currently, the main producers of LFP batteries are Chinese companies. Benchmark Mineral Intelligence (BMI) reports that China accounts for 90 percent of global LFP battery production.
In contrast, the three Korean battery companies have focused on ternary batteries. LFP batteries have the disadvantage of having short mileage due to their low energy density. For this reason, they are mainly loaded into low-priced and entry-level electric vehicles.
Ternary batteries are more profitable than LFP batteries. For this reason, Korean battery makers have not been interested in investing in LFP batteries.
However, the market atmosphere has changed as Tesla, the world’s No 1 player in electric vehicles, elevated the proportion of LFP batteries. In a recent earnings report, Tesla said that half of the cars it produced in the first quarter of 2022 were powered by LFP batteries. Tesla has been using LFP batteries from Chinese battery maker CATL for its Chinese-made Model 3 for two years. LFP batteries have been applied to the entry-level Model 3 made in the United States since 2021.
Other automakers such as Audi and BMW are considering using LFP batteries. As demand for LFP grows, the three Korean battery companies began to feel the need to respond to the market change. Rather than directly developing LFP batteries, the three companies decided to lower the prices of their ternary batteries to make them more competitive. One way they have found to lower prices is to remove cobalt from ternary batteries. Among raw materials for batteries, cobalt is the most expensive. To cut their battery prices, they decided to exclude cobalt and ramp up the proportion of manganese.
Tesla CEO Elon Musk also showed a big interest in Manganese, saying the metal has great potential as a battery material. Manganese acts as a battery stabilizer like cobalt, but is cheaper than cobalt.
“LFP batteries are heavier than ternary batteries, so seen from a mid- to long-term perspective, ternary batteries will prove to be more competitive than LFP batteries," an industry expert said.