Industry scramble for cheaper battery chemistry upends plans

Ford had planned to start production of its Explorer electric SUV in Germany late last year, but then came the order from CEO Jim Farley himself: wait. The six-month pause allowed the company to switch to using lower-cost, higher-durability lithium-iron-phosphate (LFP) batteries sourced from China's CATL. “It was better to wait half a year and launch with the latest greatest technology,” Jochen Bruckmann, launch leader for final assembly at Ford's Cologne factory, explained at an event to mark the start of production this week. Such are the savings unlocked by this newer battery chemistry that entire model programmes, even whole battery plants, are being paused in Europe and the US in the ongoing battle by established car makers to try to match the Chinese on EV costs. This week, ACC, the battery joint venture between Stellantis and Mercedes-Benz, said it had stopped building work on planned battery sites in Germany and Italy as it reviewed costs. The main stumbling point was chemistry, with ACC now looking at whether to produce LFP cells at its future German plant, a former Opel factory. Meanwhile, in the US, General Motors has paused production of the Chevrolet Bolt EV for over a year, just so it can switch battery chemistry over to LFP. GM CEO Mary Barra said the move would “significantly improve the profitability” of the car. Relaunching the Bolt with the new battery chemistry and a facelift would save “billions of dollars” compared with GM’s previous plan of building a new line of affordable EVs, Barra said. Right now, EVs in Europe and the US are too expensive compared with comparable cars in China. “The biggest advantage the Chinese have is the cost of the battery,” Ingo Stein, director of automotive and mobility at consultantcy Bain, told Autocar. “They're doing much more on LFP, which is at a lower cost point.” European batteries up to this point have been focused on the nickel-manganese-cobalt (NMC) chemistry. Last year, just 6% of all EVs sold in Europe used LFP, compared with 67% in China, according to figures from the International Energy Agency. The advantage of NMC has always been a higher energy density, allowing it to pack more of a punch per kilogram. The downside is cost, due to the price of the more exotic raw materials it needs. Right now, cobalt is the priciest ingredient needed to build lithium ion batteries, followed by nickel. LFP swaps those out for steel, iron and aluminium – three metals of negligible prices in comparison. It still needs costly lithium, but currently the raw material bill for LFP is half that of NMC, at $16 per kWh versus $31 per kWh, according to data from the bank Jefferies. Ford has been particularly bullish on LFP after realising how much it could save and has recently swapped to the chemistry for the entry version of its Mustang Mach-E electric SUV. The 70kWh pack in that car costs $6895, according to data sourced from battery material specialists Benchmark Minerals, compared with $8730 for the 62kWh pack in the rival Volkswagen ID 4, which uses the NMC formula (both batteries are sourced from CATL). For the Explorer, Ford uses Volkswagen Group’s MEB electric car platform as part of wider partnership between the two companies, meaning Volkswagen is poised to launch LFP EVs too. Volkswagen hasn’t indicated which of its wide range of MEB EVs, including the ID 4, Skoda Enyaq and Audi Q4 E-tron, will use the new CATL LFP packs, but it has announced that it's moving to the technology in China and for its cut-price smaller European models, including the Volkswagen ID 2 (arriving in 2025/2026). “The introduction of LFP battery technology is expected to reduce battery costs by one third,” said Volkswagen Group CFO Arno Antlitz on the company’s first quarter earnings call. More car makers in Europe are starting to offer the battery technology in new models, including the affordable Citroën ë-C3 supermini, which will go on sale next month priced from £21,990. Citroën owner Stellantis is doubling down on the technology after signing an initial agreement with CATL for a 50:50 joint venture for a LFP battery plant in Europe. Tesla has for a while used LFP batteries for its standard-range version of the Tesla Model 3, while BMW is planning to introduce LFP battery options for models on its new Neue Klasse EV platform. And of course most Chinese EVs sold in the UK and Europe use LFP, including those of BYD, which builds its own Blade batteries using the chemistry. The move to LFP inevitably brings European and American car makers closer into the orbit of China, which has led the renaissance of LFP from a lowly chemistry relegated to local delivery trucks to its use up to and including premium EVs. China also controls the bulk of the supply chain from the refining onwards. Much of the innovation has come from CATL, the world’s biggest battery supplier, which in April unveiled an LFP battery called Shenxing Plus that it said could power the right car for 1000km (621 miles) on a single charge. This ever-increasing range of LFP adds another nail in the coffin of NMC, given the cheaper chemistry’s other advantages of much reduced fire risk and the ability to cope with many more charge cycles. The Explorer for example has one of the longest range of any MEB car, at 602km (374 miles) from the biggest 84kWh pack (Ford quotes a 77kWh usable size). A recent upgrade for the Volkswagen ID 7 saloon on the same platform tops that with a maximum range of 709km from an 86kWh pack (Volkswagen didn’t reply to a question about the chemistry used). The rise of LFP has come at a difficult time for Europe’s battery maakers. While local governments are pushing for a regional battery supply chain, car makers can’t ignore the cost savings from importing cells from China. Benchmark Minerals research shows that LFP battery plants in China are currently running at 76% overcapacity, meaning that deals are there for the taking for car makers looking for cheap supply. Those battery firms completing European plants making NMC cells, for example Envision AESC plant in the UK, which will supply the new Nissan Leaf next year from a brand new facility, must be worrying they’re going to be undercut by competitors sourcing out of China. Even Chinese battery makers establishing plants in Europe could be feeling the pinch. Last month, Great Wall Motor battery affiliate SVolt said it was cancelling a second battery plant in Germany and still had no firm date for when it was going to start production on its first. The company blamed lower-than-expected EV sales growth as well as the cancellation of a “significant” customer order. Regional news sources said it was BMW that pulled out. All this turmoil is happening away from the customer, who will barely notice the chemistry change inside their new EV. Aside from enabling cheaper models like the ë-C3, much of the cost savings will be returned to the car maker to assist in their struggle to bring EV profit margins up to those of combustion-engined cars. It's true that LFP’s better charging resilience should allow more frequent rapid charging, while its lower tolerance of the cold might affect winter range. Mostly, however, the battle for LFP is a supply chain story of little interest to the consumer but one that goes right to the heart of the current struggle to build a sustainably affordable EV.