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| A Tesla logo is seen at a store in Denver, Colorado. AP-Yonhap |
Greater demand for LFP batteries to present opportunities
By Kim Bo-eun
Tesla's recently unveiled plan to power its standard-range electric vehicles (EV) with lithium iron phosphate (LFP) cathode batteries is set to benefit Korean battery makers by opening new opportunities in the market, with other major automakers expected to follow suit.
LFP chemistry batteries, produced by Chinese manufacturers such as CATL and BYD who have the upper hand, currently account for a little more than 10 percent of the market for EV batteries.
Research and consultancy group Wood Mackenzie forecast the LFT-type battery could account for up to 30 percent of the entire battery market. However, there are contrasting views in the industry _ that high-nickel batteries will take up the lion's share of the market in the coming years.
The LFP chemistry is able to keep battery prices low, as costs of the material are cheaper than that of nickel, cobalt and manganese (NCM) or nickel, cobalt and aluminum (NCA) batteries. LFP batteries are around 20 percent cheaper than the other high power cells. Plus, LFP batteries are stretchable and considered to be quite stable compared to NCM-based batteries in terms of potential fire risks.
Their largest challenging factor, however, is a shorter travel distance, which means they need to be recharged more often.
Tesla aims to maintain its leadership in the rapidly-growing EV market and it appears to make sense for the iconic U.S. EV maker to diversify its vehicle lineup from premium to budget models based on the type of batteries. With Tesla announcing greater use of the battery in its models, other carmakers may follow suit, launching more short-range models, which would solidify the battery segment and expand the market.
Ford and Volkswagen have expressed interest, according to analysts. Reports said Apple also reached out to CATL and BYD to purchase LFP batteries for the first-generation of its EV, tentatively named "iCar."
Local battery makers' plans
Korean battery makers LG Energy Solution (LGES), Samsung SDI and SK On are showing mixed responses to the EV market leader's plan.
Some view that Tesla's entry into the LFP-based EV segment would provide an opportunity by widening their client base; therefore, helping it increase revenue. None of the three battery makers are currently producing LFP batteries because of thinner margins and low technology barriers and they have focused instead on high-nickel batteries.
LGES admitted that it was currently developing LFP batteries to be mass produced for energy storage systems (ESS), but implied that it is developing a different low-cost battery. An ESS is a device converting electrical energy from power systems into a form that can be stored to be converted back to electrical energy when needed.
LFP batteries are increasingly being incorporated into ESS, given these devices are mainly installed in areas such as deserts, where battery size is less a matter of concern. ESS makers are therefore opting for the cheaper LFP battery.
"For EVs, we are also developing a low-cost cathode material that is cobalt free, which are able to overcome limitations such as the relatively larger amount of electricity to travel the same distance," an LGES executive told investors in a conference call on the company's third-quarter earnings.
LG and Samsung previously produced batteries with LFP materials.
SK On CEO Ji Dong-seop recently said it was also reviewing the possibility of producing LFP-type batteries. SK's newly-launched battery affiliate will update its plan regarding the LFP battery during an earnings call to be held Friday.
"If SK could be able to produce LFP batteries, it would be as a means to expand its portfolio to better respond to market circumstances," an industry official said. "There are market opportunities because demand is set to grow but supply is insufficient. Producing LFP batteries will also make it possible to hedge the risks of soaring battery material costs and safety issues."
High-nickel batteries are known to be more prone to fires, but this remains contested ― although Korea's top battery makers have seen damage from fires that erupted in vehicles using their batteries. Local battery makers are expected to be capable of producing LFP batteries due to the relatively low technological barrier.
Samsung SDI, meanwhile, said it is "not considering production of LFP batteries."
The company has been maintaining a "wait-and-see approach" and intends to enter the market only when there will be sufficient demand for the battery type.
"The issue for vehicles with LFP batteries will also be power, which is why Chinese companies are experimenting, such as by getting rid of the battery module to fit in more batteries," another industry official said. "But this can give rise to risks as covers that protect against heat are removed."
Korean battery makers have also been seeking to lower costs by reducing the portion of cobalt and increasing the portion of nickel. Cobalt is the most expensive material among nickel, cobalt, manganese and aluminum.
Even if local battery makers begin producing the battery, this will account for only a portion of their battery production, industry sources said.
"We don't expect a transition toward LFP batteries to occur," an official said.
