# Iron man Elon Musk places his Tesla battery bets Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-04-27 Category: TECHNOLOGY Category URL: https://financedigest.com/category/technology Meta Title: Tesla shifts focus to cheaper, iron-based batteries Meta Description: Discover how Tesla's move to lithium iron phosphate batteries is reshaping the electric vehicle market, undercutting nickel and cobalt prices. URL: https://financedigest.com/iron-man-elon-musk-places-his-tesla-battery-betshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-04-27t141627z4lynxnpei3q0hcrtroptp4autos-electricvehicles-battery-tech-1736815812519-compressed.jpg) By Hyunjoo Jin and Paul Lienert (Reuters) – As Tesla’s profits and prices grabbed headlines last week, a potentially pivotal development for the global car industry flew largely under the radar. The U.S. electric pioneer disclosed that nearly half of the vehicles it produced in the first quarter were equipped with lithium iron phosphate (LFP) [batteries – a cheaper rival to the nickel-and-cobalt based cells](https://www.financedigest.com/bmw-to-make-solid-powers-battery-cells-under-expanded-agreement.html "BMW to make Solid Power’s battery cells under expanded agreement") that dominate in the West. The revelation, eclipsed by the carmaker’s $19 billion revenue and [Elon Musk’s](https://www.financedigest.com/elon-musk-and-others-urge-ai-pause-citing-risks-to-society.html "Elon Musk and others urge AI pause, citing ‘risks to society’") Twitter charge, was the first time Tesla had disclosed such specifics about its batteries make-up. It flashed a strong signal that iron-based cells are finally starting to win [global appeal at a time when nickel is blighted by supply concerns due to major producer Russia’s war in Ukraine and cobalt is tainted by reports of dangerous conditions at artisanal mines](https://www.financedigest.com/volkswagen-to-invest-in-mines-in-bid-to-become-global-battery-supplier.html "Volkswagen to invest in mines in bid to become global battery supplier") in Democratic Republic of Congo. Tesla is not alone in betting that LFP batteries, already popular in China, can make inroads into [Western markets](https://www.financedigest.com/digital-inclination-to-drive-the-western-blotting-market.html "Digital Inclination to drive the Western Blotting Market"). More than a dozen companies are considering establishing factories for LFP [batteries and components in the United States and Europe over the next three years](https://www.financedigest.com/home-battery-sales-in-germany-may-surge-59-this-year-study.html "Home battery sales in Germany may surge 59% this year -study"), according to a Reuters review of the electric vehicle (EV) scene and interviews with several players. See accompanying factbox on the plans: “I think lithium iron phosphate has a new life,” said Mujeeb Ijaz, founder of U.S. battery startup Our Next [Energy which says](https://www.financedigest.com/eu-will-propose-windfall-levies-on-energy-firms-von-der-leyen-says.html "EU will propose windfall levies on energy firms, von der Leyen says") it is scouting a U.S. production site. It has a clear and long-term advantage for the [electric vehicle](https://www.financedigest.com/bmw-invests-1-7-billion-to-build-electric-vehicles-in-u-s.html "BMW invests .7 billion to build electric vehicles in U.S") industry. Ijaz has [worked in the field long enough to see a technology](https://www.financedigest.com/what-is-5g-technology-and-how-it-works.html "What is 5G technology and how it works") that failed to catch on in America a decade ago gather fresh momentum. He was [chief technology officer](https://www.financedigest.com/host-analytics-appoints-chris-labruna-as-chief-revenue-officer.html "Host Analytics Appoints Chris LaBruna as Chief Revenue Officer") at Michigan-based A123, an early producer of LFP batteries that went bankrupt in 2012 and was acquired by a Chinese company. He and other LFP advocates cited the relative abundance and cheaper prices of iron as a [key factor](https://www.financedigest.com/automotive-soft-trim-interior-materials-market-size-key-players-growth-factors-regions-and-applications-industry-forecast-by-2026.html "Automotive Soft Trim Interior Materials Market Size, Key Players, Growth Factors, Regions and Applications, Industry Forecast by 2026") beginning to outweigh the drawbacks that have held back the adoption of LFP cells globally – they are bigger and heavier, and generally hold less energy than NCM cells, giving them a shorter range. There is a mountain to climb, though. LFP chemistry has accounted for just 3% of EV batteries in the United [States and Canada in 2022 and 6% in the European Union](https://www.financedigest.com/ukraines-first-lady-to-be-guest-of-honor-at-eu-state-of-union.html "Ukraine’s first lady to be guest of honor at EU State of Union"), with nickel-cobalt-manganese (NCM) cells accounting for the rest, according to data from Benchmark Mineral Intelligence (BMI). The race is far tighter in China, where LFP commands 44% of the EV market versus NCM’s 56%. It could be long and tough [road for Western LFP cell manufacturers seeking](https://www.financedigest.com/exclusive-nissan-seeks-tech-tie-up-without-renault-as-alliance-nears-end-of-road.html "Exclusive-Nissan seeks tech tie-up without Renault as alliance nears end of road") to prosper against rivals from China, which accounts for about 90% of global production. A shorter-term concern for such companies, according to BMI’s [chief data officer](https://www.financedigest.com/deutsche-bank-names-eigendorf-new-chief-sustainability-officer.html "Deutsche Bank names Eigendorf new chief sustainability officer") Caspar Rawles, is a continued dependence on Chinese suppliers for refined materials. LFP cells also contain more lithium than NCM rivals, and industry experts raise concerns that iron-based [batteries’ historic advantage of being cheaper to produce could be eroded and even erased by rising costs](https://www.financedigest.com/bmw-bets-on-design-and-recycling-not-mining-to-lower-battery-costs.html "BMW bets on design and recycling, not mining, to lower battery costs") of the metal. NEVER LEAVE LOS ANGELES? Tesla has been using LFP in some entry-level, U.S.-made versions of its [Model 3 since last](https://www.financedigest.com/mercedes-benz-launches-e-class-its-last-new-combustion-engine-model.html "Mercedes-Benz launches E-Class, its last new combustion engine model") year, expanding their use of the technology beyond China, where about two years ago it started using LFP batteries made by Chinese firm CATL, the world’s largest EV battery maker, for some Model 3s. Yet given the historic dominance of nickel-and-cobalt based batteries in the United States, the scale of [Tesla’s usage of LFP cells in the first quarter of 2022 – fitted in roughly 150,000 cars](https://www.financedigest.com/tesla-to-warn-of-data-privacy-risk-from-car-security-cameras-in-germany.html "Tesla to warn of data privacy risk from car security cameras in Germany") produced – took some analysts and battery specialists by surprise. Tesla did not respond to a request for comment. Mitra Chem, co-founded by former Tesla battery supply chain manager Vivas Kumar, is working to [build LFP battery](https://www.financedigest.com/li-cycle-to-build-french-battery-processing-facility.html "Li-Cycle to build French battery processing facility") materials, initially in California. He said he expected nickel [prices would remain volatile because of supply](https://www.financedigest.com/oil-prices-extend-gains-with-falling-supplies-in-focus.html "Oil prices extend gains with falling supplies in focus") chain dislocations. The best [insurance policy](https://www.financedigest.com/what-type-of-life-insurance-policy-is-right-for-me.html "What Type of Life Insurance Policy Is Right For Me?") that automakers have … is to incorporate more iron-based cathodes in their portfolio,” he added. U.S. electric vehicle startup Fisker, which [plans to use LFP batteries in its lower-range SUVs, plans to initially source](https://www.financedigest.com/exclusive-germany-prepares-crisis-plan-for-abrupt-end-to-russian-gas-sources.html "Exclusive-Germany prepares crisis plan for abrupt end to Russian gas – sources") cells from CATL. But CEO Henrik Fisker said that it was in talks with battery suppliers to [source batteries made in the United](https://www.financedigest.com/most-of-bps-whiting-refinery-units-shut-following-fire-sources.html "Most of BP’s Whiting refinery units shut following fire -sources") States, Canada or Mexico from 2024 or 2025. Local [sourcing is important because it is expensive to ship the heavy packs from Asia](https://www.financedigest.com/credit-suisse-offers-higher-deposit-rates-in-asia-to-woo-the-wealthy-sources.html "Credit Suisse offers higher deposit rates in Asia to woo the wealthy – sources"), especially for low-cost, high-volume vehicles, according to Fisker. It is also not environmentally friendly, added the CEO, who is confident there will be a [major place](https://www.financedigest.com/the-majority-of-britons-do-not-have-a-will-in-place-heres-why-you-should-have-one.html "The majority of Britons do not have a will in place – here’s why you should have one") for LFP batteries in the global EV mix. “(If) I never leave Los Angeles, I never leave San Francisco, I never leave London … I think that’s where LFP comes in really [well,” he said of urban-dwelling EV owners who drive](https://www.financedigest.com/digitized-scintillation-to-drive-the-medical-wellness-market.html "Digitized scintillation to drive the Medical Wellness Market") shorter distances. Other premium carmakers are also looking at the chemistry following the outbreak of the [Ukraine war](https://www.financedigest.com/ukraine-seeks-debt-payment-freeze-as-war-ravages-economy.html "Ukraine seeks debt payment freeze as war ravages economy"), including Volkswagen’s Audi, which hasn’t used LFP batteries before. It may well be that we will see LFP in a larger portion of the fleet in the [medium term,”](https://www.financedigest.com/ubisoft-vows-to-get-back-to-operating-margin-above-20-in-medium-term.html "Ubisoft vows to get back to operating margin above 20% in medium term") Audi CEO Markus Duesmann said in March. “After the war, a new situation will emerge; we will adapt to that and choose battery technologies and specifications accordingly.” BMW’s [chief procurement officer](https://www.financedigest.com/impact-com-appoints-mike-head-as-cro-and-jenna-mills-as-director-public-relations-promotes-cristy-ebert-garcia-to-chief-marketing-officer.html "impact.com appoints Mike Head as CRO and Jenna Mills as Director, Public Relations, promotes Cristy Ebert Garcia to Chief Marketing Officer") Joachim Post also said recently that the company was examining the merits of LFP. “We’re looking at different technologies to minimize the use of resources and also we’re looking at optimizing chemistry,” he added. DISCIPLINED, NO SCREW-UPS Among their advantages, LFP cells tend to pose less of a fire risk than NCM cells, and can be fully [charged continually without losing as much performance over the life](https://www.financedigest.com/trump-charges-bring-new-york-zombie-case-back-to-life.html "Trump charges bring New York ‘zombie case’ back to life") of the battery. As the global EV market expands, the chemistry is expected to find its way into more entry-level [consumer and commercial](https://www.financedigest.com/citigroup-says-will-close-russian-consumer-commercial-business.html "Citigroup says will close Russian consumer, commercial business") vehicles where longer range is not as critical. Yet the hurdles to widespread LFP cell adoption include finding solutions to improve [energy density – thus reducing the size and weight – and grappling with the rising](https://www.financedigest.com/factbox-how-far-are-uk-energy-bills-set-to-rise-and-what-help-are-consumers-getting.html "Factbox-How far are UK energy bills set to rise and what help are consumers getting?") cost of lithium. Here’s a graphic: https://tmsnrt.rs/3uUejfn Meanwhile, building out and scaling up LFP production in the United States and Europe will take time, underscoring the [challenge to Western governments](https://www.financedigest.com/5-challenges-to-overcome-in-governance-risk-and-compliance-magazine.html "5 Challenges to Overcome in Governance, Risk and Compliance-Magazine") in reducing reliance on China. American [startups face](https://www.financedigest.com/analysis-rocket-startups-face-adapt-or-die-moment-amid-investment-drought.html "Analysis-Rocket startups face adapt-or-die moment amid investment drought") an uphill battle of scaling up to compete with CATL (Contemporary Amperex Technology Ltd), which is backed by Chinese government subsidies and supplies Tesla, among others, with LFP cells. “Everything has to be disciplined manufacturing, without any screw-ups,” said Bob Galyen, a former chief technology officer at CATL who now runs a batteries consultancy, Galyen Energy. He also noted: “A U.S.-based company does not have to [worry about the geopolitical issues that China](https://www.financedigest.com/european-shares-edge-higher-on-healthcare-lift-weak-china-data-stokes-worries.html "European shares edge higher on healthcare lift, weak China data stokes worries") and U.S. have presently.” (Reporting by Hyunjoo Jin in San Francisco and Paul Lienert in Detroit; Additional reporting by Christina Amann and Victoria Waldersee in Berlin; Editing by Pravin Char) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---