China's Low-Cost 'LFP Battery' Offensive... K-Battery Cannot Back Down

Low Performance but Strong Price Competitiveness LFP
Rising Raw Material Costs Burden, Automakers Show Interest
Battery Top 3 Companies Ponder Mid-Low Price Market Strategies

[Asia Economy Reporter Oh Hyung-gil] American electric vehicle manufacturer Tesla equipped about half of the electric vehicles produced in the first quarter of this year with lithium iron phosphate (LFP) batteries. Tesla plans to further expand the use of LFP batteries in the future, as diversifying battery materials is crucial for long-term production growth.

Audi and BMW are also pursuing plans to increase the proportion of LFP batteries in their mid- to low-priced electric vehicle models. There are even forecasts that LFP batteries will surpass nickel-cobalt-manganese (NCM) batteries, also known as ternary batteries, and dominate the future battery industry.

The invasion of cheap Chinese-made 'LFP batteries' has begun. Although LFP batteries have slower charging speeds and shorter driving ranges, the number of automakers choosing LFP batteries for their affordable prices is increasing, signaling a shift in the electric vehicle battery market. The K-battery industry, which has focused on NCM batteries to build differentiation, now faces the inevitable need to revise strategies to compete with LFP batteries.

According to the industry on the 2nd, Chinese battery manufacturers leading with LFP batteries are expanding their market share in China, the world's largest electric vehicle market.

According to the China Automotive Battery Research Institute, 49% of LFP batteries installed in Chinese electric vehicles in the first quarter of this year were products of CATL.

Chinese electric vehicle manufacturer BYD also supplied 34% of LFP batteries, with the two companies recording a combined market share exceeding 80%. CATL, the world's number one battery manufacturer, recorded a 51% market share in the NCM battery market, while LG Energy Solution held only 6%.

CATL's growth foundation, supported by global investment expansion, is based on LFP batteries. CATL plans to secure a production capacity of 550 GWh through 10 global production plants, with the Ningde plant holding the largest capacity at 171 GWh. In March alone, CATL achieved battery shipments of 10.81 GWh in China, capturing half of the market share.

LFP batteries are gaining attention because the strategies of automakers aiming to reduce cost burdens and Chinese companies leading with LFP batteries align perfectly.

In particular, although prices of most key battery materials have recently risen, nickel has shown a steep upward trend. Nickel production is concentrated in a few countries such as China and Russia, and the Russia-Ukraine war has disrupted supply chains. In contrast, lithium is produced in various countries, making it relatively safe from supply crises.

However, LFP batteries have lower energy density compared to NCM batteries, resulting in relatively smaller battery capacity, which means they occupy more space and add weight when installed in electric vehicles, a noted disadvantage.

The three domestic battery companies preparing to compete with LFP batteries point to these disadvantages as their killing points.

LG Energy Solution is structuring its competitive framework with the high-nickel NCMA battery, which has been mass-produced since early this year. This is a quaternary battery that adds relatively inexpensive aluminum to the existing NCM. The nickel content has been increased up to 90% to improve battery output, and the proportions of cobalt and manganese have been reduced to below 5% each, with aluminum added to reduce manufacturing costs.

Samsung SDI plans to lower costs and secure driving range at premium model levels through the nickel-cobalt-manganese (NMX) battery, which excludes costly cobalt and increases the manganese proportion. SK On intends to complete technology development within the year to improve the energy density and fast-charging capabilities of LFP batteries and will proceed with mass production depending on market conditions.

An industry official said, "Interest in LFP batteries is increasing due to stable supply and price fluctuations of key materials," adding, "The core of battery competition lies in who can quickly develop affordable yet high-performance batteries through diverse material research."

This content was produced with the assistance of AI translation services.