Tesla Sparks Low-Cost Competition... Growing Presence of Chinese LFP

Low-Cost Models Equipped with Chinese LFP Batteries
Expansion to Affordable Models Amid Vehicle Price Competition
Korean Companies Respond with Cobalt-Reduced NCM
US IRA Implementation May Present Opportunities for Korean LFP Products

The Tesla Model S is being unveiled at 'EV Trend Korea 2018' held at COEX in Gangnam-gu, Seoul. Photo by Jinhyung Kang aymsdream@

"I was surprised by how much the scale has grown since the last time I attended a few years ago." At the '2023 Battery Technology Symposium' held on the 18th at the Gwanggaeto Hall of Sejong University in Seoul, Professor Ki-Seok Kang of Seoul National University's Department of Materials Science and Engineering, who presented a paper titled 'Lithium-rich Layered Oxide Cathodes Beyond High Nickel NCM (Nickel-Cobalt-Manganese),' felt the heightened public interest in secondary batteries. The Korean Electrochemical Society, co-host of the event, reported that "the number of attendees over the two days, the 17th and 18th, was 750," marking "the highest number ever."

However, battery researchers and industry professionals attending the event openly expressed their underlying concerns. They feel uneasy when thinking about China, which is gradually increasing its presence in the secondary battery industry. As consumers begin to prioritize price when purchasing electric vehicles, more automakers are turning to Chinese-made LFP (Lithium Iron Phosphate) batteries. Chinese companies are also continuously releasing improved versions of existing LFP batteries.

LFP Batteries Penetrating Even the Entry-Level Market

Chinese battery companies have rapidly grown by supplying LFP batteries to domestic electric vehicle manufacturers. The main raw materials for LFP battery cathodes, phosphate and iron, are cheaper than the materials used in ternary batteries such as NCM and NCA (Nickel-Cobalt-Aluminum), which are primarily produced by Korean companies. China is also the world's largest producer of phosphate rock and iron. Although LFP batteries have lower performance compared to ternary batteries, they are inexpensive and stable. Domestic companies have focused on high nickel ternary batteries, which have increased nickel content. High nickel batteries offer high energy density but are somewhat less stable than LFP batteries.

Until last year, many forecasts suggested that LFP batteries would be used mainly in low-cost models, while ternary batteries would dominate the entry-level and premium electric vehicle markets. Recently, these forecasts have been revised. With LFP batteries entering the entry-level market, it is expected that they will fiercely compete with ternary batteries for market leadership.

Scenes from the '2023 Battery Technology Symposium' held on August 17-18 at Gwanggaeto Hall, Sejong University, Seoul. The event was a great success with approximately 750 attendees over two days. (Photo by The Korean Electrochemical Society)

At the event, Doo-Yeon Lee, Vice President of SNE Research, also stated, "We expect intense competition between LFP (or LMFP, Lithium Manganese Iron Phosphate) batteries and NCM (or cobalt-free NCM) batteries in volume vehicles." This means that as LFP batteries expand beyond low-cost models into the entry-level electric vehicle market, they will compete head-to-head with ternary batteries like NCM.

There are three main reasons behind this. First, Chinese battery companies, which were content with their domestic market, are now turning their attention to overseas markets. Second, Tesla's price competition has intensified, leading more automakers to seek LFP batteries.

Tesla has been leading the electric vehicle price competition this year by consecutively lowering prices of the Model S and Model X in global markets such as the U.S. and China. On the 15th, Tesla reduced the prices of the Model S and Model X in China by up to 70,000 yuan (approximately 12.81 million KRW). Last month, Tesla launched the mid-size SUV Model Y in Korea using Chinese CATL batteries, lowering the price by 20 million KRW.

Global automakers like Ford and Volkswagen are also joining the price reduction efforts. The most effective way to lower electric vehicle prices is to use cheaper batteries. Batteries account for about 40% of the cost of an electric vehicle. On June 18, Yoo-Jin Oh, a research fellow at Hana Financial Management Research Institute, stated in a report titled "Electric Vehicle Price Competition Intensifies, Must Change to Survive," that "while efforts have focused on improving energy density to extend electric vehicle driving range, going forward, the expansion of affordable LFP batteries is expected."

Meanwhile, the performance of LFP batteries has also improved significantly. Chinese companies have added manganese to existing LFP cathode materials to enhance energy density, producing LMFP batteries. A representative example is the M3P battery supplied by Chinese CATL to Tesla since the fourth quarter of last year. This product improves energy density by about 15-20% at a price similar to existing LFP batteries. On the 16th, CATL also announced an LFP battery capable of driving 400 km with a 10-minute charge. This product will enter mass production by the end of this year and be supplied to customers starting next year.

Gotion High-Tech, a Chinese company in which Volkswagen is the largest shareholder, announced in May that it will mass-produce the LMFP battery (product name: L600 Astroino) capable of driving 1,000 km on a single charge starting next year.

"LFP Expansion, Opportunity for Korean Companies"

Korean companies are responding to the expansion of LFP batteries in two main ways.

First, they are lowering the price of ternary batteries. The key is to reduce the cobalt content, which is expensive in cathode materials. Cobalt accounts for 20-50% of the cost of ternary batteries depending on the ratio. About 60% of the world's cobalt reserves are concentrated in the Democratic Republic of Congo, and most of the cobalt mined and refined there is exported to China. Due to high dependence on a specific country, research and development on decobaltization are actively underway for supply chain security. In Korea, many companies including LG Energy Solution, Samsung SDI, and SK On are developing cobalt-free batteries.

Domestic companies are also actively developing LFP batteries. This year, all three battery cell manufacturers along with major material companies such as Ecopro BM, POSCO Future M, and L&F have declared their entry into the LFP battery market.

In particular, the implementation of the U.S. Inflation Reduction Act (IRA) is seen as an opportunity for Korean companies. As U.S. automakers need to reduce their dependence on China for critical minerals, Korean LFP batteries could serve as an alternative to Chinese products. Bo-Hyun Gong, director at Ecopro BM, explained, "The expansion of LFP batteries is accelerating in the global market, and the implementation of the IRA could be an opportunity for Korean companies producing LFP batteries."

Of course, Chinese companies have also taken steps to circumvent the IRA. A representative example is CATL's joint venture with Ford established in February through a technology partnership.

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