Tesla's Model 3. Source: Tesla
The electric vehicle (EV) market is facing significant headwinds.
On the one hand, consumer anxiety over EVs’ limited range and extended recharge periods is making the majority reluctant to commit.
High vehicle prices are not helping; significant uptake is only occurring where governments offer substantial financial incentives.
On the other hand, the high cost of the batteries makes it tough for manufacturers to offer vehicles at prices cheap enough to make a total cost of ownership argument really compelling, despite prevailing range fears.
Tesla, it would seem, has concluded price trumps range.
According to a Financial Times report, Tesla has agreed to buy prismatic lithium-iron-phosphate (LFP) batteries — the main alternative to cobalt and nickel products — from China’s CATL for its shorter-range Model 3 cars in China.
LFP batteries are widely used in electric cars and buses in China because they are cheaper than nickel and cobalt-containing batteries, but they do suffer from lower power densities and, as such, provide less range than more expensive lithium cobalt oxide (LCO) and lithium nickel cobalt aluminum oxide (NCA) batteries, which have nearly twice the power density in Wh per kg, as this graph from the Battery University illustrates:
Using less effective but cheaper LFP batteries will enable Tesla to further reduce the cost of the Model 3 in China, the Financial Times reports.
In January, Tesla cut the cost for a standard-range battery model to 323,800 renminbi ($46,271) from 355,800 renminbi. Other EV producers, such as China’s BYD, are also adopting the less efficient but cheaper LFP batteries in a new model due out later this year.
Chinese nickel and cobalt producers share prices plunged on the Tesla news. Both China Molybdenum and Huayou Cobalt, China’s two largest cobalt miners, fell more than 8% in what the Financial Times suggests is bearish news for cobalt producers, for whom automotive electrification is a big part of their value proposition.
But in reality, technology remains the biggest threat to nickel, cobalt and associated battery metal component metals, like molybdenum, manganese, etc.
Battery development is moving so fast that if a new formula or battery structure for NCA batteries came out tomorrow promising twice the range, nickel and cobalt would be firm favorites again. The vulnerability of these metals’ prices to technological developments underlines the precarious position in which battery producers and EV manufacturers find themselves.
What may be the result of Tesla’s decision — and of BYD’s new model introduction — is that the battery market fragments around multiple technologies driven by the compromise between price and range that manufacturers judge their potential clients will be willing to accept.
Unfortunately, for now, the 500-mile EV still seems a long way off.