Last week, when Korea’s three major battery companies announced their earnings on conference calls, all stressed that they would focus on cobalt-free batteries to meet the growing preference for lithium iron phosphate (LFP) batteries manufactured relatively cheap in China.
As battery prices soar, global battery companies are increasing their investment in relatively cheap LFP investments. According to Taiwanese market research firm TrendForce, the global market share of LFP was 32-36% in 2021. Although ternary nickel, cobalt and manganese batteries still account for over 60%, some experts predict that LFP batteries will outperform ternary batteries. batteries in 2024.
Currently, the main producers of LFP batteries are Chinese companies. Benchmark Mineral Intelligence (BMI) reports that China accounts for 90% of global LFP battery production.
In contrast, the three Korean battery companies focused on ternary batteries. LFP batteries have the disadvantage of low mileage due to their low energy density. For this reason, they are mainly charged in low-cost and entry-level electric vehicles.
Ternary batteries are more cost effective than LFP batteries. For this reason, Korean battery manufacturers have not been interested in investing in LFP batteries.
However, the market mood has changed as Tesla, the world leader in electric vehicles, has increased the proportion of LFP batteries. In a recent earnings report, Tesla said half of cars produced in the first quarter of 2022 were powered by LFP batteries. Tesla has been using LFP batteries from Chinese battery maker CATL for its China-made Model 3 for two years. LFP batteries are applied to entry level Model 3 made in USA since 2021.
Other automakers like Audi and BMW are considering using LFP batteries. As the demand for LFP increased, the three Korean battery companies began to feel the need to respond to market changes. Rather than directly developing LFP batteries, the three companies decided to lower the prices of their ternary batteries to make them more competitive. One of the ways they have found to bring prices down is to remove cobalt from ternary batteries. Among the raw materials for batteries, cobalt is the most expensive. To reduce the price of their batteries, they decided to exclude cobalt and increase the proportion of manganese.
Tesla CEO Elon Musk has also shown great interest in manganese, saying the metal has great potential as a battery material. Manganese acts as a battery stabilizer like cobalt, but is less expensive than cobalt.
“LFP batteries are heavier than ternary batteries, so in a medium to long term perspective, ternary batteries will prove to be more competitive than LFP batteries,” said an industry expert.