Musk's Battery Bet: Lithium Iron Phosphate Batteries Are Gradually Rising in Prominence

Sina Tech News, Beijing time, April 28 morning—According to reports, while Tesla’s profits and stock price grabbed headlines across major media outlets last week, a potentially pivotal development in the global automotive industry largely went unnoticed. Tesla, the U.S.-based electric vehicle company, revealed that nearly half of the vehicles it produced in the first quarter were equipped with lithium iron phosphate (LFP) batteries—batteries that are significantly cheaper than the nickel-cobalt cells dominating Western markets. This marks the first time Tesla has disclosed details about its battery composition; yet, the news was overshadowed by other stories, such as the global leader in electric vehicles reporting $19 billion in revenue and Elon Musk’s ongoing efforts to acquire Twitter.
This news also sends a strong signal that iron-based batteries are finally starting to capture global attention—just as nickel faces supply challenges due to the Russia-Ukraine conflict, and cobalt is being impacted by reports of hazardous working conditions in artisanal mining operations in the Democratic Republic of Congo. Tesla isn't the only automaker recognizing the potential of LFP batteries; these cells have already gained widespread popularity in the Chinese market—and now, they're rapidly making their way into Western markets.
Reuters' review of the electric vehicle sector, combined with interviews of several key players, reveals that currently over a dozen companies are considering building factories in the U.S. and Europe within the next three years to produce LFP batteries and related components. Mujeeb Ijaz, founder of the U.S.-based battery startup Our Next Energy, commented: "I believe lithium iron phosphate is experiencing a renaissance, as it offers clear long-term advantages within the electric vehicle industry." Our Next Energy also stated that they are actively exploring new production sites in the United States.
Ijaz has been working in this field for a long time, and he has observed that LFP technology—once unable to gain traction in the U.S. a decade ago—is now experiencing renewed momentum. Previously, he served as Chief Technology Officer at Michigan-based A123 Systems, an early pioneer in LFP battery production, which went bankrupt in 2012 before being acquired by a Chinese company. Along with other LFP advocates, Ijaz believes that iron’s abundant reserves and lower cost are key factors driving the resurgence of LFP batteries. However, these batteries also come with their own limitations: compared to nickel-cobalt-manganese (NCM) ternary lithium batteries, LFP cells are bulkier, heavier, and have lower energy density, resulting in shorter driving ranges for electric vehicles equipped with LFP batteries. For automakers aiming to adopt LFP technology, these drawbacks present a significant challenge—a "mountain" that needs to be overcome. According to data from Benchmark Mineral Intelligence (BMI), in 2022, LFP batteries accounted for just 3% of EV batteries used in the U.S. and Canada, and 6% in the EU, with the remaining share dominated by NCM batteries.
The situation in China, however, is entirely different: LFP batteries are far more competitive. Data shows that LFP batteries already account for as much as 44% of the Chinese electric vehicle market, while the remaining 56% comes from NCM batteries. For Western LFP battery manufacturers aiming to compete with their Chinese rivals, this could prove to be a long and challenging journey, given that China dominates global LFP production, producing roughly 90% of the world’s supply. Moreover, compared to NCM batteries, LFP cells require significantly more lithium. Some experts in the battery industry are concerned that, as metal costs continue to rise, the inherent cost advantage of iron-based batteries—owing to their lower production expenses—may gradually erode over time, potentially disappearing altogether in the future.
Tesla has long been using LFP batteries in some of its entry-level models, and starting last year, the company began equipping the entry-level Model 3—produced in the U.S.—with these batteries. Meanwhile, just a few years earlier, Tesla had already started incorporating LFP batteries manufactured by China's CATL into the entry-level Model 3 assembled in China. CATL is the world's largest producer of electric vehicle batteries. However, given the historical dominance of NCM batteries in the U.S. market, Tesla's decision in the first quarter of 2022 to rely heavily on LFP batteries—installing them in roughly 150,000 vehicles produced during that period—certainly caught many analysts and battery experts off guard.
Tesla did not respond to the request for comment on this issue.
Mitra Chem, co-founded by Vivas Kumar, the former Tesla battery supply chain manager, is currently focused on manufacturing LFP battery materials. The company initially set up production in California. Kumar noted that he expects nickel prices to remain volatile due to supply-chain disruptions. He remarked, "The best safeguard automakers can adopt is to incorporate more iron-based batteries into their product portfolios." Meanwhile, U.S.-based electric vehicle startup Fisker also plans to use LFP batteries in its entry-level SUV model, with the company initially intending to source these batteries from CATL. However, Henrik Fisker, CEO of Fisker, revealed that the company is now in negotiations with battery suppliers to secure cells made in the U.S., Canada, or Mexico, starting as early as 2024 or 2025.
Fisker emphasized that local battery procurement is crucial, as transporting heavy battery packs from Asia incurs significantly higher costs. For low-cost, mass-produced vehicles, this increase in battery expenses could lead to a substantial rise in vehicle pricing, ultimately undermining the product's competitiveness. The CEO added that this approach is also environmentally unsustainable. He believes LFP batteries will play a vital role in the global electric vehicle landscape moving forward. He pointed out that urban EV owners typically drive relatively short distances each day. "If I never leave Los Angeles, never venture beyond San Francisco, or even stay within London," he noted, "I think LFP batteries would offer a clear advantage in these scenarios—exactly where their unique strengths can truly make a difference."
Following the outbreak of the Russia-Ukraine conflict, other premium automakers have also been keeping an eye on this type of battery—among them is Audi, a brand under Volkswagen, which had never before used LFP batteries. Audi CEO Markus Duesmann stated in March of this year: "In the medium term, we may see LFP batteries accounting for a significant share of our vehicle lineup. Post-war, a new scenario will emerge, and we’ll adapt to it by carefully selecting both battery technology and specifications accordingly."
BMW's Chief Procurement Officer, Joachim Post, recently also stated that the company is exploring the advantages of LFP technology. He said: "We are investigating various technologies to minimize resource consumption, while simultaneously working on optimizing the chemical composition of our batteries." LFP boasts numerous benefits, and perhaps the most appealing one is its significantly lower risk of fire compared to NCM batteries—plus, it maintains excellent charging capacity even after prolonged use. As a result, LFP batteries experience no noticeable decline in either lifespan or performance over time.
As the global electric vehicle market continues to expand, LFP battery chemistry is expected to find its way into more entry-level consumer and commercial EVs, where range isn’t the primary concern. However, for LFP batteries to achieve widespread adoption, there are still several challenges that need addressing—such as developing solutions to boost energy density, thereby reducing the battery’s size and weight. Additionally, the industry must find a way to tackle the rising costs of lithium. Meanwhile, establishing manufacturing facilities in the U.S. and Europe to ramp up LFP production will take time, and U.S.-based startups are already facing the daunting task of scaling up their operations to compete with industry leader CATL.

Translated from Sina Auto

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