Lithium Price Surge Leaves Car Makers Comparing LFP with NCM batteries

Steep rises in battery raw materials prices since the start of 2021 have favoured a faster shift to LFP batteries for electric vehicles, over NMC batteries. Cobalt and Lithium for example have become dearer by 70% and 700% respectively.
The lowest-cost pack has always been lithium-iron-phosphate, or LFP, the preferred choice of Tesla, Volkswagon and Rivian for their China-made entry-level models since 2021.

The second cheapest option is Nickel-cobalt-manganese, or NCM, batteries but it includes cobalt, which is expensive and its production process is controversial. NCM batteries continue to be favoured in the EU markets – where consumers prefer cars that take them across the country or cross continent in the fewest charges.

According to Chinese manufacturers, battery metal costs in March were up 580.7% on year for LFP batteries on a dollar per kilogram basis, rising to nearly $36/kwh. NCM batteries were up 152.6% on over the same period to $73-78/kwh in February.

“There were concerns, indeed, because the cost of LFP was rising too much for the segment that it targets, which is low-cost batteries,” concurred a lithium producer source. “There are no clear alternatives to nickel-intensive batteries (those containing 8 parts nickel or more) in the short- to medium-term. A return to lower-nickel NMC batteries reintroduces concerns about cobalt usage, while LFP batteries can not yet fully match the range performance and also have relatively unfavorable low-temperature characteristics compared with nickel-intensive batteries,” Alice Yu, senior analyst, S&P Global Market Intelligence.

“When looking at designing battery plants, we look at flexibility. Right now there is price parity between LFP and NCM. If LFP becomes a lot cheaper again we can may be prioritize production, but right now we should produce NCM because it’s a premium product,” an automotive OEM said. A second automotive OEM echoed that comment, “LFP batteries will be there for entry level vehicles, but not adopted for premium cars”.

The largest advantage for sodium-ion is its lower production cost, sources said. Due to the abundance of sodium on earth, these battery packs could cost almost 3%-50% less than lithium-ion batteries. The energy density is comparable to LFP. In a sign of maturing for Sodium Ion technology, Contemporary Amperex Technology (CATL), one of the largest battery makers in China, unveiled last year its first generation of sodium-ion battery, alongside its AB battery pack solution, which showed it was able to integrate sodium-ion cells and lithium-ion cells into one pack.
“We would certainly look at sodium-ion but we need to first focus on the technologies that are already out there and bringing the plant online,” one battery manufacturer said.