The Rise of Lithium Iron Phosphate (LFP) Batteries in China's EV Market

Recently, the China Automotive Battery Innovation Alliance released data indicating a significant rise in the market share of lithium iron phosphate (LFP) batteries in the country's electric vehicle (EV) sector. As of June, LFP batteries accounted for 31.7 GWh, or 74%, of the total battery installations in new energy vehicles, solidifying their position as the leading choice for EV power systems.

The resurgence of LFP batteries, which had previously been overshadowed by ternary lithium batteries, raises questions about their recent market dominance. Why are traditional automakers, new EV startups, joint ventures, and multinational giants increasingly opting for LFP batteries?

Factors Behind LFP Battery Dominance

Industry experts believe the cost advantages of LFP batteries are a major factor behind their growing popularity, especially amid intense price competition in the EV market. A researcher from SVOLT Energy explained that LFP batteries have significantly improved in energy density over the years. Meanwhile, the rising prices of nickel and cobalt—key materials in ternary lithium batteries—have made LFP batteries a more cost-effective option.

Technological Advancements and Cost Efficiency

The affordability of LFP batteries is a critical advantage. According to MySteel, as of July, the average price for automotive LFP batteries in China was 380 RMB/kWh, compared to 550 RMB/kWh for high-nickel ternary batteries. This price difference can translate to significant savings for consumers, especially in the competitive market landscape.

Technological improvements have also played a role. A notable engineer from a prominent battery manufacturer noted that early LFP batteries required complex processes, such as nano-treatment and carbon coating, to compensate for low conductivity. However, advancements in production processes, like the compression of lithium carbonate powder, have simplified manufacturing and increased energy density.

Innovations in LFP Battery Design

In addition to technical improvements, the design of LFP batteries has evolved. Initially, battery cells were encased in modules, which were then assembled into packs (CTP). Now, with advancements allowing for the removal of modules, cells can be directly integrated into the CTP or even the vehicle chassis (CTC), maximizing space efficiency. This design evolution aligns with the industry's increasing emphasis on safety and cost-effectiveness.

Major Chinese automakers are investing heavily in LFP battery research and development. BYD has introduced the Blade Battery, while Geely and Gotion High-Tech have developed the Shield Short Blade and soft pack LFP batteries, respectively. These innovations have further boosted the market share of LFP batteries.

Future Trends and Competition

Mo Ke, founder of Real Lithium Research, predicts that while various battery technologies will coexist in the long term, including solid-state and sodium-ion batteries, LFP batteries will maintain their market leadership at least until 2030. He points out that M3P batteries, a type of phosphate-based ternary material, offer higher energy density than traditional LFP batteries while being more cost-effective than ternary lithium batteries. This could make them a new trend in the industry.

The "Long vs. Short Blade" Debate

The LFP battery market has also seen a division between long and short blade designs. BYD's first-generation Blade Battery, a long blade design, has battery cells nearly one meter long. In contrast, Geely's Shield Short Blade Battery measures only 58 centimeters. Geely's Vice President and Dean, Li Chuanhai, argues that short blade batteries offer better fast-charging performance and safety due to reduced internal resistance. This is why Geely and other manufacturers, like SVOLT Energy and GAC Aion, have adopted the short blade approach.

Despite the debate over blade length, the consensus among automakers is that in-house battery research and production are crucial. In November 2023, Changan launched its first standard battery cell. The following month, GAC Aion completed its own battery factory, and Zeekr unveiled the world's first mass-produced 800V LFP super-fast charging "Gold Brick" battery.

The Push for In-House Battery Development

According to a partner Advanced Manufacturing and Mobility Industry, in-house battery development allows automakers to improve performance and reliability tailored to their vehicles. It also enables cost control, a key factor for profitability. NIO CEO Li Bin emphasized that battery costs account for 40% of a typical passenger vehicle's price, and manufacturing their own batteries can significantly improve profit margins.