The Electric: Should Iron-Based Batteries Be a National Security Priority?
Last week, the Biden administration released its final rules attempting to cut China out of the U.S. battery supply chain and encourage American companies to build battery and electric vehicle manufacturing capacity in the U.S. It left one conspicuous opening for Chinese companies: For two years, they could continue to supply graphite to U.S. battery manufacturers and automakers, who claimed that without the exemption, none of their EVs would qualify for Inflation Reduction Act tax credits. China makes virtually all the world’s battery-grade graphite, and the automakers said the reprieve would give them time to find other sources of the material.
The leniency arguably should have included another component—lithium-iron-phosphate, or LFP, an iron-based cathode used in most Teslas and Chinese EVs. Today, Chinese companies such as Contemporary Amperex Technology Ltd. make almost all of the world’s LFP batteries. In contrast, the major non-Chinese automakers, apart from Tesla, have favored nickel-manganese-cobalt batteries, which deliver higher energy density and greater driving range than LFP, but also typically cost more and face more supply constraints because their metals are scarcer. Ford, General Motors, Volkswagen and other automakers plan to incorporate LFP into at least some of their models, and that number is likely to grow because of the pressure to cut costs.
But the U.S. industry has been slow to create a local supply of LFP: Last year, Ford announced that it would license LFP technology from CATL, installing it in a new plant in Marshall, Mich. GM and Tesla are also reportedly negotiating LFP licensing deals with CATL. U.S., Japanese and South Korean companies are building 34 battery gigafactories in the U.S., according to The Information’s Gigafactory Database, but the Ford plant and an Illinois factory planned by China’s Gotion are the only two that will make LFP. The rest will produce NMC cells and packs.
For the past four years, when I have asked auto executives why they are building almost exclusively NMC plants, they have uniformly said NMC batteries are the best available, but that they are prepared to switch if something better comes along. Analysts say NMC in fact did seem like the best battery until the late 2010s, when sudden improvements in LFP by Chinese companies made those batteries competitive. But by then, the automakers and their South Korean suppliers had already committed to NMC.
The Invention of LFP
LFP was invented in the early 1990s in the lab of John Goodenough, the late University of Texas physicist who shared a 2019 Nobel Prize for creating the lithium-ion battery. The breakthrough offered many potential uses, but suffered from a considerable shortcoming—it barely conducted electricity. Soon after, Michel Armand and Karim Zaghib, researchers for utility Hydro-Québec, resolved the flaw with a carbon coating that vastly increased LFP’s conductivity. In the early 2010s, U.S. battery startup A123 Systems briefly commercialized LFP in power tools. But in 2012, the company went bankrupt after an expensive recall of batteries it had made for Fisker Automotive; A123 was sold off in pieces. And with that, LFP was presumed dead—with its relatively low energy density and the stigma of the A123 bankruptcy, everyone assumed it simply wasn’t good enough.
Everyone, that is, except for the Chinese. Starting in the early 2010s, Chinese battery makers Byd and CATL assigned teams of researchers to improve LFP; the Chinese government subsidized the manufacture of the chemistry, especially for electric buses. By 2018, more than 90% of China’s new public buses had LFP batteries, and soon after that both Byd and CATL said they had achieved breakthroughs in boosting LFP’s performance for electric cars. CATL said some of its LFP batteries delivered 300 miles of driving range, and most of China’s EV companies now use the chemistry.
Last year, China became the world’s largest car exporter, and most industry analysts think Chinese EV makers such as Byd and Li Auto are likely to flood the world with their LFP-powered vehicles. To compete, Western automakers will also have to produce EVs and plug-in hybrids powered by LFP.
The infrastructure law signed by President Joe Biden in 2021 includes grant money to encourage LFP production. ICL Group, a specialty minerals company, last year broke ground on a $400 million LFP battery plant in St. Louis, half of which was funded under the infrastructure law. Over the last week, I asked industry hands and watchers whether the government should do more. I wondered whether, in the same way many countries view steel and cars as strategic industries, the U.S. should effectively designate LFP a strategic product and offer bigger incentives to produce it. Perhaps not surprisingly, Vivas Kumar, CEO of Mitra Chem, one of a handful of U.S. startups attempting to develop LFP, gave me a resounding yes. “LFP is the chemistry that is most relevant to the fastest-growing segments” of the industry, he told me.
Mitra recently opened an office in South Korea, whose battery and EV production qualifies for IRA tax credits because the country has a free trade agreement with the U.S. Kumar said he is researching South Korean manufacturing costs, and that Mitra may make its batteries there. “We’ll do whatever is going to give us the best probability of getting our product placed in the hands of a customer so that we can generate revenue at the cheapest cost possible,” he said. “We are focused on being an Inflation Reduction Act-compliant company, not necessarily exclusively a U.S. manufacturing company.”
Some independent analysts agree that the U.S. seems to lack a plan for establishing an LFP industry—and should have one. Corey Cantor, an EV analyst for BloombergNEF, a renewable energy research firm, noted that the three big South Korean battery makers—LG Energy Solution, Samsung and SK On—have said they’re working on LFP batteries but have shown no sign they’ll be producing any before the end of the decade. Likewise, Panasonic, Tesla’s main battery supplier, has announced no LFP plans. The ICL plant is the only U.S. LFP facility that’s received a grant or loan from the IRA or infrastructure law.
Cantor said the U.S. will only develop an LFP industry if the South Koreans move faster or U.S. startups get more government backing. “What is the U.S. strategy on LFP?” he asked. “Are they just going to continue to let CATL dominate it?”
About two years ago, CATL and other Chinese companies began to speak publicly about a tweak to LFP that juiced its energy density and driving range by adding manganese, another plentiful material. Such a battery, called LMFP, would boost LFP’s energy density by around 20% without creating supply chain issues, according to Steven Kaye, former chief technology officer at LFP cell developer Our Next Energy. An EV with such a battery could go 360 or so miles on a charge, thus matching many formulations of NMC, the higher-density battery chemistry favored by Western automakers. Last month, CATL announced a new LFP battery, the Shenxing Plus, which it said would deliver 375 miles on a charge; the company didn’t release details, but analysts said the Shenxing Plus was likely LMFP.
Battery makers have struggled to commercialize LMFP because the manganese gradually dissolves into the battery’s liquid electrolyte, and doesn’t conduct electricity as well as LFP, Kaye said. But Chinese battery makers began blending highly conductive NMC into the LMFP. The addition of a bit of nickel and cobalt resolved many of the battery’s shortcomings, he said.
Chinese automaker Chery reportedly plans to soon release an EV called the Luxeed S7 with an LMFP battery made by CATL. I asked Kaye why CATL appears to have figured out LMFP for EVs before Western companies. He noted the relative novelty of the chemistry that includes NMC, and said CATL’s scale gave it a manufacturing advantage, allowing it to commercialize faster than anyone else.
Mitra’s Kumar is skeptical. Just because CATL says it’s producing the chemistry, he said, doesn’t mean it’s ready for the global market. “LMFP is going through the same learning curve that LFP did,” Kumar said. He expects battery makers to gradually reduce the NMC content of LMFP until there is no nickel or cobalt in the chemistry, but says the process will take time.
But LFP and LMFP could relegate NMC to large SUVs and pickup trucks and high-end luxury EVs. Some industry watchers worry that the West is again letting opportunity pass it by, allowing China to get the spoils. “LMFP is in the beginning stages [in] China, but we shouldn’t wait until it’s good enough in China to start doing it in the West,” Kumar said. “We’ve already learned that lesson from seeing how LFP developed.”