The Second Spring of Lithium Iron Phosphate

In 2020, two major events brought lithium iron phosphate its moment of glory.

In March, BYD's lithium iron phosphate blade battery was launched. Once the blade battery was launched, who could compete with it? BYD's electric sedan "Han" equipped with blade batteries quickly sold out, and it took two months to queue up for the car. In October, Tesla Model 3 equipped with Ningde Times lithium iron phosphate battery was included in the catalog of the Ministry of Industry and Information Technology and exported to the European market.

Although it is a highlight moment, for lithium iron phosphate, it is a "comeback" and a second spring.

Lithium iron phosphate and ternary batteries are both new energy power battery material solutions. Ternary batteries have higher energy density, which allows the car to "drive further", while lithium iron phosphate is more stable, which allows the car to "drive safely". This is like one is a racer in Akina Mountain, and the other is a steady old driver. Both have their own advantages and disadvantages, and they fight each other.

Lithium iron phosphate was once the king of electric vehicle power batteries, with a market share of 60% in 2016. Later, it was gradually overtaken by ternary batteries and fell to about 30% in 2019. However, the market changed in the first half of this year, with ternary battery shipments dropping significantly and lithium iron phosphate battery shipments starting to increase.

Why has the lithium iron phosphate battery experienced ups and downs? What is the industry logic behind it? How far can it go in this comeback?

The first driving force: policy baton

The current development of the electric vehicle industry is greatly influenced by policies, and lithium iron phosphate batteries are no exception. They dance under the baton of policies, experiencing ups and downs and returns.

Under the guidance of policies, the development of lithium iron phosphate batteries can be divided into three stages: demonstration and promotion gaining a foothold, targeted support being neglected, and subsidy reduction ushering in a return.

Since 2009, the government has provided real money to subsidize the market and promote the development of the industry. Early policies favored commercial vehicles, and lithium iron phosphate took advantage of its safety and cycle life advantages and gained a firm foothold. From 2014 to 2016, the shipment volume of lithium iron phosphate increased from 12,000 tons to more than 56,000 tons.

BYD, the leading domestic battery manufacturer, launched its own lithium iron phosphate battery as early as 2007 and announced its entry into the electric vehicle market. Perhaps it was because of his optimism about the general trend of electric vehicles that Li Lu, a member of the American Academy of Arts and Sciences and the founder of Himalaya Capital, introduced BYD to Warren Buffett. The following year, Warren Buffett subscribed to about 10% of BYD's shares, becoming the third largest shareholder.

However, it is impossible for policies to support all electric vehicles all the time, and teachers always pay more attention to top students.

In December 2016, the state adopted a targeted support policy, which included the energy density of battery systems into the assessment criteria for the first time. High energy density and long driving range are the focus of subsidies. The top student, ternary batteries, are highly favored, while lithium iron phosphate batteries are neglected, with a growth rate of only 5.7% in 2017.

BYD, which specializes in lithium iron phosphate, encountered a crisis in the passenger car market. The lithium iron phosphate batteries it had worked hard to develop could only be used in electric buses. In 2017, BYD, which was forced into a corner, had no choice but to join the craze for ternary batteries and started a head-on battle with the small giant CATL.

After 10 years of policy support, the electric vehicle industry has grown, and parents will eventually let their children learn to walk on their own.

Subsidies declined significantly in 2019, down 50-70% from 2018, and are scheduled to be completely withdrawn by the end of 2022. Without government spending, consumers can only live within their means, and the more cost-effective lithium iron phosphate battery has returned to the public's attention. It continues to penetrate the low-end and mid-end markets, and the high-end market dominated by ternary batteries has also begun to loosen up.

The rise and fall of the country were due to policies, the decline was also due to policies, and the return today is still due to policies.

The second driving force: strong skills are needed to forge iron

The return of lithium iron phosphate batteries is not only due to the reduction of subsidies and the return to market competition, but also the continuous improvement of technology.

The development of lithium iron phosphate in China originated from a patent dispute. In 2008, Hydro-Quebec of Canada obtained the patent authorization for lithium iron phosphate in China. However, in 2010, the China Battery Industry Association filed an invalidation request with the State Patent Office. After several court reviews, all Canadian patents were finally declared invalid.

The patent barrier for domestic enterprises to enter lithium iron phosphate has disappeared, but the development abroad still requires patent authorization, and domestic enterprises have more advantages in entering this field. In addition to the patent dividend, domestic enterprises are also very powerful in technological progress, which can be mainly divided into: reducing manufacturing costs and increasing driving range.

In the evolution of battery paths, ternary and lithium iron phosphate have been competing in two dimensions: cost and performance. Whoever is cheaper and easier to use will have the advantage.

Compared with ternary lithium, lithium iron phosphate has two major advantages on the cost side: cheap raw materials and cheap processing.

Since it does not contain precious metals such as cobalt and nickel, the price of lithium iron phosphate raw materials is cheaper and fluctuates less than that of ternary batteries. In terms of manufacturing cost, lithium iron phosphate is also lower than ternary batteries. From 2014 to 2019, the cost of domestic lithium iron phosphate batteries fell by about 60-70%. In 2020, the price of lithium iron phosphate battery packs was even about 15% lower than that of ternary batteries, showing cost advantages in market competition.

Cost reduction can only solve the problem of "affordability". If you want to compete with the ternary car, you have to solve the problem of "running farther", which requires increasing the range. Improving the range requires batteries with higher energy density and putting more batteries in a limited chassis.

Since 2010, the energy density of lithium iron phosphate batteries has doubled from 90Wh/kg to 190Wh/kg, while improvements in chassis battery pack design allow more batteries to be put in. To this end, CATL has come up with CTP technology, and BYD has even launched blade batteries.

CTP (Cell to Pack) technology, also known as module-free design, directly arranges multiple cells in the box without assembling them into modules first. Simply put, this is similar to putting tea leaves directly into a box without putting the tea leaves into a small tea bag first and then into the box. The number of parts is greatly reduced, the utilization rate of the chassis space is greatly improved, and the manufacturing cost is further reduced.

In comparison, BYD's lithium iron phosphate blade battery is more thorough in its module-free design. One blade is a large battery and does not require a module at all. It has higher space utilization and its energy density is close to the current level of ternary battery packs, but the price is about 15% lower and it is safer.

The core patents are invalid in China, making it easy for domestic companies to enter this field. The reduction in battery costs and the increase in driving range make it affordable for consumers to buy and drive.

The third driving force: collaborative progress of the industrial ecosystem

This wave of return also plays an important role: industrial ecosystem synergy, including the joint progress of vehicle manufacturers and infrastructure.

After subsidies declined sharply in 2019, the industry began to shift from a strong policy-driven to a market-driven one. At this time, the pressure on vehicle manufacturers, who had received subsidies for many years, to reduce costs suddenly increased.

In order to open up a larger low-end market, reducing the cost of upstream components is the most direct means, and the high cost-effectiveness of lithium iron phosphate batteries is naturally a good choice. With the opening of a larger low-end market, the scale effect makes the manufacturing cost lower. Taking the Tesla Model 3 Standard Range Edition as an example, the cost of lithium iron phosphate battery pack is more than 20% lower than that of ternary battery pack, and the battery pack cost of each vehicle is saved by up to 8,000 yuan.

In 2020, many popular models in the market directly chose lithium iron phosphate batteries, such as BYD's domestic electric sedan "Han" and the people's commuter car "Hongguang miniEV". If the dawn of batteries is to reappear, popular cars must come first.

Cars are cheaper, but charging is still a major concern for consumers.

In the 2020 Spring Festival travel rush, the traffic police in Qingyuan, Guangdong Province, reluctantly issued a notice: Many new energy vehicles broke down due to insufficient power on the Qingyuan section of the Xuzhou-Guangzhou Expressway, causing traffic congestion. Since then, electric vehicles have received a second new nickname besides "electric dad": new energy roadblocks.

How to better solve charging anxiety? The breakthrough lies in constantly improving the infrastructure. Increasing the number of charging piles and shortening the charging time are what consumers want.