By using lithium iron phosphate, is NIO making progress or regressing?

Recently, it was reported that NIO will launch a new battery pack with a battery capacity of more than 75 degrees, and this battery pack will use lithium iron phosphate technology. Compared with NIO, which once boasted that its product performance was comparable to ABB, in terms of battery technology route selection, switching from ternary lithium batteries with higher energy density to lithium iron phosphate with lower energy density, is it a technological advancement or regression? 

1. Ternary lithium battery VS lithium iron phosphate

Ternary lithium battery and lithium iron phosphate are the two current domestic electric vehicle power battery technology routes. The difference between them is mainly the difference in the use of positive electrode materials in the battery cell. The ternary material in the ternary lithium battery refers to the polymer of nickel (Ni), cobalt (Co), manganese (Mn) or aluminum (Al); while the positive electrode material of the lithium iron phosphate battery is a battery product using lithium iron phosphate (LiFePO4) polymer. 

The characteristics of ternary lithium batteries are high energy density, long driving range, and good charging and discharging performance. Therefore, they have been adopted by most OEMs before. However, ternary lithium batteries also have two fatal disadvantages: poor thermal stability, easy spontaneous combustion, and high cost. Many previous fire and spontaneous combustion accidents of electric vehicles were basically caused by ternary lithium batteries. On the other hand, the performance of lithium iron phosphate is just the opposite of that of ternary lithium batteries. Its electrochemical performance is relatively stable, but its energy density is low, especially in low temperature environments in winter. The electrochemical activity is low, which directly leads to a significant reduction in winter driving range and charging efficiency. In addition, since lithium iron phosphate batteries do not contain precious metal cobalt, the orphan cost is also low.

Taking the current mainstream purchase price of car companies as an example, ternary lithium batteries are generally 800 yuan per kWh, while lithium iron phosphate batteries can be as low as around 600 yuan. Previously, Model 3 lowered the entry price of the vehicle by replacing lithium iron phosphate batteries, but in winter, especially in northern regions, the cruising range of Model 3 was significantly reduced.

2. The battery pack solution needs to be upgraded, and high battery life is no longer a requirement

Currently, NIO mainly has two types of battery packs with capacities of 70 degrees and 100 degrees. However, practice has shown that the 70-degree battery pack is clearly not enough.

The battery pack released in 2017 may only have a usable capacity of about 65 degrees. If the winter temperature is taken into account, the available capacity may need to be discounted. In addition, the price difference between the 70-degree and 100-degree battery packs is as high as 56,000 yuan, which has greatly increased the cost of buying a car for many consumers. Therefore, with the advancement of technology, NIO also urgently needs to find a new solution between the 70-degree and 100-degree battery packs. 

Previously, NIO had launched an 84-degree battery pack solution between the 70-degree and 100-degree battery pack technology solutions, but this solution used the high-nickel technology of CATL's NCM811. As a result of a series of NCM811 battery fires in OEMs, which caused an uproar in the industry, NIO gradually gave up promoting the implementation of this technical solution. 

As a supporter of lithium iron phosphate technology, BYD's trump card now is the blade battery based on this technology. From the data alone, the maximum range of the BYD Han equipped with blade batteries can also reach 605 kilometers. Compared with the current and even past ternary lithium batteries, the disadvantages of lithium iron phosphate, which has innovated the battery pack assembly technology, are not so obvious. If we also consider the advantages of lithium iron phosphate batteries in terms of stability, it can help NIO avoid battery safety problems to the greatest extent. 

In addition, with the improvement of charging infrastructure, and considering that NIO is also deploying battery replacement facilities across the country, people may not be as demanding about the range of electric vehicles as before. In the absence of fundamental breakthroughs in battery materials, increasing the range means stacking the number of batteries. Increasing the number of batteries will directly increase the purchase cost of the entire vehicle, and the power consumption per 100 kilometers of the vehicle will also increase.

For consumers who only use it for commuting in the city, a range of 400-500 kilometers is more than enough. If you really need to cope with long-distance inter-provincial travel needs, you can consider battery replacement/supercharging technology, or use other technical routes that are more convenient and reliable.

3. Reduce costs to cope with the impact of Tesla

Tesla's sales in China continue to rise, which is not only inseparable from its high brand appeal, especially Musk's personal halo, but also inseparable from its leading position in the three-electric system and autonomous driving technology. But the most important thing is actually its continuously lowered price after localization. Previously, the Model 3's price was reduced to less than 250,000 yuan, which had already put pressure on a number of new domestic car companies. With the domestic production of its mid-size SUV Model Y, the price after deducting subsidies is less than 350,000 yuan, which is also very cost-effective. Domestic car people, including Li Bin, still think that Tesla still has room for price cuts in the future, and the 300,000 Model Y should be expected in the short term. If you take into account the license plate and road rights that Tesla can enjoy in the first- and second-tier cities in China with license plate restrictions, the price of a 90,000 yuan Shanghai license plate alone is already very competitive. Because in Shanghai, even if you are willing to spend 90,000 yuan, you may not be able to get a license plate. 

For NIO, the target customer groups of its two SUVs and coupes such as EC6 are quite different from those of a sedan such as Model 3. The Chinese love for SUVs will discourage many consumers from buying the expensive imported Model Y. However, as Model Y began to be produced in China and Tesla once again raised the price cut banner, NIO will definitely not sit still. Using lithium iron phosphate battery technology on existing models is the fastest way to reduce costs. 

According to relevant information, NIO is currently developing a model with a lower positioning than the existing ES6 and EC6. The Xinqiao Industrial Park, which has just been laid in Hefei, has a planned production capacity of up to 1 million units per year, and it also needs to rely on a lower-priced national car to increase capacity utilization. It is reported that with the support of NIO's Baas service, the price of this model can be as low as 276,000 yuan. If a 75-degree lithium iron phosphate battery pack can be used, the cost is expected to decline further. At that time, NIO's sedan product matrix will not only have the flagship sedan ET7 that will boost the brand's positioning, but also a sedan model that is equally competitive in terms of cost performance, competing with Tesla through high and low matching. 

In addition to NIO, Xpeng Motors will also launch lithium iron phosphate battery products. We can also see from the earlier Volkswagen Power Day that Volkswagen also has four battery technology routes in parallel, and as a low-cost solution, lithium iron phosphate batteries will also be installed on a large scale in its entry-level models. As Elon Musk said, electric vehicles can only be truly popular if they are priced the same as fuel vehicles.

For NIO, it is strategically correct to consider the lithium iron phosphate battery solution when planning entry-level models. If NIO wants to truly become a leading player in the electric vehicle market, lithium iron phosphate batteries are indispensable.