Lithium iron phosphate "conquers" overseas, while ternary metals are losing ground

The situation in which lithium iron phosphate batteries are the "big brother" and ternary batteries are the "little brother" has lasted for three years in the Chinese market. Moreover, the market advantage of lithium iron phosphate over ternary batteries is further expanding. In June this year, the market share of lithium iron phosphate power batteries installed capacity reached nearly 70%, which is more than twice that of ternary batteries.

In the overseas market, the lithium iron phosphate technology route dominated by Chinese companies is also constantly eroding the position of ternary batteries. Domestic leading companies represented by CATL, EVE Energy, Envision Power, Hunan Yuneng, Changzhou Lithium Source, Huayou Cobalt, and Tsingshan Holdings are accelerating the expansion of overseas production capacity of lithium iron phosphate batteries.

In the United States, in July this year, EVE Energy's American joint venture ACT started construction in Mississippi, with a planned annual production capacity of approximately 21GWh of square lithium iron phosphate batteries. It is expected to start shipments in 2026, and companies such as Daimler Trucks will become its main customers; in February last year, Ford and CATL announced that the two parties will invest US$3.5 billion to build a new lithium iron phosphate battery factory in Michigan, with an initial designed annual production capacity of approximately 35GWh, which is also expected to be put into production in 2026.

In Europe, the construction of Envision Power's Spanish factory started in July this year. The factory will develop and produce the latest generation of lithium iron phosphate batteries. After it goes into production in 2026, it will become Europe's first lithium iron phosphate battery factory; Ampere, the electric vehicle business unit of Renault Group, announced that it will include lithium iron phosphate batteries in its large-scale production of electric vehicles, and will cooperate with LG Energy Solution and CATL to establish a supply chain in Europe, and will provide lithium iron phosphate batteries for Ampere.

In addition, in November last year, CATL signed a memorandum of understanding with Stellantis, the world's fourth largest automobile group. CATL will supply lithium iron phosphate battery cells and modules to Stellantis in Europe, and the two parties are also exploring the possibility of establishing a joint venture. Currently, CATL has planned a production capacity of more than 100GWh in its European factories. At the Munich International Motor Show last September, CATL stated that it would produce the Shenxing supercharger battery based on lithium iron phosphate materials in its factories in Germany and Hungary.

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Demand for lithium iron phosphate batteries in overseas markets surges

"We need and will use lithium iron phosphate batteries because they are more cost-competitive and can produce more affordable vehicles for the middle class," said Stellantis CEO Carlos Tavares. Moreover, lithium iron phosphate batteries also have the characteristics of long life and high thermal stability, which will help Stellantis provide customers with high-quality, durable and affordable electric vehicles, ranging from sedans, crossovers and SUVs in the B to C segments.

In fact, the advantages of lithium iron phosphate batteries over ternary batteries have been proven in the world's largest new energy vehicle market.

Data from the Power Battery Application Branch show that China's power battery installation in the first half of this year was about 203.7GWh. Among them, the installation of ternary batteries was 71.1GWh, accounting for 34.9%, a year-on-year increase of 19.3%; the installation of lithium iron phosphate batteries was 132.5GWh, accounting for 65.1%, a year-on-year increase of 32.8%. In June, the installation of ternary batteries was 13.1GWh, accounting for 30.4%, a year-on-year decrease of -9.7%; the installation of lithium iron phosphate batteries was 29.9GWh, accounting for 69.5%, a year-on-year increase of 43.1%.

The decline of ternary batteries is not only reflected in the domestic installed capacity, but also in the export of lithium iron phosphate batteries, which have far exceeded that of ternary batteries. Data shows that in the first half of this year, China's exports of lithium iron phosphate batteries were 23.9GWh, a year-on-year increase of 48.6%; the exports of ternary batteries were 35.6GWh, a year-on-year decrease of 9.3%. According to this trend, it is just a matter of time before lithium iron phosphate battery exports surpass ternary batteries.

In fact, lithium iron phosphate batteries have become increasingly popular among overseas automakers in recent years. Tesla, Volkswagen, BMW, Mercedes-Benz, Ford, Hyundai, Renault, GM, Nissan, Toyota, Honda and other international automakers have already or plan to further expand the installation of lithium iron phosphate batteries. Tesla CEO Musk claims that two-thirds of Tesla cars will use lithium iron phosphate batteries in the future, and one-third may use ternary batteries.

At present, overseas markets, especially Europe and the United States, have a huge demand for lithium iron phosphate batteries. Industry insiders pointed out that the key task of the current European electric vehicle industry is to reduce costs, and lithium iron phosphate batteries will also play an important role. According to industry estimates, by 2030, the total demand for power and energy storage batteries in Europe will reach 1,500GWh, of which about half, or 750GWh, will use lithium iron phosphate.

In the United States, more than a dozen companies have announced plans to build lithium iron phosphate battery and material factories, with an investment of more than 100 billion yuan. According to Adamas Intelligence, although the proportion of lithium iron phosphate batteries in the battery production capacity announced in the United States does not exceed 20%, the agency predicts that in the middle of the next decade, the share of lithium iron phosphate batteries in the United States will increase to nearly 30%.

"Lithium iron phosphate batteries have undoubtedly set off a second wave in the battery industry, and this wave is beginning to move to the West," said Ryan Castilloux, founder of Adamas Intelligence. According to research reports from international institutions, cost and safety will continue to be the first factors that battery suppliers need to consider in a variety of battery application scenarios. Lithium iron phosphate batteries are expected to surpass ternary batteries and become the dominant technology route in the next 10 years.

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Reshaping the global battery industry

As overseas markets' demand for lithium iron phosphate batteries increases, Chinese battery manufacturers are building factories overseas one after another, while Chinese material manufacturers are also following suit in a big way.

In April this year alone, two leading companies made big moves. Hunan Yuneng announced that the company plans to set up a project company in Spain and invest 129 million euros (about 982 million yuan) to build a lithium battery positive electrode material project with an annual output of 50,000 tons. The first phase of Changzhou Lithium Source Indonesia Lithium Iron Phosphate Plant with an annual output of 30,000 tons has been put into production. The total investment of the project is 290 million US dollars (about 2.08 billion yuan), and the planned annual production capacity of lithium iron phosphate materials is 120,000 tons. It is the world's first overseas 10,000-ton-level large-scale lithium iron phosphate material production base.

In addition, Huayou Cobalt and LG Energy Solution announced in September last year that they would jointly build a lithium iron phosphate material factory in Morocco, which is expected to be put into production in 2026, with an annual output of 50,000 tons of lithium iron phosphate materials, which will be supplied to the North American market. In October last year, Tsingshan Holdings announced that it would invest more than US$233 million (approximately RMB 1.67 billion) in Chile to build a lithium iron phosphate material factory with a maximum annual production capacity of 120,000 tons, which is expected to be put into operation in 2025.

At present, although car companies and battery manufacturers in Europe, the United States, Japan and South Korea are also focusing on lithium iron phosphate batteries, Chinese companies have the most complete lithium iron phosphate industry chain supporting system and deep technical foundation in the world, and have formed obvious cost advantages through scale. As Chinese companies expand their production capacity in overseas markets, they will also reshape the global battery industry landscape.