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Tesla’s Efficiency Advantage: Cheap & Abundant LFP Batteries Will Power Mass-Market EVs

Tesla’s second quarter earnings call just confirmed what may be the hottest technology topic for the electric vehicle revolution. Relatively inexpensive and abundant Lithium Iron Phosphate (LFP) batteries are well suited to affordable mass market EVs, so long as they are energy efficient. This confirms that frequent concerns over battery mineral constraints (and fundamental cost barriers) for powering the EV transition can potentially be laid to rest.

Tesla’s second quarter earnings call just confirmed what may be the hottest technology topic for the electric vehicle revolution. Relatively inexpensive and abundant Lithium Iron Phosphate (LFP) batteries are well suited to affordable mass market EVs, so long as they are energy efficient. This confirms that frequent concerns over battery mineral constraints (and fundamental cost barriers) for powering the EV transition can potentially be laid to rest.

In Tesla’s recent 2nd quarter earnings call, Elon Musk confirmed that lithium-iron-phosphate (often called lithium-ferro-phosphate or simply LFP) batteries will play a key role in energizing the company’s highest volume vehicles, starting with the Shanghai Model 3:

“Total vehicle efficiency has gotten good enough — with Model 3 for example — that we actually are comfortable having an iron phosphate battery pack in Model 3 in China. That will be in volume production later this year. So we think that getting a range that is in the high 200s — almost 300 miles — with an iron phosphate pack taking into account a whole bunch of of powertrain and other vehicle efficiencies [is possible].

“And that that frees up a lot of capacity for things like the Tesla Semi and other projects that require higher energy density [batteries]. So you have two supply chains that you can tap into: iron phosphate or nickel [nickel-based chemistries].”

The improving vehicle efficiencies mentioned as examples in the call include:

“powertrain efficiency, and some tire efficiency, drag coefficient … our HVAC going to a heat pump.”

Battery Mineral Costs and Volumes — Advantage LFP

We’ve covered LFP battery technology many times before, and Tesla has supply contracts in place with CATL for these batteries. LFP’s basic advantage is that, relative to the conventionally used nickel-based cathode chemistries, its key constituent minerals — iron, phosphates, and more recently, trace amounts of manganese, are highly abundant, and relatively inexpensive. Iron ore, for example, is mined at a volume of almost 3 billion metric tons each year, a thousand times more than the ~2.5 million tons of nickel that are mined annually (and only 60% of that is class 1 nickel, suitable for batteries).

Likewise, phosphates are currently mined at around 160 million tons per year according to USGS. Manganese production is around 16 million tons per year.

Largely as a consequence of their relative abundance and already well established supply chains, the cost of these minerals is inexpensive: Iron ore is typically under 10 cents per kilo and relatively stable in pricing. Phosphate rock is in the same ballpark. Manganese ore is less expensive still. There are refining and processing costs to add to these figures, but this is still an order of magnitude less than the mineral prices for nickel-based battery cathodes (see below).

Relative to other industrial uses of iron, phosphates, and manganese, the fraction of these minerals going to LFP battery manufacturing is relatively small, and will remain so, even with anticipated fast growth in EV battery production. In short — there’s already enough supply of these minerals to accommodate battery manufacturing without requiring huge increases in mined quantities, or spikes in pricing.

Nickel-based EV battery chemistries, on the other hand, took an already significant ~6% of global class 1 nickel production, even at 2019’s EV market share of around 2.5% of auto sales. When EV market share climbs to 25%, that’s going to require 60% of the recent historical volume of global class 1 nickel production. That’s nickel that is already in demand for steel making and other industrial processes. Nickel typically costs around $13 per kilo, and an average BEV battery requires on the order of 40 to 60 kilos ($600 to $900 raw cost of nickel). In mid 2019 the nickel price spiked to almost $18 per kilo (so, over $1000 raw cost of nickel for larger battery EVs).

Then there are the well known problems around cobalt, with ethically complex supply chains, limited mined quantities (most of which is already claimed for battery manufacturing), and high prices. Cobalt is now moving from today’s 20% cathode mass (in common NCM 622 varieties) to just 10% of cathode by mass (in the latest NCM 811 or 712 varieties). But that’s still on the order of ~5 kg per vehicle at recent prices of around $33 per kilo (around $165 raw cost). In 2017–2018, the cobalt price spiked to around $95 per kilo (so, almost $500 raw cost per vehicle).

Battery cells. Image courtesy CATL.

Tesla uses at least two varieties of nickel-cobalt cells, from Panasonic (NCA) and LG Chem (NCM), and has tried to minimize the amounts of cobalt required, but there’s still some cobalt exposure there, and obviously the nickel exposure is unavoidable, it being the key ingredient of this class of battery chemistry. (During the earnings call, Tesla CEO Elon Musk even requested nickel suppliers to get in contact and to ramp up their production as much as possible).

Overall, then, the key minerals for LFP batteries are a great deal more abundant, and prices are less expensive (and more stable) than minerals for nickel-based batteries. This reflects in LFP batteries already being a good bit less expensive than nickel-based batteries per kWh, the rumour being on the order of 20% less expensive for Tesla — though, the exact costs are closely guarded competitive secrets. Since the constituent minerals are so inexpensive, and LFP energy density continues to steadily improve, there’s plenty of scope for that price per kWh to keep reducing further over the coming years.

Sufficient Energy Density At The Pack Level

LFP cells do not have quite as high energy density as nickel-based cells. Although, the difference is minimized by their not needing as complex (and heavy) packaging in EV battery packs. This is because their greater thermal stability, lower cooling needs, and typically better cycle life compared to nickel-based cells. The cutting edge commercially used energy density at cell level is roughly 190–200 Wh/kg for LFP compared to 275–300 Wh/kg for nickel-based cells. Energy density at the pack level is a much closer 160 Wh/kg vs. 200 Wh/kg. Both technologies (along with other battery chemistries) are gradually improving their energy density and other performance characteristics with further research.

The 160 Wh/kg at the pack level that is possible today, for cutting-edge LFP, is already sufficient energy density for compelling passenger EVs, if used wisely. As Tesla’s EVs have rapidly become more efficient in their use of energy, the suitability of LFP batteries has therefore grown in scope. Tesla leads the industry in energy-efficient EVs. Although, we see also good progress from Hyundai and one or two other manufacturers (though, usually for more modest-performance, family vehicles).

Musk made is clear that nickel-based battery packs will still play a key role in the Tesla vehicles that require the very highest energy density:

There’s two general classes of cell: iron phosphate and nickel based. Nickel based cells have higher energy density, so longer range. Obviously those are needed for something like the Semi, where every unit of mass that you add in battery pack you have to subtract in cargo, so it’s very important to have a mass efficient and long-range pack. …

However, what we’re seeing with our passenger vehicles is that total vehicle efficiency has gotten good enough that we actually are comfortable having LFP.” [blends into the same quote as we saw above]

Close to 300 Miles or 500 Kilometers

Later in the earnings call, Tesla CEO Elon Musk also reiterated the “almost 300 mile” point he first made above (top of article):

“With regard to passenger vehicles, I think the new normal for range is going to be (in US EPA terms) approximately 300 miles. I think people will really come to expect [a] number close to 300 miles as normal … because you do need to take into account … is it very hot outside or very cold? … Are you driving up a tall mountain, with a full load? And people don’t want to get to the destination with 10 miles of range [remaining] they want some reasonable margin. So I think really close to 300 miles is going to be a new normal. … ~500 kilometers basically.”

I agree that this is a good target to aim for, depending on the market and how efficient the vehicle is in cold conditions and at highway speeds. Super efficient heat pumps and smart thermal management (and vehicle insulation) helps with cold conditions. Though, extreme cold can still give at least a 15–20% hit to range even with these. Slippery aero helps maximize energy efficiency on those occasional long highway trips, but high speeds cause a range hit of at least 10% compared to more typical daily speeds on mixed road types. So, a cold winter road trip can sap a good 30% or more of your rated range. Thus Musk’s point in the above quote.

Having a bit of a battery size / range buffer that you only rarely utilize does help with battery pack longevity also, and increases effective charging speeds for recovering usable energy (if charging curves are sensibly engineered). Having good range (and fast charging speeds) is especially useful for the (minority) of folks who don’t have home or workplace charging and want to get a week’s typical commute from a single top-up. EVs will need to accommodate these folks on the way to 100% clean transport. Fast charging speeds (relatively high c-rates) are another strong characteristic of many varieties of LFP batteries.

However, I do think that many folks in Europe and Asia are less tied to the notion of a vehicle providing freedom-to-road-trip than folks in North America. Many in Europe and Asia would be perfectly happy with 400 km / ~250 miles of rated range. Either way, this more modest range requirements is obviously even more comfortably within the scope of LFP batteries to provide.

Musk’s comments suggest that nickel-based batteries will still be the favoured choice for Tesla’s long-range vehicle variants as well as for the Semi truck.

Standard-range (or SR+, or perhaps even the lesser-spotted “Mid Range“) vehicles with 400 or 500 km of range are a great match for LFP batteries. This includes the LFP Model 3 being made for the first time right now in China, and later for other global markets. Model Y also will work with LFP batteries for close to 450~500 km variants. A future smaller Tesla vehicle (a compact hatchback or compact crossover) with LFP should also see close to 450~500 km of range. If Tesla ever brings back 300 mile versions of the Model S and Model X, LFP will fit the bill perfectly for these also.

As Tesla’s vehicles’ energy efficiency continues to improve, and LFP chemistry continues to improve (both in energy density, charging speed and longevity), we will see Tesla leveraging LFP to continue to offer more and more compelling vehicles over time. LFP will help keep the cost of batteries improving, enabling Tesla to provide more affordable vehicles over time.

Meanwhile, other vehicle makers wishing to offer compelling EVs at competitive prices must learn from Tesla’s approach, and focus on vehicle efficiency.

Article images courtesy of Tesla except where noted.

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Max is an anthropologist, social theorist and international political economist, trying to ask questions and encourage critical thinking about social and environmental justice, sustainability and the human condition. He has lived and worked in Europe and Asia, and is currently based in Barcelona. Find Max's book on social theory, follow Max on twitter @Dr_Maximilian and at, or contact him via LinkedIn.


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