Tesla switching to LFP batteries in all standard-range vehicles

Tesla is altering the battery chemistry it makes use of in all its standard-range electrical autos to a model with a lithium-iron-phosphate (LFP) cathode, the automaker mentioned Wednesday in its third-quarter investor deck.

The transfer is probably going a method for Tesla to extend revenue margins on its totally electrical vehicles, whereas not essentially having to boost car costs. Up to now, Tesla has been criticized for sporadic car worth modifications.

The corporate is already making autos with LFP chemistry at its manufacturing unit in Shanghai. It sells these vehicles in China, the Asia-Pacific area, and Europe.

China usually promotes the usage of such a battery, in keeping with supplies researcher and guide Roskill. The agency notes that round 95% of LFP cathode manufacturing is produced in China.

In September, Tesla requested Mannequin 3 reservation holders within the US in the event that they’d settle for a automobile that had a battery made with LFP cells as a substitute of the Nickel Cobalt Aluminum Oxide (NCA) cells that Tesla beforehand used for Mannequin 3 sedans offered in North America.

“LFP has each constructive and destructive trade-offs,” mentioned Sam Abuelsamid, Guidehouse Insights principal analyst. “It is considerably cheaper and does not require any nickel or cobalt. It is also extra secure, which makes it safer.”

One main draw back: The cells are much less energy-dense, which implies they provide decrease vary for a similar weight as different cells. Chilly climate additionally impacts them extra, Abuelsamid mentioned.

Abuelsamid believes Tesla’s change is “in all probability a wise thought as a result of they in all probability aren’t go to decrease costs so it should doubtless enhance their backside line.”

Different automakers comparable to Ford Motor and Volkswagen have expressed curiosity within the battery chemistry for lower-priced fashions, in keeping with Abuelsamid. He mentioned it is also notably interesting for industrial autos like supply vans that do not want multi-hundred mile vary.

Snow Bull Capital CEO Taylor Ogan, a long-time Tesla bull, advised CNBC, “LFP batteries are cheaper and safer. With this chemistry, you possibly can cost your car’s battery as much as 100% and never fear as a lot about degradation long-term. The opposite factor is these batteries are very easy to recycle. And sourcing uncooked supplies for these is simpler to do, ethically. That is why iron-based batteries are actually the battery of China already, they usually’re all you want for standard-range vehicles.”

The 2 prime producers of these kind of battery cells are CATL and BYD. Tesla is already procuring batteries from CATL the businesses have beforehand disclosed.

Tesla didn’t present extra particulars in regards to the choice aside from the investor deck saying it’s “shifting to Lithium Iron Phosphate (LFP) battery chemistry globally.”

Tesla didn’t instantly reply for remark.

– CNBC’s Lora Kolodny contributed to this report.