Long-suffering cobalt bulls were dealt another blow on Wednesday after reports that the world’s largest electric carmaker is shifting some production of its most popular model away from batteries that contain nickel and cobalt.
In a surprise move, China’s top battery manufacturer CATL will supply Tesla with lithium iron phosphate (LFP) batteries for Model 3 production at its newly built $2 billion factory outside Shanghai.
The Model 3 is Tesla’s most popular and the US-made version uses the company’s nickel-cobalt-aluminum (NCA) cathode chemistry. Most other automakers favour nickel-cobalt-manganese (NCM) cathodes.
Cobalt miners may make up some lost ground if the Model 3 proves popular in China, which accounts for half the world’s EV sales
LFP batteries are cheaper than batteries using NCA and NCM but lack the energy density, reducing driving range. LFP batteries power almost the entire electric bus fleet in China and are popular for smaller city runabout vehicles where range is not an issue.
According to Benchmark Mineral Intelligence, a battery supply chain and price reporting company, cobalt played no part in Tesla’s decision to use LFP cells:
The move is a specific strategy to balance the cost reduction of Model 3 with appropriate range and performance for China’s domestic market.
Benchmark believes LFP powered Model 3s will qualify for China’s EV subsidies as range estimates with Tesla’s drivetrain efficiency will take it beyond the 250km (155 miles) threshold for the minimum subsidy payout of CNY 18,000 (roughly $2,600).
Benchmark estimates that the total cost saving compared to Model 3s made in the US using NCA cells will be in excess of 25%, but it is unlikely that Tesla will produce LFP models outside China.
Cobalt miners may make up some lost ground if the Model 3 proves popular in China, which accounts for half the world’s EV sales. Tesla plans to use NCM 811 cells (~80% nickel, ~10% cobalt) supplied by LG Chem for its long-range Model 3s for the domestic market.
Benchmark domestic Chinese prices for cobalt sulphate jumped by more than 10% in January, to $6,900 a tonne. Measured from multi-year lows hit during the summer, prices for cobalt used in the battery supply chain have recovered 30%.
Chinese nickel sulphate prices fell an average of 5.8% on the previous month in January, according the Benchmark data, but at CNY24,500 ($3,500) per tonne ex-works >22% nickel content, prices are flat year-on-year.
3 Comments
jonathan hall
Your article about Tesla in China is highly biased and inaccurate.
1. The range is inadequate and as yet they do not qualify for subsidies
2. The contract is very short term, check it out
3. It looks very like a Tesla ruse to attempt to get the price of cobalt down
4. 10% cobalt batteries are unstable and as yet unproven, the cars still catch fire.
Do more homework.
Frik Els
Thanks for your comment Jonathan
1. They have not yet officially achieved that range, but my guess is that Tesla would not opt for LFP if it meant customers won’t qualify for a subsidy which would cancel out savings with the cheaper battery. Tesla cut the price of the Model 3 in China in January but it’s still $46,000+. I wouldn’t buy a car at that price that only goes 250km but that’s Tesla and CATL’s read of the Chinese market.
2. That may be so but I doubt firms like CATL and Tesla would enter into an agreement of this size only to abandon the project. If that where to happen, and it’s not impossible, it would certainly cement the position of NCM and NCA.
3. Of all the major EV makers Tesla is the least exposed to the cobalt price as the NCA cathodes they have developed, as claimed by Musk, already uses less cobalt than NCM 811. They’d be doing BMW, VW et al a favour by driving down the Co price.
4. According to data from Adamas Intelligence which tracks the battery chemistry of EVs sold around the world. based on the lithium deployment 811 chemistries (10%) used grew 370% y/y in Dec 2019 and have now surpassed NCM111 (30% Co). It’s been slow for the very reasons you mention but the market is moving in the direction of low cobalt cathodes
Frik
Jonathan Hall
I suggest you read Simon Moores comment from Benchmark Intelligence debunking all the conclusions in your article.