Lithium iron phosphate batteries: Cleaner electrification

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  Quantumrun Foresight
• February 26, 2025

Insight summary

Lithium iron phosphate batteries are becoming a key alternative to traditional electric vehicle (EV) batteries due to their lower cost, improved safety, and more sustainable materials. As companies invest in making these batteries more efficient, their use is expanding beyond vehicles to large-scale energy storage, reshaping supply chains and global trade. This shift may lead to lower EV prices, job growth in battery production, and new government policies to support domestic manufacturing and renewable energy storage.

Lithium iron phosphate batteries context

Lithium iron phosphate batteries are emerging as a strong alternative to traditional nickel-cobalt-based batteries in EVs due to their affordability, safety, and sustainable sourcing. These batteries, often referred to as LFP, use iron and phosphate as cathode materials, which supply electricity, and are significantly more abundant and cost-effective than nickel and cobalt. Their adoption has surged in recent years, particularly in China, where they already power a majority of EVs. As automakers seek to lower production costs and reduce reliance on materials with volatile prices, Tesla, Ford, and Hyundai are increasingly incorporating LFP technology into their EV lineups.

One of the key advantages of LFP batteries is their improved safety profile, as they do not release oxygen during thermal events, reducing the risk of fire compared to nickel-cobalt batteries. Additionally, LFP cells tend to have a longer lifespan, with some studies showing they can handle nearly five times as many charge cycles as their nickel-based counterparts. However, their lower energy density has historically limited their use in markets that prioritize long-range vehicles. Advancements such as the addition of manganese to LFP cells by Toyota and Hyundai in 2023 have significantly improved their energy storage capacity, with some models reaching up to 450 miles on a single charge.

The growing investment in LFP battery production is also reshaping global supply chains, with major players like China-based Contemporary Amperex Technology Co. Ltd. (CATL) and BYD leading the industry. In the US, Michigan-based Our Next Energy is building a USD $1.6 billion manufacturing facility, while Ford is constructing a USD $3.5 billion LFP plant in collaboration with CATL. Additionally, startups like Mitra Chem are leveraging artificial intelligence to accelerate the development of lithium manganese iron phosphate chemistries that further enhance performance. 

Disruptive impact

As manufacturers push for wider adoption, consumers may see lower EV prices and longer-lasting batteries, reducing the frequency of vehicle replacements. However, LFP-powered cars may have longer charging times and require larger battery packs for extended range, which could mean more frequent charging stops on long trips. Additionally, their lower performance in cold weather could make them less practical for people living in regions with harsh winters, leading some consumers to choose other battery options despite the lower cost.

Delivery services, rideshare companies, and public transportation systems may benefit from the longer cycle life and reduced fire risk, lowering insurance and maintenance costs. However, automakers may face supply chain adjustments as they move away from nickel and cobalt, requiring new supplier agreements and domestic production investments. Energy storage companies may also accelerate LFP adoption for grid-scale storage, helping businesses manage electricity costs but also increasing competition among battery manufacturers to improve efficiency.

Meanwhile, governments may need to rethink infrastructure planning and trade policies as LFP adoption grows. Investments in charging networks could shift toward accommodating vehicles with larger LFP battery packs, especially in colder climates where efficiency drops. Trade policies may also be affected, as China dominates LFP production, potentially prompting governments to increase subsidies for local battery manufacturing. Additionally, incentives for grid storage using LFP could reshape national energy strategies, encouraging countries to store renewable power more efficiently and reduce reliance on fossil fuels.

Implications of lithium iron phosphate batteries

Wider implications of LFP batteries may include: 

• The demand for LFP batteries increasing the need for domestic mining of lithium, iron, and phosphate, leading to new regulations and land use debates.
• The shift to lithium iron phosphate batteries reducing reliance on conflict minerals like cobalt, leading to fewer ethical concerns in the supply chain.
• Lower-cost EVs enabling more low-income households to transition to electric transportation, leading to shifts in vehicle ownership patterns.
• Automakers reconfiguring vehicle designs to accommodate larger lithium iron phosphate battery packs, leading to changes in vehicle weight, aerodynamics, and performance.
• The increased safety of lithium iron phosphate batteries lowering insurance premiums for EVs, making them more financially accessible to consumers.
• The expansion of LFP battery production requiring new workforce training programs, leading to job creation in battery manufacturing and recycling.
• Countries with strong lithium and iron reserves gaining economic leverage in global trade, leading to shifting geopolitical alliances in the energy sector.
• The growing presence of LFP batteries in large-scale energy storage supporting renewable energy integration, leading to more stable electricity grids.
• The disposal and recycling of LFP batteries requiring new waste management strategies, leading to changes in environmental regulations and industry practices.
• Governments revising vehicle tax incentives to favor lithium iron phosphate battery adoption, leading to a shift in consumer purchasing behavior and automaker production priorities.

Questions to consider

• How could the lower cost and increased safety of LFP batteries change the way you approach buying or using an EV?
• What new job opportunities might emerge in your city as automakers and energy companies expand LFP battery production?