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Why Tesla Is Shifting More EVs To Lithium Iron Phosphate Batteries

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Why Tesla Is Shifting More EVs To Lithium Iron Phosphate Batteries

Tesla Inc (NASDAQ: TSLA) has sounded out in the past its intention to move away from batteries with nickel cathode, given constraints in supply, and CEO Elon Musk reiterated this in a tweet late Thursday.

What Happened: Nickel supply constraints are the biggest concern for Tesla in scaling lithium-ion cell production, Musk said in the tweet.

The Tesla CEO also went on to add that this is the reason why the company is shifting its standard-range EV models to iron cathode.

Musk also suggested that the use of lithium iron phosphate, or LFP, batteries will free up more battery supply of lithium-ion chemistry cells using nickel cathodes for the company's other vehicle programs.

Previously, Musk had said the energy density of LFP batteries has improved enough to justify the use of these cells in lower-end vehicles.

Related Link: Tesla Gets A Street High $1,200 Price Target: 'The Fireworks Aren't Over Yet'

Why It's Important: Tesla is using LFP batteries in its Model 3 standard range plus vehicles manufactured in China.

Thursday's tweet comes as an indicator that the EV giant could shift to LFP batteries in base model vehicles marketed in Europe and other regions.

Nickel is the preferred option for EV batteries due to its higher energy density and greater storage capacity.

Yet compared to iron, nickel is expensive, with prices soaring of late as the booming EV market continues to rely heavily on the metal.

Nickel mining is also fraught with environmental risks. Fitch said in a recent report that it expects increased use of nickel in batteries to lead to a market deficit from 2025.

Related Link: How Bitcoin, Demand Are Driving Tesla Shares Lower

 

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