While Europe’s auto industry looks anxiously at its stumbling battery hope, Northvolt, the Asian market leaders are sharpening their blades. In the truest sense of the word: Where Northvolt is struggling with the production of its nickel-manganese-cobalt batteries (NMC), better known as lithium-ion batteries, BYD uses blade cells. Or, in German, “blade cells”).
The individual cells of a BYD battery are 96 centimeters long, 9 centimeters high and just 1.35 centimeters thick – just blades. And the BYD cells don’t just differ in shape. They are also chemically mixed differently than NMC batteries. BYD and now many other Chinese manufacturers now prefer to build LFP batteries. They use iron phosphate instead of nickel, manganese and cobalt, which is cheaper and easier to obtain.
The future belongs to the cells, believes Philipp Rose from the consulting firm Strategy&. Lithium-ion batteries are currently dominant in electric cars; the International Renewable Energy Agency estimates their share at 60 percent. LFP batteries were below 30 percent. In Europe the proportion is likely to be significantly lower; iron phosphate batteries have so far been particularly widespread in China.
Rose estimates that LFP could already have a share of 40 percent in Europe by the end of the current decade, and perhaps even make up around half of the market by the beginning of the 1930s. The first European car manufacturers are already making the switch, at least in relatively inexpensive segments: Stellantis is already using iron phosphate batteries, Renault has just committed to this, and Volkswagen is also planning to use them.
Volume manufacturers are finding it more difficult than premium brands to achieve their electric car goals; you can do without the higher performance of the NMC cells. The LFP batteries are around 20 percent cheaper, and the necessary materials for the batteries are readily available practically worldwide. In addition, the LFP batteries should be able to withstand more charging cycles and be less susceptible to battery fires. One disadvantage, however, is the lower energy density. Fewer kilometers can be squeezed out of the cells than lithium-ion batteries. But that can be avoided, says consultant Rose. The manufacturers tried to accommodate significantly more cells in the packs.
Strategy& and Batemo, a specialist in battery simulation software, tested the blade cells, which BYD now also supplies to Tesla and Toyota. The analysis of this is available to manager magazin.
“Europe is more of a student”
The good news for the German industry: BYD has not installed a “miracle battery” in its current models. “The performance of the battery is rather average,” says Rose. And yet: “The Chinese battery industry is clearly a leader in industrial production. Europe is more of a student here.”
And the Chinese are expanding. BYD has announced a battery factory in Hungary, market leader CATL wants to manufacture in Germany, among other places. The providers are outdoing each other with announcements for the coming LFP generation: CATL recently promised a battery with a range of 1,000 kilometers per charge.
The global number three, LG Energy Solutions, is also joining in: the Koreans are to supply Renault with LFP batteries with a total capacity of 39 gigawatt hours for five years starting in 2025. That’s enough for around 590,000 electric cars.
The Strategy& analysis shows how great the advantages of Asian manufacturers are in production. Even with the same material costs, the experts calculate that one kilowatt hour of a Chinese-made LFP battery costs 71.20 euros. In the USA it is 74.30 euros and in Germany 77.10 euros (see graphic).
Germany is clearly at a disadvantage, especially when it comes to energy and labor costs. According to the analysis, they are 38 percent higher than in China. For their analysis, the study authors assumed a salary of 58,560 euros for employees in Germany; they estimated the price of electricity at 10 cents per kilowatt hour and 7.5 cents per kWh for gas. China is significantly lower everywhere, be it in terms of salaries (18,588 euros), electricity prices (5 cents) or gas prices (2.5 cents).
Rose believes that European battery manufacturers could still catch up. You even have to. “Much of our prosperity and value creation in the auto industry in Europe will depend on the localization of battery production,” he says. “Europe must therefore be present in this market.” This applies to lithium-ion and iron phosphate batteries.
There are levers to at least partially offset the disadvantages in energy and personnel costs. The material accounts for 65 percent of the total cost of LFP batteries – and Europe has no disadvantages compared to other regions, at least on paper. Those who can minimize waste will therefore be particularly successful. The current example of Northvolt shows how critical this factor is; The Swedes are struggling with quality problems during the ramp-up
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When it comes to LFP batteries, it is now becoming apparent that European battery manufacturers are looking for cooperation with little-known, specialized Asian companies. “The Europeans do not have their own LFP supply chain today, and they will certainly not go into the production of LFP cathode material alone in the future,” explains Rose. So consider joint projects with partners that localize LFP technology in Europe in order to be able to compete with the Chinese market leaders. The Europeans must set themselves the goal of extracting as many raw materials as possible locally. What is not available in Europe can and must be obtained in neighboring regions in order to reduce dependence on Asia.
More on the topic
If you look at the battle for battery supremacy as a marathon, the European industry has just reached “kilometer 10 or 15,” estimates Strategy& expert Rose. He sees the market leaders from China “maybe 5 kilometers” further – with more runners in the team.
Can the backlog still be caught up? Difficult, says Philipp Rose. “But we have no other choice. We have to do this.”