The lithium battery, a key component of electric vehicles, ushered in a miraculous reversal. The proportion of lithium iron phosphate batteries reached 52% last year, surpassing that of ternary batteries. In the first quarter of this year, it continued to grow. Analysts estimate that its market share will exceed 60% in 2024.
Since Tesla took the world stage, electric vehicle batteries have always been dominated by ternary lithium batteries. Because of their strong instantaneous output capability, they have become Tesla's first choice. Lithium iron phosphate batteries (LFP Battery) are regarded as a lower-performance alternative but with the improvement of battery technology and Tesla's about face, lithium iron phosphate batteries have suddenly become a lead actor.
Market analysis agency TrendForce pointed out, from the perspective of China, the world's largest electric vehicle market, the power battery market reversed in 2021. Lithium iron phosphate batteries officially surpassed ternary batteries with 52% of installed capacity. Installed capacity in the first quarter of this year continued to rise to a 58% share and growth rate was much faster than that of ternary batteries.
However, from the perspective of the global electric vehicle market, thanks to the increase in the penetration rate of new energy vehicles in Europe and the United States, ternary batteries will still had a market share of more than 60% in 2021, far exceeding lithium iron phosphate batteries, which had a market share of about 32~ 36%.
▲ Global share of lithium iron phosphate battery capacity（Source：TrendForce）
According to TrendForce investigations, planned expansion projects announced by global cathode material manufacturers are concentrated in China and South Korea with a nominal total planned production capacity exceeding 11 million tons, of which the planned production capacity of lithium iron phosphate cathode accounts for about 64%. However, since planned production capacity exceeds market demand, there will be a certain gap between the total planned production capacity of the industry and the actual production capacity in the future and it remains to be seen how much actual effective production capacity can grow.
However, it is almost no surprise that lithium iron phosphate batteries will become the lead actor of the market in the next two or three years because major car manufacturers are accelerating the transformation of electric vehicles, which will make the supply of lithium batteries even tighter. Including wafers and automotive wires, there are supply problems. The first focus of car manufacturers has shifted from performance to cost.
Under this trend, TrendForce expects that the cost-effectiveness advantage of lithium iron phosphate batteries will become more prominent and it may become the mainstream of the terminal market in the next 2-3 years. The global installed capacity ratio of lithium iron phosphate batteries and ternary batteries will also increase from 3:7 to 6:4 by 2024.
From the perspective of consumers switching from ternary lithium batteries to lithium iron phosphate batteries, although acceleration of electric vehicles will become weaker, acceleration is still far better compared to fuel vehicles with similar vehicle prices. Now, the general public may not need the explosive performance of zero-hundred acceleration within 4 seconds and acceleration that is 3 seconds slower can keep the car price within an acceptable range, which is definitely a worthwhile compromise.