Tesla to Use Iron-Based Batteries in Standard Range EVs

Tesla Shifts to Iron-Based Batteries for Standard Models

Tesla announced on Wednesday a transition to iron-based batteries for its standard range Model 3 and Model Y vehicles, a change impacting global markets. This update, detailed in the company’s third-quarter earnings report, validates earlier suggestions from Tesla CEO Elon Musk regarding the increasing importance of this more affordable battery chemistry within their product offerings.

LFP Batteries: A Cost-Effective Alternative

Lithium-iron-phosphate (LFP) batteries utilize a well-established, lower-cost chemistry and are widely adopted in China. Currently, electric vehicle batteries outside of China predominantly rely on nickel-based compositions, such as nickel-manganese-cobalt or nickel-cobalt-aluminum. Beyond the economic benefits, LFP cells offer a significant advantage by reducing dependence on scarce materials like cobalt and nickel.

Tesla CFO Zach Kirkhorn confirmed during a Wednesday investor call that the company has observed price fluctuations affecting both nickel and aluminum.

Patent Expiration and Localized Production

The limited adoption of LFP batteries outside of China has historically been linked to a set of key LFP patents. These patents have enabled China to maintain a dominant position in the LFP battery market.

However, these patents are nearing their expiration date, and Tesla appears to be strategically positioning itself to capitalize on this shift. Company executives have indicated plans to establish LFP battery production facilities in close proximity to their vehicle manufacturing locations.

Localization of Supply Chain

“Our objective is to localize the production of all essential vehicle components within the region – at a minimum, the continent – and ideally even closer to where the vehicles are assembled,” stated Drew Baglino, SVP of Powertrain and Energy Engineering at Tesla, during the investor briefing.

“We are actively collaborating with our suppliers to achieve this goal, extending our efforts beyond final assembly to encompass as much of the upstream supply chain as possible.”

Update on 4680 Battery Pack Development

Tesla also provided a concise update regarding its 4680 battery pack, a custom cell design developed internally. The company has previously stated that the 4680 battery is projected to deliver increased energy density and extended vehicle range.

Baglino reported that the 4680 battery is on schedule for integration into vehicles at the start of the coming year, with structural testing and validation progressing as planned. He cautioned, however, that “this is a new architecture and unknown unknowns may exist still,” acknowledging potential unforeseen challenges.

“From a cell standpoint, we are confident in the maturity of the design and the readiness of manufacturing processes to align with the pack timeline previously mentioned,” he concluded.