LFP 2022 Licensing Shift and China MIIT Regulations Affecting Auto Industry

[curiouscarbon]

An article from last year, that I recently read, had some interesting insights about LFP tech going forward.

An executive summary for yall:

Just quoting this part because it's mildly nuanced:

LFP cathode producers explained to Roskill that the consortium managing LFP’s IP rights reached an agreement with the Chinese battery industry a decade ago in which, as long as LFP was produced and used within China, the consortium would not charge Chinese manufacturers a licensing fee. As a result, the price of Chinese LFP batteries has always been considerably lower than non-Chinese LFP batteries. However, the patents’ restrictions over LFP will start to expire in 2022. Simultaneously, the limitation of LFP exports on Chinese producers will be largely removed, along with the licensing fee for non-Chinese LFP cell producers. The removal of this IP barrier could become the largest opportunity for LFP-based Li-ion batteries to rapidly gain market share in the EV market outside China.

China MIIT regulations approved in May 2020 will require EVs to inhibit any fire or explosion within five minutes after a thermal runaway incident happens in battery cells. NCM chemistries will require Mitigation systems: mica sheet, aerogel, steel beams, other options.

Runaway-prone high energy density cell chemistries for EV will work out to lower effective energy density due to protection system.
LFP enables higher effective density due to lack of need for as intense fire mitigation systems which are typically bulky.

Cobalt price volatility caused cost of 50kWh battery pack to go up 13-28% over one year, which translated to 4-7% total vehicle cost.
LFP had 1% volatility in price over that period with marginal affect on total vehicle cost.

Cobalt is challenging to source in a way that avoids rewarding human rights violations, and 25% of cobalt reserves could be depleted by 2030, even assuming recycling.

I hope this summary has been of use to someone

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1) New, stricter safety standards in China and their associated costs will drive LFP demand going forward​

New MIIT regulations approved in May 2020 will require EVs to inhibit any fire or explosion within five minutes after a thermal runaway incident happens in battery cells. To achieve that level of protection, Chinese EVs using nickel-based chemistries such as NCM will require mitigation systems; these may include the use of fire-proof mica plates between pack and vehicle, “aerogel” segments distributed throughout the pack, or robust but heavy steel beams, among many other solutions. Such protection systems come at a monetary cost but, more importantly, an energy density cost (given their weight and volume), undoing advances in cell performance that were designed to lower pack cost and, therefore, EV prices.

2) LFP as the only enabler of cheaper and safer pack architectures​

To avoid these costly mitigation systems, OEMs interviewed by Roskill confirm that batteries using inherently safe LFP cathode materials would allow them to build simplified battery packs without modules, and without the otherwise necessary but voluminous safety and auxiliary components. In the last 12 months, companies such as BYD, CATL and Honeycomb (SVOLT) have revealed several pack architectures using this approach. As a result, some of these companies claimed up to 30% higher volumetric energy density, while decreasing the cost by as much as 30%, thanks to a more streamlined pack design.

3) IP rights kept LFP confined to the Chinese market; this will change after 2022​

LFP cathode producers explained to Roskill that the consortium managing LFP’s IP rights reached an agreement with the Chinese battery industry a decade ago in which, as long as LFP was produced and used within China, the consortium would not charge Chinese manufacturers a licensing fee. As a result, the price of Chinese LFP batteries has always been considerably lower than non-Chinese LFP batteries. However, the patents’ restrictions over LFP will start to expire in 2022. Simultaneously, the limitation of LFP exports on Chinese producers will be largely removed, along with the licensing fee for non-Chinese LFP cell producers. The removal of this IP barrier could become the largest opportunity for LFP-based Li-ion batteries to rapidly gain market share in the EV market outside China.

4) Cobalt price volatility is pushing OEMs to keep LFP in the loop​

Cobalt price rises in 2018 made the cathode cost on a 50kWh battery pack move up 13-28% y-on-y. Although the cost impact at total vehicle level was much smaller, at 4-7%, this change could wipe out the margin obtained in smaller mass-market cars. In comparison, the cost of LFP moved just 1% y-on-y in the same period, with a marginal effect on total car cost.

5) Supply concerns and ESG factors are putting cobalt in the spotlight​

Although several initiatives to control and certify cobalt mined without child-labour or artisanal mining exist today, it remains difficult to control other parameters such as the environmental impact of those mines, or corruption practices related to cobalt extraction in the DRC. These environmental, social, and governance (ESG) concerns, coupled with the fact that around 25% of global cobalt reserves could be depleted by 2030 (even when considering ultra-high nickel chemistries and cobalt recycling), pose a significant risk to supply chain disruptions.

6) The implications for nickel and cobalt in a higher LFP world are significant​

Although some stakeholders and researchers believe that the resurgence of LFP batteries will be a short-lived trend, LFP could become an industry standard in urban EVs (A-B car segments) and perhaps in compact EVs (C-D car segments). This could be especially true in countries with lower purchasing power. To show the implications of these possible trends, Roskill has modelled the impact of a higher penetration of LFP batteries in its base-case EV forecast. A displacement of between 9% and 25% in both cobalt and nickel demand could be experienced by the end of the decade, depending on the regional split of LFP penetration, with an evident shift in the demand for lithium compounds (LiOH vs. Li2CO3).

7) Forward thinking: how possible is it for LFP to really overtake nickel-based cathodes?​

Given that 95% of LFP cathode manufacturing is produced in China, and that LFP module-less technologies allow carmakers to lower their vehicle price tags, it is likely that LFP will be a growing trend – albeit confined to the Chinese auto industry until at least 2022. This is shown clearly in the strategy followed by carmakers such as BYD, Tesla, Volkswagen (with stakes in Guoxuan/Gotion High Tech), and possibly Toyota (in its collaboration with LFP market leader BYD). However, beyond 2022, a window of opportunity opens for LFP materials, with the expiration of the LFP patents and licensing rights.

8) Caveats​

Technology breakthroughs, until then, are nevertheless to be expected. Development of nickel-based cathodes with 1-5% cobalt loadings or no cobalt at all are present in the technology roadmaps of most European and North American automakers and their cell suppliers. In any case, LFP should be considered as a complementary or refuge material in addition to high-nickel chemistries. While LFP could power urban and some larger vehicles in the C-D car segments, nickel-based cathode will continue to be the go-to option for most automakers offering driving ranges over 400-500Km or performance vehicles.

 

[Steve_S]

There is very few people out there who know these details... There also few who understand that Solar Panel Tech went a similar route as well.
Now that nasty bit: Western Governments allowed it because they were influenced to believe that Renewable Energy, EV's etc was just a FAD and would not last and that FUD was so pushed by Big Fossil (with 100'd of millions of dollars spent spreading that fud (while collecting government subsidies no less) handed the whole sector to China on a Solid Gold Platter and guaranteed protection for 10+ years.

Consider the 100's of millions (more like Billions) that China has made as a result, all the companies, jobs and that huge pile of taxable income ! Which the West just gave away, only to discover that they are all 10 years behind the game because it was NO FAD and they bought the FUD Lies ! But they get MAD at China for it, NOT the FUDSTERS that cost National Economies 100's of millions of dollars in revenue from taxes etc...

 

[curiouscarbon]

Surely it will all balance out in short order in an organized fashion ......

Looking forward to more LFP in USA. Well thermally regulated EV grade LFP cells should give many people a much happier outlook on battery reliability. Unfortunately to have a local source of material means to dig.

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For examples of fire mitigation systems, this one seems kinda neat to me:

Using 3M Novec Engineered Fluid. The video suggests a direct puncture would be effectively mitigated by the fluid.

Perhaps awkward if it leaks out after a crash.

 

[Steve_S]

I feel that once LFP is actively produced in EU, US and elsewhere that many things will shift quickly. The advantages of less resources required (no cobalt etc) the less complicated manufacturing which in turn means less processing & manufacturing "load" as well as an easier to recycle product means adoption & implementation should jump to the fast track. Something to keep a really sharp eye on for the next 18-24 months, especially for investors. Some moves are already underway. The horses are lining up at the gates...