Why Tesla May Move To Less Energy-Dense Batteries For Its China-Built Cars

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Image: Ding Ting/AP
Image: Ding Ting/AP

Why Tesla may put a less energy-dense battery type in some of its Chinese-built cars; Europe wants to compete with Asian battery manufacturers, but it won’t be easy; GM is making major changes that will affect plant workers; Renault is struggling; More on the GM-FCA racketeering lawsuit. All that and more in the Morning Shift for February 19, 2020.

1st Gear: Why Tesla May Move To Less Energy-Dense Batteries For Its China-Built Cars

Most EV automakers (like Volkswagen in its promising new MEB platform) use Lithium Nickel Manganese Cobalt Oxide (NMC) battery cell chemistry, though for quite a while now, Tesla has been using Lithium Nickel Cobalt Aluminum Oxide (NCA)batteries. In either case, energy density is rather high, especially compared to another popular kind of battery, lithium iron phosphate, or LFP.


And yet, according to a new report from Reuters, Tesla is considering moving to LFP for its China-built cars as a way to reduce costs associated with cobalt. From the story:

Tesla Inc. is in advanced talks to use batteries from Contemporary Amperex Technology Co. that contain no cobalt — one of the most expensive metals in electric vehicle batteries — in cars made at its China plant, people familiar with the matter said.

Adoption would mark the first time for the U.S. automaker to include so-called lithium iron phosphate, or LFP, batteries in its lineup, as it seeks to lower production costs amid faltering overall EV sales in China.

Tesla has been talking to the Chinese manufacturer for more than a year to supply LFP batteries that will be cheaper than its existing batteries by a “double-digit percent,” said a person directly involved in the matter, who was not authorized to speak with media and declined to be identified.


What’s most interesting is how the battery supplier CATL might pull this off according to Reuters’ sources: By getting rid of battery modules, and inserting cells directly into packs in what’s known as “cell-to-pack technology.”

Reuters received no comment from Tesla or CATL, nor does the news site know “to what extent Tesla intends to use LFP batteries,” though it does mention that one of the sources says Tesla’s use of NCA batteries will continue, which isn’t surprising.


It’s worth pointing out that, as shown in Elon Musk’s tweet above, Tesla has been on a mission to reduce cobalt content in its batteries, presumably because Cobalt is expensive and is surrounded by questionable mining practices.


CleanTechnica breaks down this new LFP rumor in detail, describing why Tesla might make the move to the less-dense batteries and getting into the context around the cell chemistry. From CleanTechnica:

The problem with LFP batteries is that they have a much lower energy density than the NMC/NCA batteries that companies like Tesla use in their electric vehicles. In fact, the technology originally had only a 90–120 Wh/kg battery density. However, thanks to those massive incentives, the technology was developed further, and currently CATL’s LFP batteries have reached capacities like 160 Wh/kg. For comparison, Tesla’s NMC 2170 cells made by Panasonic are somewhere around 247 Wh/kg. [Editor’s note: It appears to me from the table from “Moneyball” in this article that CATL has gotten energy density to >200 Wh/kg.]


The story goes on to talk more about cell-to-pack technology and its packaging benefits:

Until now, battery cells were first put into modules and then put into packs. Both CATL and Tesla have decided that they want to get rid of the modules and place the cells into packs directly. CATL has already done so and calls it cell-to-pack technology. While information about this is scarce, the company claims that this can increase energy density by 10–15% and improve volume utilization by 15–20%. In total, it can reportedly reduce the parts needed for the battery packs by 40%.


With this new strategy, CleanTechnica writes, LFP could work quite well for the standard-range Tesla Model 3, which only has around 50 kWh of capacity:

Technically speaking, if you added 35% more 160 Wh/kg LFP cells to the Model 3 Standard Range’s battery pack, you would reach the 50 kWh needed. There is space for 32.6% more cells, so the numbers are already close. If Tesla did get rid of the modules and had more space, it could indeed fit enough LFP cells into the pack to get the same range as the current Model 3 Standard Range.


Right now, this move to LFP is just a rumor, but it makes sense. It aligns with Tesla’s aim to reduce cobalt content in its batteries, and—as CleanTechnica points out by citing a Reuters story from last year—Volkswagen has also indicated its interest in using LFP for Chinese-market cars. “These have lower energy density than NMC cells, but Chinese drivers tend to stay within large cities and do not travel long distances by car,” Reuters wrote.

We’ll hopefully learn more about all of this at Tesla’s “Battery and Powertrain Investor Day” in a few months.


2nd Gear: Europe Is Cranking Up Its EV Battery Manufacturing To Compete With Asia

Right now, the vast majority of leading EV battery manufacturers are headquartered in Asia. The juggernauts LG Chem, Samsung SGI, and SK Innovation hail from South Korea; Panasonic is from Japan; and Contemporary Amperex Technology (CATL) and BYD are Chinese companies.


The fact that the most valuable single part (well, assembly) of any EV built in Europe tends to come from companies outside of the continent has the European Union concerned about its automakers’ competitiveness, with Bloomberg writing:

The $2 billion project [to bring a new CATL battery plant to Germany]—one of about a half dozen battery factories under construction in Germany alone—worries European policymakers, who are desperate to ensure their auto industry doesn’t lose competitiveness in the transition to electric vehicles. EV sales in Europe are expected to jump to 7.7 million in 2030 from just under half a million in 2019, according to forecasts from BloombergNEF. Those vehicles will mainly be powered by batteries from Asian manufacturers like CATL, unless European companies fight back and build a local supply chain.


While a number of Asian battery producers are involved in joint ventures with European companies, and have major operations in Europe, Bloomberg reports the European Union’s plans to get EU-based companies in on the fun, writing:

“If we let China own the battery, then we lose out on the centerpiece of electric cars,” says German Deputy Economy Minister Thomas Bareiss. “I’m not sure that’s the best approach for our auto industry.”


...the European Commission set up the Battery Alliance initiative. In December it approved €3.2 billion in aid for projects approved or currently under way at 17 companies, including BASF, BMW, and Fortum. The measure is meant to encourage greater investment in factories by these and other European companies.

National governments are also committing large sums to battery efforts, especially in Germany. In early February its economy minister, Peter Altmaier, announced a €5 billion project for battery cells in Germany and France. Altmaier has been a leading proponent of developing a local battery sector. The goal, as he sees it, is to build “the best and most sustainable batteries in Germany and Europe.” There is no other option, he has said, if its carmakers are to succeed.


But to create a greener supply chain means mining locally, and that could be tricky in Europe, as Bloomberg notes::

But there is little mining of key ingredients like lithium, and no capacity to turn those resources into high quality vehicle batteries. A desire to bring lithium and other materials closer to the production line is partly driving the efforts. “Lithium hydroxide doesn’t travel well,” say Andreas Scherer of AMG Advanced Metallurgical Group NV. “It doesn’t like to sit in a bag in the belly of a ship for six weeks—that’s bad for quality.”

Stringent environmental rules and community opposition to more mines could slow the momentum. Land owners and environmental groups fear the resulting emissions and pollution. Finland’s Keliber Oy in November postponed its planned initial public offering and the construction of a lithium mine on appeals against its environmental permit.


European environmental requirements could mean that locally-mined batteries may not be the cheapest ones out there, but, as Dietrich Wanke, CEO of an Austria-based mining company, told the news site: “It must be seen as a unique product, contributing to the reduction in carbon dioxide emissions in Europe.”

It’s going to be a tough road for European companies to compete, because Asian battery makers have already laid foundations in Europe and forged ties with automakers.


3rd Gear: Big Changes Are Underway At GM And Factory Workers Will Be Feeling Them

The Chevrolet Impala is ceasing production next week, after which point the Detroit-Hamtramck Assembly plant in which the car has been built for many years will begin a transition to electric vehicle production. The Detroit News writes about the plant’s planned revamp:

No longer will engines and transmissions be installed at the General Motors Co. factory. Electric motors and battery packs will take their place. By late 2021, GMC Hummer EVs will be built, followed by the Cruise Origin, a self-driving electric ride-sharing shuttle.

Work on the $2.2 billion investment at the plant will start in March. The reworking of the plant will include comprehensive upgrades to the general assembly area and the paint and body shops, GM has said. Upgrades include new machines, conveyors, controls and tooling.


The story goes on:

“The plant configuration is probably going to change more dramatically than for a normal model changeover… in this case we will probably see the assembly line get gutted,” said Sam Abuelsamid, principal analyst at Navigant Research

The changeover could include the inclusion of a battery-pack assembly line, Abuelsamid said, because of the volume of vehicles GM plans to build there.


The retooling could take 12 to 18 months, the news site writes, and this has a number of workers concerned about what they’ll do during that period.

Speaking of concerned GM workers, the company continues its cost-cutting efforts by pulling out of various overseas markets, as the Detroit Free Press writes:

General Motors is exiting Australia, New Zealand and Thailand to save costs in the underperforming markets and better hone its focus on growth markets as well as on its electric vehicle and self-driving car strategies.

As a result, GM said it expects to incur net cash charges of $300 million and to record total cash and non-cash charges of $1.1 billion. These charges will primarily be incurred in the first quarter and continue through the fourth quarter.


Reuters reports that all 1,500 employees at GM’s Rayong operations in Thailand will be laid off.

4th Gear: Uh Oh, Renault

Moody’s Investors Service’s ratings system basically assesses a company’s ability to repay a debt, so having a poor rating can make it tricky to get a decent loan. That’s a big deal in any industry, which is why Renault shares dropped after Moody’s lowered the French company’s debt rating to “junk” status. From Reuters:

The shares were down 1.9% at 0942 GMT, among the worst performers on Paris’ benchmark CAC-40 .FCHI index. They earlier fell 2.3% to 30.2 euros ($32.71) a share, their lowest since mid 2012, when auto manufacturers were still reeling from the global financial crisis and recessions in Europe.

Like some rivals, and its Japanese alliance partner Nissan (7201.T), Renault is under pressure as demand dwindles in markets like China. It is also bedding down a new management team after a scandal surrounding former boss Carlos Ghosn.


The story continues:

Moody’s said it did not expect Renault to return to “healthy” operating margin levels in the medium term, and highlighted other challenges the carmaker has in common with peers, including high investments to produce less polluting vehicles.

“The cost to comply with CO2 regulation in the European Union and the ongoing electrification of Renault’s fleet will have further dilutive effects on profitability,” Moody’s said.


As the story notes, the interim CEO of Renault, Clotilde Delbos, is spearheading a number of restructuring efforts, and says the costs associated with them are what’s affecting cash flow. 2020, he says, should be better.

5th Gear: An Update On The Whole GM Racketeering Suit Against FCA

You might recall the news story from last year about how GM has brought a racketeering lawsuit against Fiat Chrysler, specifically alleging that the Auburn Hills-based automaker had bribed union officials to—according to the Detroit Free Press’ story at the time—“achieve favorable labor costs and operate ‘differently than their competitors that helped’ lower FCA’s costs, said [GM’s executive vice president and general counsel] Glidden.”


Now the Detroit News has a small update on the whole situation, and it appears that FCA has something small to celebrate. From the story:

U.S. District Judge Paul Borman is allowing Fiat Chrysler to delay turning over the documents requested by the Detroit automaker until he determines whether the case should be dismissed...

“We are confident in the merits of our case, which is grounded in the long-running conspiracy that FCA orchestrated,” GM spokesman Jim Cain said in a statement. “We look forward to promptly proceeding with discovery following resolution of their motion to dismiss.”


The story goes on:

GM last year served Fiat Chrysler with 55 broad document requests that trace to more than 10 years ago and four interrogation requests.

“We are pleased with the judge’s decision to deny General Motors’ motion seeking immediate discovery,” FCA said in a statement, reiterating its rival’s claims are “meritless and malicious.”


Not exactly a huge win, but something. We’ll see where this goes. According to the report, GM has until March 9 to respond to FCA’s request to dismiss the case.

Reverse: Darrell Waltrip Wins 1989 Daytona 500 In Epic Fashion Thanks To Smart Fuel Strategy

From the Washington Post’s contemporary article:

Of the many variables that go into winning the Daytona 500, fuel economy isn’t often one. But the way Darrell Waltrip and his pit crew saw it, it was all they had going today. “We knew we couldn’t outrun the leaders,” said pit crew chief Jeff Hammond, “so we had to try to outlast ‘em.” The result was a risky, come-from-nowhere victory for Waltrip in this rich season opener of the NASCAR/Winston Cup Circuit. He watched his fuel pressure gauge bottom out twice in the last three laps, but refused to stop for even a splash. Both times the gauge miraculously popped back up and his engine kept firing, right to the checkered flag and a $184,400 first prize for the 7.64-second victory over race favorite Ken Schrader.


Neutral: Do You Have Concerns About EV Battery Manufacturing?

Are you kept awake at night thinking about the environmental, ethical, and financial challenges associated with manufacturing batteries? What about the current energy density challenges? Where do you see this all going; where do you hope it’s headed?