- 25% of vehicles manufactured in Europe predicted to have LFP batteries, reducing reliance on nickel
- A modest global lithium deficit is likely in 2025, significantly widening by 2030
- Investment needed now to scale up lithium industry, as it takes years to build battery-grade capacity
- More can be done to reduce demand with effective use of lithium
- Call for UK investment to secure future battery material supply chains
- Opportunity for the UK to capitalise on the anode active material supply gap in Europe
- World battery demand for the automotive sector could exceed 2,800 GWh by 2030, more than double the forecast for 2025.
With ownership of battery electric vehicles on the rise, European OEMs aiming to reduce their reliance on nickel and cobalt in battery production need to look to alternatives. The latest forecast from the Advanced Propulsion Centre (APC) predicts 25% of all installed battery capacity in European-manufactured vehicles will be Lithium Iron Phosphate (LFP) or derivatives thereof.
The findings from the most recent APC Quarterly Demand Forecast also highlight the impending lithium shortage, which could delay global efforts to manufacture enough battery electric vehicles (BEVs) to meet anticipated consumer demand in 2030.
Most recent APC projections show that the global lithium deficit in 2030 could see the expected manufacture of 40 million BEVs reduced to just 25 million in that constrained scenario.
The rise of LFP in Europe
The use of LFP in car batteries has historically been favoured by Chinese manufacturers. Adoption outside of China was limited due to the various IP arrangements and perceived higher energy density of NMC cells. However, recent improvements in the energy density of LFP batteries, alongside potential superior safety, cost reduction, cycle life and reduced material supply concerns, have resulted in many OEMs revisiting their battery strategies.
Several leading vehicle manufacturers have now either stated their intent or expressed interest in introducing LFP batteries. Tesla has been a first mover on this with around 50% of their global vehicle deliveries in Q1 2022 being LFP variants.
European OEMs like Volkswagen producing entry-level segment vehicles will likely lead the charge in LFP adoption across the region. However higher performance segments, such as large vans and sedans, could also see a modest uptake in LFP, especially where battery durability is important. A wide spectrum of other OEMs, from new start-ups, such as Rivian to established OEMs like Ford, have now pledged to utilise LFP batteries in larger vehicle models.
A looming lithium supply crunch
Irrespective of the proportions of LFP, NMC or other chemistries adopted globally, battery-grade lithium will still be in demand in vast quantities. Julian Hetherington, Automotive Transformation Director at the APC, observed:
“The lithium industry is still relatively small compared to other technology metals, and we understand the challenges this industry faces in scaling up to meet the demands of BEV production over the coming years.”
“The UK government and industry is rightly investing in building Gigafactories to not only secure vehicle assembly, but also energise a UK supply base for high value components like cathodes and anodes. However, we also recognise the importance of securing stable material supply chains. That’s why the APC has supported UK feasibility study projects exploring lithium extraction and refining via our Automotive Transformation Fund.”
The APC’s insight report launched today aims to define the lithium supply challenge facing the automotive industry. The next Quarterly Demand Forecast will explore the impact of increasing lithium supply as well as reducing demand.
Luke Bates, Automotive Analyst at the APC suggests that investing in supply is only one side of the lithium equation:
“In the face of a future lithium squeeze, the industry needs further investments to increase the supply of lithium chemicals and enact measures that reduce our demand for it.”
“We can’t rely solely on supply side measures to increase the primary supply of battery grade lithium or think recycling is a silver bullet. Using smaller or modular batteries, introducing sodium-ion in entry level vehicles and adopting fuel cells for larger, heavier vehicles are all potential pathways we could explore.”
Other key data and conclusions in the latest Quarterly Demand Forecast include:
- Work needs to continue to localise UK supply chains enabling OEMs to export EVs tariff-free
- Limited availability of anode active material in Europe is likely to draw in big investments to localise supply
The APC is the organisation tasked by the UK government and automotive industry to accelerate the transition to low-carbon transport solutions. They use their unique insight, gained from working closely with the global automotive industry to provide insight and forecasting to support government with strategic policy decisions and also to provide clarity to the industry about the projected demand, product and technology roadmaps.