[Bojo, Battery] Despite Similar Chasm, Price Gap Between LFP and NCM Widens... Expanded Over 30%

LFP More Affected by Lithium Price Fluctuations
Price Decline Faster Than NCM

Along with the demand contraction in batteries due to the electric vehicle chasm (temporary demand stagnation in a growing industry), the price gap between LFP (Lithium Iron Phosphate) and NCM (Nickel Cobalt Manganese) batteries is widening. In a demand contraction situation where price competitiveness has become more important than anything else, the trend of strengthening the price competitiveness of LFP batteries led by China is narrowing the position of domestic battery companies.

According to Samsung Securities and the battery industry on the 25th, LFP batteries are estimated to be 33% cheaper than ternary batteries in the first quarter of this year. The price difference in the same period a year ago was 27%, and the price gap has gradually expanded to 30% in the second quarter, 29% in the third quarter, and 32% in the fourth quarter of last year. Looking only at the first quarter of this year, the relative price competitiveness of LFP has increased by 6 percentage points.

The industry generally viewed the price difference between LFP and NCM batteries as 20-30%, but if the price gap expands to over 30%, automakers have more room to adopt LFP batteries despite their lower energy density. Moreover, it is known that by utilizing CTP (Cell-to-Pack) technology from companies like CATL, more LFP battery cells can be installed in electric vehicles, achieving driving ranges comparable to NCM batteries.

According to SNE Research analysis, compared to NCM (Nickel Cobalt Manganese) batteries, which Korean battery companies focus on, China's main product, LFP batteries, were $18 cheaper per kWh in the first half of last year, but the difference widened to $36 in the first half of this year.

The widening price gap between LFP and ternary batteries is due to greater price fluctuations in LFP batteries caused by lithium price volatility. While ternary batteries include other expensive minerals such as nickel and cobalt, LFP contains only iron and phosphate, which are inexpensive except for lithium, so the raw material price proportion of lithium is higher. Lithium prices soared to a record high of 581.5 yuan per kg (about 110,000 KRW) in November 2022, then plummeted by more than 90% in just 1 year and 9 months.

"China is not really in a chasm... Korea should benchmark China"

Kim Kwang-joo, CEO of SNE Research, said at the 'KCAB 2024' seminar hosted by SNE Research the day before, "The term 'chasm' is used domestically in Korea, but in fact, China is not in a chasm," adding, "From now on, Korea should benchmark China's battery industry and national policies."

In fact, in the first half of this year, the electric vehicle market including pure electric vehicles (BEV) and plug-in hybrids (PHEV) grew by 30.9% in China, while the U.S. grew by 11.0% and Europe by 3.0%. Even in the global market excluding China, the market share of Chinese battery companies increased from 35.1% last year to 38.9% in the first half of this year.

CEO Kim pointed out that China's LFP batteries have grown based on price competitiveness, stating, "As cathode material prices have dropped significantly, the price gap between NCM and LFP has widened, making it difficult for OEMs to use only NCM batteries." He added, "The domestic battery industry greatly underestimated LFP about 4 to 5 years ago," emphasizing, "Even if LFP is supplied to OEMs in 2025, it is questionable whether it can be competitive, so development must be accelerated."