China’s EV Champion Bets Big on a Different Flavour of Battery

BYD is betting on older battery technology, re-engineered for better range, to undercut competitors

By guest author Jacky Wong from Wall Street Journal

Graphic and caption courtesy by Wall Street Journal

Tesla’s long-awaited Battery Day is coming next week. In China, it’s looking more like battery year. A new twist on an old battery technology has helped supercharge shares of BYD, the country’s largest electric-vehicle maker.

Like Tesla, shares of the Chinese EV maker have reached stratospheric levels: Its Hong Kong-listed stock price has nearly tripled this year. Nearly half of those gains came just this month after BYD, in which Warren Buffett’s Berkshire Hathaway owns a roughly 8% stake, gave bullish guidance for this quarter in August. The company’s new flagship EV Han, launched in July, is likely off to a good start. BYD’s auto sales were hit by the pandemic in the first half, though its pivot to become a face-mask manufacturer helped soften the impact.

But investors appear to be even more excited by its new “blade battery.” The battery, announced in January, is a type of lithium iron phosphate battery (LFP), which is safer and cheaper than many EV batteries as it doesn’t use costly cobalt. LFP technology has been around for a long time in China but its low energy density, and hence lower range for EVs, means it is mostly used for cheaper cars or electric buses, which travel over similar distances regularly. Now new battery architecture has improved its energy density, which makes it more acceptable for wider use.  Even Tesla is using LFP batteries from Chinese maker Contemporary Amperex Technology (CATL) for its Shanghai-made Model 3.

Apart from improved technology, policy could be another reason behind the resurgence of LFP batteries. Chinese subsidy policy had preferred EVs with longer ranges and higher energy density, so cars with LFP previously may not have been eligible. But China’s most recent policy on subsidies—much lower and only available for EVs priced below 300000 yuan (USD 44000)—means auto makers opt to pack cheaper LFP into their cars again. LFP-based designs accounted for 45.6 % of total Chinese battery output in July, a rise from 24.5 % in the same period last year, according to S&P Global Platts.

BYD’s blade battery is for internal use currently, which helps lower costs and boost margins. But there are hopes that it will eventually be for sale externally. BYD, for example, has a EV joint venture with Toyota in China.

Still, the technology’s prospects outside China might be more limited. “The industry outside of China is pushing for longer range and moving to more nickel-rich chemistries to achieve this. Within China there is a need for cheaper-model options which are using LFP, “said Caspar Rawles, head of pricing assessments at Benchmark Mineral Intelligence.

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