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Following Tesla’s recent decision to switch to lithium iron phosphate (LFP) batteries for future standard range vehicles worldwide, namely its Model 3 and Model Ys, Tesla’s China-dominated LFP battery supply chain has also garnered rising attention. In fact, China’s CATL and BYD make 95% of global 95% LFP batteries, with few alternatives available. Since 2020, CATL has begun to supply its LFP batteries for Tesla’s standard range Model 3s produced in Shanghai, playing a crucial role for the EV maker’s price reduction effort.

Tesla’s localisation goal overly depends on China

The decision to adopt LFP batteries on a global scale, especially in the U.S. market, has wide implications: Tesla’s stated goal to localize all key vehicle components, reaching as far upstream as possible, has posed a challenge for its Chinese suppliers who have been reluctant to move productions to the US.

As seen in a recent talk between Apple, BYD and CATL over EV battery supplies, the Chinese manufacturers have refused to build U.S. plants solely to supply Apple, citing difficulties to find sufficient personnel as well as the overall uncertainties amidst the ongoing Sino-American conflict.

According to analysts, even if CATL set up productions in the United States, it wouldn’t enjoy the cost advantages it had in China, lacking access to subsidies and a catered supply chain. At the moment, CATL is planning overseas production sites in countries such as Germany and Indonesia, but facing challenges in the United States. While BYD operates a plant in California, it focuses on BYD’s electric bus business and doesn’t produce battery cells.

Taiwanese suppliers an alternative? 

In fact, when it comes to LFP batteries, there have been limited alternatives to Chinese suppliers – a significant risk when other automobile makers like Mercedes-Benz are also taking up LFP solution. Apart from China, only Japanese and Taiwanese suppliers are active in the LFP sector. Following the stalled discussions with Chinese manufacturers, for example, Apple has reportedly sent a delegation to Japan. Meanwhile, Taiwan’s Advanced Lithium Electrochemistry Co., also known as Aleees, is also seeking an opportunity to hit into global LFP battery supply chain.

Founded in 2005, Aleees has long devoted itself to the R&D and production of LFP cathode materials, focusing especially on LFP-NCO (Nano-Cocrystalline-Olivine) technology. The technology aims to solve the poor rate performance of iron phosphate cathode material. Already a supplier to CATL, Aleees also supplies other prominent regional battery makers such as China’s state-owned Tianjin Lishen Battery and South Korea’s LG Chem.

Currently, 95% of Aleees’ sales come from Asia, but it is increasing its presence in the U.S. and European markets, which together accounts for 4.5% of its sales. According to the company, a total of 19 customers are validating its battery cathode products, six of them are EV manufacturers, nine of them are in the energy storage business, while the rest are active in both sectors.

Backed by prominent investors like KPCB and Deutsche Bank, Aleees also announced its intention in July to go public on NASDAQ via SPAC.

 

Reference: MoneyDJ, UDN, Anue