This Little-Known EV Battery Technology Will Drive the EV Revolution
[Editor’s note: “This Little-Known EV Battery Technology Will Drive the EV Revolution” was previously published in July 2022. It has since been updated to include the most relevant information available.]
You may think you know of every battery innovation, especially as students of innovation. But a secret EV battery technology you’ve likely never heard of could be a key driving force in the next chapter of the Electric Vehicle Revolution.
Here’s the thing about EVs. Everyone wants to drive one these days. But for all the talk of falling prices, they’re still insanely expensive.
The battery I’m talking about will fix that problem.
This battery is the key to making a sub-$20,000 electric car, which could fundamentally accelerate the EV Revolution. Everyone who wants to drive an electric vehicle could finally afford one.
Indeed, this battery is a complete game-changer.
And it’s not just a concept or a science project stuck in research labs. This battery is already being used in cars today.
It’s ready to change the world in 2022, not 2023, 2024 or 2025. It’s ready to change the world right now.
I’m talking about LFP — lithium-iron phosphate batteries.
Battery Chemistry 101
Your typical battery comprises three things: an anode, an electrolyte and a cathode. Batteries work by promoting the flow of ions from the anode, through the electrolyte and to the cathode when being used. When batteries charge, the ions flow back through the electrolyte to the anode.
EV batteries — which are most commonly lithium-ion batteries — work in the same fashion.
Lithium ions are stored in the anode. When the car is being driven, the lithium ions flow through the car battery’s electrolyte and into the cathode. When the car is being charged, those same lithium ions flow back from the cathode to the anode.
Considering this chemistry, we can easily see why a lot of resources are dedicated to cathode innovation. The cathode is where lithium ions flow when an EV is being driven. So, the better that cathode is at “absorbing” those lithium ions, the longer the battery will last and the longer the EV will drive.
Said differently, the absorption properties of the cathode determine the driving range of an EV. Higher cathode absorption leads to longer driving ranges. Lower cathode absorption leads to shorter driving ranges.
Therefore, one of the most critical problems in EV battery science is optimizing the cathode’s absorption properties. The best way to do that is to change the composition of various metals in the cathode.
Decades of research has seen every metal composition tested in the cathode. And it’s concluded that there are two types of dominant cathode compositions that produce the best types of lithium-ion batteries.
One of those compositions is talked about all the time. The other is seldomly mentioned. Yet, the underrated one holds the game-changing breakthrough that my analysis suggests is key to making a sub-$20,000 electric car.
The Two Major Types of EV Batteries
The two dominant types of lithium-ion battery chemistries are nickel manganese cobalt (NMC) and lithium iron phosphate (LFP) batteries.
The two are very similar. Both work by promoting the flow of lithium ions. Both have graphite anodes. And both have the same electrolyte solutions.
The difference between LFP and NMC batteries is in the cathode composition. NMC batteries use a combination of nickel, magnesium, and cobalt in the cathode. LFP cathodes are a mix of iron and phosphorous.
For various chemical engineering reasons, NMC batteries have higher absorption properties than LFP batteries. In short, NMC cathodes are better at absorbing lithium ions than LFP cathodes. And consequently, NMC batteries are significantly denser. Specifically, they’re about 30% more energy dense.
That basically means EVs with NMC batteries weigh less, can driver farther and recharge faster than EVs with LFP batteries. In short, when it comes to EVs, NMC batteries have higher performance qualities than LFPs.
For that reason, NMC batteries have become the gold standard in EVs. For years, driving ranges, recharge times, and car weight were huge limiting factors for EVs. So, companies like Tesla (TSLA) leveraged NMC batteries to solve those problems. Over 80% of all EV batteries today are NMC or NMC-related batteries. LFP batteries comprise less than 15% of total EV batteries today.
However, as you can see below, LFPs are expected to meaningfully expand EV battery market share over the next five years. Why?
NMC batteries have their own downfalls. And they’re being acutely challenged in today’s supply constrained, high-cost global economic environment.
As a result, LFP batteries — not NMCs — will be the big driver of the next wave of the EV Revolution. That has huge investment implications.
LFP Is Ready to Change the World
In short, NMC batteries are absurdly expensive. And in an inflationary environment, consumers are optimizing for costs over performance. As such, automakers are pivoting from NMC to LFP batteries.
The science here is pretty simple.
The “C” in NMC is cobalt, which is a rare Earth metal. By definition, there’s not much cobalt on the planet. Our research suggests there’s less than 10 million tons of cobalt in the world. And half of that is from the Congo. In many cases, retrieving cobalt requires expensive efforts, deforestation, habitat destabilization, and more. As a result, cobalt is absurdly expensive (more than $30,000 per ton). And it’s subject to volatile supply disruptions, which makes NMC batteries inherently expensive and supply constrained.
LFP batteries don’t have those problems.
The “F” in LFP batteries stands for iron. Unlike cobalt, iron is abundant. About 5% of the Earth’s crust is made of iron. There are 180 billion tons of iron on the planet. And while there are especially large concentrations in places like Australia, there is a bit of iron everywhere. As a result, iron prices are a small fraction of cobalt prices at just $90 per ton.
In other words, LFP batteries may have less energy density than NMCs. But they’re also way cheaper — about 40- to 50% less expensive.
The Affordability Factor
In 2018 and ’19, EVs were getting less than 200 miles of driving range per charge. There were very few charging stations on the roads. Inflation was below 2%. And consumers wanted high-performance EVs.
In 2022, the situation is completely different. Electric cars (even LFP-powered ones) are getting way more than 250 miles of driving range per charge. EV charging stations are everywhere. And inflation is running at nearly 10%.
In that world, consumers don’t really care about high-performance EVs. They want affordable ones.
LFP batteries are the key to cheap EVs.
That’s why nearly every major EV maker’s been exploring ways to use more LFP batteries in their EVs over the past year.
This isn’t to say LFP batteries will kill NMCs. But we’re now entering a new era of LFP and NMC co-existence. The former serves as the de facto battery for economic EVs, and the latter services the premium EV market.
The investment opportunity here is pretty simple.
When you look out at the big EV stocks today — Tesla, Lucid (LCID), Rivian (RIVN), etc. — they’re all making premium EVs. But the next wave of the EV Revolution will be driven by cheap EVs. Who is going to make all those affordable cars?
The answer: Find the company mastering LFP battery technology.
The Final Word on an EV Battery Breakthrough
I believe the company that will master LFP battery technology and sell the most popular affordable electric car in the market hasn’t even made an EV yet. In fact, it hasn’t even announced an EV yet.
I’m talking about Apple (AAPL).
Yes, that Apple — the maker of the iPhone, iPad, Mac, and Apple Watch.
Apple has reportedly been working on an electric Apple Car for years now. The company has yet to announce anything official. But over the past two years, the rumor mill has substantially accelerated. Now many analysts, investors and enthusiasts feel like it’s a done deal that Apple will launch its EV by 2024.
Considering Apple’s success with nearly every product it’s launched in its 40-year history — and the amount of resources it has reportedly poured into this project — I think the odds are high that the Apple Car is a huge hit.
So, what’s the connection to LFP batteries?
Well, one of the rumors flying around the Apple Car is that Apple will use LFP batteries to power it. The company wants to make an EV that, like the iPhone, is cheap enough to be a ubiquity.
The only way to do that? LFP batteries.
That’s why I think the company that will drive the next leg of the EV Revolution is one that hasn’t even made an EV yet: Apple. And it’ll be the biggest reason why we go from ~10% EV penetration to 50%-plus.
That’s exciting news. But that’s not all…
I’ve discovered a tiny $3 stock that my analysis suggests could be the supplier of the most mission-critical piece of technology for the Apple Car.
If I’m right about the Apple Car being a huge hit, it could soar up to 40X from current levels.
We discuss this stock’s catalyst in depth in my newsletter Hypergrowth Investing, where you can find out how to invest in this breakthrough stock.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.