Tesla Inc. will start using cheaper lithium iron phosphate batteries globally, a move away from the chemistry used to power most electric vehicles as prices for key materials soar.
The switch to LFP batteries will apply to Tesla's standard-range vehicles, the company said in its third-quarter-earnings release, confirming a strategy flagged last year to use the budget components to deliver lower-cost models.
Most of the auto industry relies on nickel and cobalt in lithium ion batteries to boost EV performance. Yet supplies of both materials are constrained, and ethical issues have long dogged cobalt mines in the Democratic Republic of the Congo, the top supplier. Nickel, which helps provide power and range, is also prone to fire, a risk the industry is spending billions to control.
Higher prices of nickel are currently having an impact on battery cells, according to Tesla's Chief Financial Officer Zach Kirkhorn. "Some of those costs have been flowing through to us," he said on an earnings call. "It's not a substantial amount of cost, but it's not small."