April 2020

BYD reveals strategy to dominate the EV market

Maya Xiao
Maya Xiao

Maya has an interdisciplinary technical background in vehicle electrification, system automation and robotics. Based in China, she is the lead analyst for Interact Analysis’ Li-ion battery and forklift research, also covering markets for industrial and collaborative robots.

As an industrial giant that straddles the key areas of new energy vehicles and lithium-ion batteries, BYD revealed two major pieces of news in March:

On March 16th, the company announced the establishment of five new companies, all grouped under the brand Fudi, to accelerate external sales of new energy vehicle core components, marking the full shift of its lithium-ion battery products from internal supply to marketization;
On March 29th, BYD officially released a new generation of power battery products – Blade Battery – and announced that this series of products have been successfully mass-produced and rolled off production lines at its Chongqing plant, which is owned by Fudi Battery company.

As one of the biggest proponents of lithium iron phosphate (LFP) technology, how will BYD’s recent actions affect the evolution of the future technological and competitive landscapes for lithium-ion batteries? And in which application scenarios does LFP have greater market potential? Interact Analysis will combine our lithium-ion battery, electric commercial vehicle and global forklift reports to give you a detailed interpretation:

The significance of the Blade Battery lies in the improvement of the overall energy density and the decrease in the overall cost of the LFP battery pack.

The establishment of Fudi Battery represents the start of large-scale external sales of BYD’s battery and electric vehicle parts products.

These actions will have an impact on two key aspects of the lithium-ion battery industry – technology advancement and market competition.

The blade battery is unsheathed

The blade battery is a blade-shaped flat battery created by BYD on the basis of the elongated and thin design of the original lithium iron phosphate cells. It can be directly fixed on the frame of the battery pack, it also assumes some functions of the structural parts as an energy source, so the footprint of the battery pack is greatly reduced.

In addition to the security concerns highlighted by the needling test at their press launch, BYD claims that the blade battery can increase the volume specific energy density by 50%, as space utilization can be increased from 40% to 60% as shown in the upper picture. With a life span of up to 8 years and 1.2 million kilometers, the company claims the overall cost is reduced by 30%.

In terms of cost, at present, according to several leading battery companies, the average system cost of lithium iron phosphate batteries is around $130/ KWh. If BYD can reduce the cost by another 30% as advertised, then average battery pack cost would fall to around $90/ KWh. Should this happen, then LFP will have a commanding cost advantage over other chemistries lithium-ion batteries.

However, in order to achieve this ultimate solution of space utilization, whether it will affect other design parameters of the battery pack, the product has yet to prove itself commercially.

Coincidentally, the CTP (cell directly integrated into the battery pack) technology solution that CATL launched recently can also be used for lithium iron phosphate. In October 2019, CATL revealed a cooperation agreement with Volkswagen’s Latin American truck and bus company. CATL’s CTP integrated power battery platform enables the integration efficiency of the company’s new lithium iron phosphate standard battery pack to increase from 75% to 90%. System energy density has also increased to 160 Wh/ kg.

Given the safety and high-temperature performance of lithium iron phosphate material, a revival of the use of lithium iron phosphate technology in passenger vehicles seems quite plausible.

Fudi Battery Company established

Fudi Battery Co., Ltd., registered in May 2019, forms the core of the five companies that now sit under the Fudi brand. The other four were registered in December 2019 and are widely seen as an attempt to achieve vertical integration of the industrial chain. In May 2017, BYD announced that it will begin to use its power battery business to supply external new energy vehicle manufacturers. But, despite a couple of decent customer wins – Dongfeng Motor and Chengdu Bus – growth in the external customer base has been slow.

In 2019, China’s new energy vehicle sales fell 4% year-on-year, the first year-on-year decline in nearly a decade. The development of the industry has hit a major roadblock with sharply falling subsidies and weak demand for passenger EVs. On the one hand, BYD is pursuing opportunities besides electric trucks and forklifts, while on the other the Fudi companies are attempting to promote external sales of batteries and EV parts.

The establishment of Fudi Battery marks a shift in BYD’s lithium-ion battery strategy from internal supply to external marketization. According their press conference video, Fudi’s Chongqing plant started exclusively producing blade batteries in March 2020 and has an annual production capacity of 20 GWh. Considering that BYD has a very significant share in the battery cell production and end-user markets (electric vehicles and forklifts), this trend will also have an impact on the European and American markets.

According to our global lithium-ion battery database, we can clearly see the change in the proportion of LFP in production capacity terms in recent years (see fig. 1).

Due to the relentless pursuit of higher energy density by electric vehicle manufacturers in the past few years, the proportion of LFP production capacity relative to the total market has dropped from 38.6% in 2015 to 27.9% in 2019. However, we expect this ratio will rise to >30% by 2023 due to future technology breakthroughs and cost reductions.

*Please note that the capacity in fig .1 includes total production capacity of lithium-ion batteries for electric vehicles, consumer electronics and energy storage equipment.

Application prospects and market potential of LFP

In 2019, global shipment of power lithium-ion batteries (for electric vehicles or construction machines) was about 120 GWh, of which lithium iron phosphate batteries accounted for about 28%. In the electric passenger vehicle market, NMC/ NCA batteries have an absolute advantage (with a market share of over 90%); but in commercial vehicle applications, lithium iron phosphate occupies a dominant position.

In addition, the electric forklift market cannot be ignored. Our latest forklift report has shown Lithium-ion batteries are rapidly replacing traditional lead-acid batteries (see fig. 2). In 2019, more than 200,000 lithium-ion forklifts were sold worldwide.

Alongside power battery applications, energy storage systems, especially stationary energy storage equipment applications, are also very suitable for lithium iron phosphate battery technology.

In early March, 5G base station applications ordered close to 4 GWh of lithium-ion batteries in a single week:

On March 4th, China Mobile announced that it would purchase 1.95 GWh of lithium iron phosphate batteries.
On March 11th, China Tower announced that it would tender for the purchase of 2 GWh of lithium iron phosphate battery pack products.

Additionally, China Tower, as a pilot unit for the secondary use of decommissioned automotive batteries in China, has established cooperative relationships with more than ten car companies and power battery companies for battery recycling purposes.

As large amounts of China’s first generation of electric vehicle batteries are about to be retired from service, more electric vehicle manufacturing companies will consider the perspective of battery life cycle costs.

This is likely to promote the application of lithium iron phosphate technology in electric vehicles.

Key Takeaways:
  1. The energy density of the battery cell and the energy density of the battery pack cannot be generalized. The core of the blade battery is a structural design innovation of the prismatic lithium iron phosphate battery, and not a new technology or a cell technology breakthrough.
  2. The blade battery is an improvement on the overall energy density of the LFP battery, and the establishment of Fudi heralds the opening of large-scale sales of BYD batteries. Considering that BYD has occupied a considerable market share of both the battery production and application sides, the impact of BYD’s actions will not only impact Chinese markets, but also European and American markets too.
  3. Mobile base station energy storage, forklifts, buses and logistics vehicles are just some of the many areas where lithium iron phosphate is used, and its market share is expected to increase significantly in 2020.
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