Tesla said last week it was shifting to lithium-iron-phosphate (LFP) battery chemistry globally in its standard-range vehicles, away from nickel-cobalt.

However analysts believe demand will remain strong for nickel and cobalt, which are used in batteries for longer-range vehicles.

"We think both high-nickel/LFP will co-exist in the market to serve different segments," JP Morgan analysts said in a note dated October 22.

"Auto OEMs also want to have optionality and we expect them to turn more vocal on using LFP in the next 12 months."

Benchmark Mineral Intelligence chief data officer Caspar Rawles said the change wasn't huge news for the supply chain for a number of reasons, given Tesla's standard range models outside North America were being produced at Giga Shanghai which had used LFPs for some time.

Also, Benchmark estimated only 20-30% of Tesla's North American sales were standard range, with the majority extended range options.

"In addition, due to the forecasted sales volume increase for Tesla, outright demand for nickel and cobalt is set to increase, with the company needing to commit to bigger volumes year on year," Rawles told Mining Journal.

"This will only be compounded by the releases of Roadster, Cybertruck and eventually Semi which will require high nickel cobalt containing chemistries also."

He said while some global legacy automakers had committed to LFPs, the increasing commitments to electrification by car manufacturers in recent months meant demand for both nickel and cobalt would continue to rise rapidly.

"At Benchmark we've forecast demand to 2030 for cobalt from batteries to rise 13% CAGR and for nickel 22%," Rawles said.

Developed countries including the UK and Canada have pledged to phase out sales or registrations of new internal combustion engine cars by a certain date - although Australia is yet to. 

The pathway to zero emission transport almost certainly required electric vehicles fuelled by zero emission electricity, experts from the University of New South Wales said this week, noting less than 1% of new cars bought in Australia last year were EVs, compared with more than 4% globally.

Rising lithium prices to hit carmakers

Meanwhile lithium prices have surged to record highs thanks to demand from the increasing electrification effort outstripping supply.

Pilbara Minerals received a record offer this week of US$2,350/dmt for a future spodumene shipment in its third digital auction.

Benchmark's battery-grade lithium carbonate price EXW China has increased 313.33% since this time last year to an all-time high, approaching $29,000/t and above its 2018 peak of $24,750/t. 

Reports have been circulating in China that several lithium ion battery makers have looked to increase the price of their battery cells in response to rising raw material costs, the battery materials price reporting and research agency said today.

It's the first cell price rise in the Gigafactory era and automakers will take the hit, according to Benchmark.

"The reality is there is little automakers can do to escape using lithium," Rawles said.

"Whilst we may see some other technologies used in transportation for specific end uses/markets, lithium ion as we see today is going to be the dominant technology by far for the foreseeable future.

"Not only is there a huge amount of sunk capital into the supply chains of today's cell technology but bringing in alternatives will require lengthy qualification and even if it makes it through, it is unlikely to beat lithium ion on cost and performance metrics." 

Analysts point to solid state batteries becoming prominent within 10 years, which is believed will fuel further demand for lithium.

"Once safety issues are addressed, we think the end game of EV (at least from a driving performance perspective, not involving service level) will eventually lead to drive range efficiency," JP Morgan analysts said.

"It is also a must-go-to stage before solid-state-battery take-off by the end of the decade."

Rawles agreed.

"At Benchmark we see conventional lithium-ion as being the dominant cell technology to the end of the decade and beyond, the most likely superseding technology we see is solid state which is likely to become more commonplace towards the end of the decade," he said.