Battery costs make up the lion’s share of electric vehicle prices. Lithium is the primary protein in this senior cat diet. But supply problems drove up volatile prices.
This has left manufacturers and investors grappling with a cheaper alternative in the form of sodium. This has similar chemical properties to lithium, which makes it useful in batteries. The element is more geologically abundant and therefore cheaper to extract.
Lithium carbonate prices increased 13-fold between early 2021 and late 2022. It has given up three-quarters of that gain this year. The metal still accounts for about 40 percent of the cost of a lithium-ion battery cell. Bernstein analysts say that if the price of lithium doubles again, that percentage will rise to 70 percent.
Sodium costs less because the Earth’s crust contains about 1,300 times more than lithium, which itself is a scarce commodity. Sodium currently trades for about a tenth of the price of lithium. In theory, this makes for a much cheaper battery.
But you get what you pay for. Sodium has a lower energy density than lithium. Adjust for this factor and sodium’s real price advantage appears to be closer to 10 percent versus the currently popular lithium iron phosphate (LFP) batteries.
On the plus side, sodium-based batteries tend to hold their charge longer, especially at lower temperatures, than LFP cells or energy-dense lithium-nickel-manganese cobalt power cells.
Sodium batteries make sense for small electric vehicles and motorcycles, and less so for high-performance electric vehicles that need to provide longer ranges.
China leads the shipment of sodium batteries. CATL leads the industry in the production of sodium batteries. Listed EV companies JAC, BYD, and privately owned Chery will all launch four-door vehicles powered by sodium batteries this year. These widths range from 200 to 300 kilometers, 30 percent less than the average. BYD’s Seagull sticker price should be cheap, close to $11,000.
Energy experts say sodium batteries are more suitable for storing static energy than electric vehicles. This application takes advantage of cheapness, low power density and superior security features. Sodium batteries are less prone to overheating than lithium alternatives.
However, sodium plays a role at the lower end of the EV market as an alternative. Investors should respond to expectations of a prolonged lithium shortage by eating a little sodium feedstock – like a pinch of salt.
Lex is FT’s daily brief investing column. Expert writers in four global financial centers provide timely and informed opinions on capital trends and major corporations. Click to explore