Sodium batteries: it’s worth it

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Battery costs account for the largest share of electric vehicle prices. Lithium is the key protein in the diet of big cats. But supply problems have driven up volatile prices.

That has left manufacturers and investors fumbling for a cheaper substitute in the form of sodium. It has chemical properties similar to lithium, which makes it useful in batteries. The element is even more geologically abundant and therefore cheaper to extract.

Lithium carbonate prices increased 13-fold between the beginning of 2021 and the end of 2022. It has given up three-quarters of that gain this year. Metal still accounts for about 40 percent of the cost of a lithium-ion battery cell. If the price of lithium doubles again, that share would rise to 70 percent, Bernstein analysts say.

Sodium costs less because the earth’s crust contains about 1,300 times more than lithium, which itself is not a rare commodity. Sodium is currently trading at about a tenth of the price of lithium. In theory, that makes the battery much cheaper.

But you got what you paid for. Sodium has a lower energy density than lithium. Adjust for that factor and the true price advantage of sodium seems closer to 10 percent compared to currently popular lithium iron phosphate (LFP) batteries.

On the plus side, sodium-based batteries tend to hold their charge longer, especially at low temperatures, than LFP or energy-dense lithium cobalt-nickel-manganese power cells.

Sodium batteries make sense for micro EVs and scooters, less so for high-output EVs that need to offer longer ranges.

China is leading the charge toward sodium batteries. CATL leads the industry in the production of sodium batteries. JAC electric vehicle manufacturers and BYD, and privately owned Chery will launch four-door vehicles that run on sodium batteries this year. These offer ranges of around 200-300 km, 30 percent below average. BYD’s Seagull should have a cheap sticker price closer to $11,000.

Energy experts say that sodium batteries are better suited for static energy storage than electric vehicles. That application takes better advantage of economy, lower power density, and superior security features. Sodium batteries are less prone to overheating than lithium alternatives.

Even so, sodium has a role to play at the lower end of the EV market as a substitute. Investors should respond to forecasts of prolonged lithium shortages by eating a bit of the sodium commodity, like a pinch of salt.

Lex is the FT’s concise daily investment column. Expert writers in four global financial centers provide informed and timely opinions on capital trends and large companies. click to explore