Tesla plans to make semi-electric trucks and affordable electric cars with iron-based batteries

TSLA Inc (TSLA.O) has announced plans to use cheaper, iron-based batteries in its Semi heavy electric trucks and an affordable electric vehicle at a later date, along with a new version of its semi-heavy electric trucks.

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Elon Musk, Tesla's Chief Executive Officer, has championed lithium iron phosphate (LFP) battery technology dominated by Chinese suppliers, stating in March that "the vast majority of the heavy lifting for electrification will be done by iron-based cells."

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It is however difficult for Chinese suppliers to build battery factories in the United States due to the political tensions between the United States and China.

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In its paper on "Master Plan Part 3" released on Wednesday, the world's leading electric vehicle manufacturer indicated that it would use lithium-ion polymer batteries for its "short-range" heavy electric trucks, which it calls "Semi Light," without mentioning a particular launch date for the vehicles.

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Tesla last December began to deliver semi-electric trucks that have a longer driving range per charge, of 500 miles per charge, that use nickel-based batteries, and have a 500-mile driving range per charge. The company has previously stated that it plans to launch a 300-mile range version of its electric vehicles as well.

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As for Tesla's proposed small electric vehicles, they will use LFP batteries that will have a capacity of 53 kilowatt-hours (kWh), compared to 75 kWh for Model Y and Model 3.

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Tesla announced last month that it would cut assembly costs by half in future generations of its vehicles, which will be manufactured in Mexico and other countries in the future.

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In addition, Tesla stated that it would also be using LFP batteries in its mid-sized vehicles, Model 3 and Model Y, although no timeline was given.

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For the majority of its Model 3 and Model Y vehicles sold in the U.S., Tesla currently uses nickel-based batteries in its vehicles.

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Among LFP advocates, Musk cited an abundance and cheaper price of iron as a major factor that outweighed the drawbacks that have held back the adoption of LFP cells around the world in recent years. The downside to these cells is their size and weight, as well as their limited capacity, which results in shorter ranges compared to nickel-based cells.

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There are also fewer risks associated with the combustion of LFP cells as compared to nickel-based cells.

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In order to meet Tesla's rapidly growing battery demand, the company currently sources LFP batteries from Contemporary Amperex Technology Co (300750. SZ), a Chinese company that does not have a factory in the United States. LG Energy Solution (373220. KS), Tesla's South Korean supplier, has said it intends to manufacture LFP batteries at its proposed factory in Arizona as part of its long-term battery strategy.