Tesla is altering the battery chemistry it makes use of in all its standard-range electrical automobiles to a model with a lithium-iron-phosphate (LFP) cathode, the automaker mentioned Wednesday in its third-quarter investor deck.

The transfer is probably going a means for Tesla to extend revenue margins on its absolutely electrical vehicles, whereas not essentially having to lift automobile costs. Up to now, Tesla has been criticized for sporadic automobile value modifications.

The corporate is already making automobiles with LFP chemistry at its manufacturing facility in Shanghai. It sells these vehicles in China, the Asia-Pacific area, and Europe.

China usually promotes the usage of any such battery, in response to supplies researcher and advisor Roskill. The agency notes that round 95% of LFP cathode manufacturing is produced in China.

In September, Tesla requested Mannequin 3 reservation holders within the US in the event that they’d settle for a automobile that had a battery made with LFP cells as a substitute of the Nickel Cobalt Aluminum Oxide (NCA) cells that Tesla beforehand used for Mannequin 3 sedans offered in North America.

“LFP has each optimistic and adverse trade-offs,” mentioned Sam Abuelsamid, Guidehouse Insights principal analyst. “It is considerably cheaper and does not require any nickel or cobalt. It is also extra steady, which makes it safer.”

One main draw back: The cells are much less energy-dense, which suggests they provide decrease vary for a similar weight as different cells. Chilly climate additionally impacts them extra, Abuelsamid mentioned.

Abuelsamid believes Tesla’s change is “most likely a wise thought as a result of they most likely aren’t go to decrease costs so it would seemingly increase their backside line.”

Different automakers akin to Ford Motor and Volkswagen have expressed curiosity within the battery chemistry for lower-priced fashions, in response to Abuelsamid. He mentioned it is also notably interesting for business automobiles like supply vans that do not want multi-hundred mile vary.

Snow Bull Capital CEO Taylor Ogan, a long-time Tesla bull, informed CNBC, “LFP batteries are cheaper and safer. With this chemistry, you’ll be able to cost your automobile’s battery as much as 100% and never fear as a lot about degradation long-term. The opposite factor is these batteries are very easy to recycle. And sourcing uncooked supplies for these is simpler to do, ethically. That is why iron-based batteries are actually the battery of China already, and so they’re all you want for standard-range vehicles.”

The 2 high producers of these kind of battery cells are CATL and BYD. Tesla is already procuring batteries from CATL the businesses have beforehand disclosed.

Tesla didn’t present extra particulars in regards to the resolution apart from the investor deck saying it’s “shifting to Lithium Iron Phosphate (LFP) battery chemistry globally.”

Tesla didn’t instantly reply for remark.

– CNBC’s Lora Kolodny contributed to this report.