Market and product

Compiled by Bao Hien

LFP is becoming increasingly common in electric vehicles and energy storage systems, but the cathode material supply chain remains heavily dependent on China, prompting efforts to develop alternative sources.

In 2026, the lithium iron phosphate (LFP) battery industry is facing two contrasting trends: rapidly growing demand, particularly from energy storage systems (ESS), and efforts by manufacturers outside China to build more independent supply chains.

Why is LFP gaining popularity?

Compared with nickel-based cathode materials such as NCM, LFP offers greater thermal stability, lower costs because it uses iron and phosphate, and a longer cycle life.

These characteristics make LFP well suited to ESS applications, where safety, service life and cost are often prioritized. However, its lower energy density compared with nickel-rich cathodes has made improving material performance an important area of research.

New materials target higher performance

Epsilon CAM of India says its Gen 3.0 LFP material has entered the validation stage with cell manufacturers in Asia-Pacific, Europe and the United States.

The material has a reported discharge capacity of 159 mAh/g and a minimum electrode density of 2.51 g/cm³. According to Epsilon, these figures are comparable to high-energy-density LFP materials currently supplied mainly by Chinese manufacturers. However, this claim has not yet been independently verified.

Research is being conducted at the company's Cathode Technology Center in Moosburg, Germany, which has a 250-tonne-per-year demonstration plant and cell-testing capabilities.
Epsilon aims to build a commercial facility in India with annual LFP cathode capacity of 20,000 tonnes by 2028, followed by a target of 100,000 tonnes per year.

Importantly, the company says its technology and manufacturing processes do not involve Chinese entities, allowing the material to meet U.S. requirements related to Prohibited Foreign Entities (PFE), an increasingly important consideration for battery supply chains serving the U.S. market.

Rising demand keeps China central to supply

While new sources are being developed, major battery manufacturers continue to rely on Chinese suppliers to keep pace with capacity expansion.

South Korea's LG Energy Solution (LGES) has signed an agreement worth more than KRW 5 trillion, or about US$4.3 billion, with China's Lopal Tech for the supply of LFP cathode materials between 2026 and 2028.

Under the agreement, Lopal Tech will supply LFP cathode materials to LGES, while LGES will provide lithium carbonate and other raw materials to Lopal Tech. Most of the materials covered by the agreement are expected to serve the North American market.

LGES is also expanding ESS battery production in the United States and Canada, targeting more than 60 GWh of global ESS battery production capacity by the end of 2026, including more than 50 GWh in North America.

The company is also building an LFP cell plant in Lansing, Michigan, under a US$4.3 billion agreement with Tesla. The facility is expected to begin production in 2027 and supply cells for Tesla's Megapack 3 energy storage system.

Two approaches to the same challenge

These developments point to two emerging strategies.

The first is to build an independent supply chain, as Epsilon is pursuing, covering technology, materials and manufacturing outside China while meeting U.S. origin requirements.

The second is to combine existing supply sources with domestic manufacturing capacity. LGES continues to work with Chinese suppliers in the short term while building cell manufacturing facilities in the United States to bring production closer to the end market.

In the short term, China's scale and established manufacturing ecosystem mean it is likely to remain a major player in the LFP supply chain.

Over the longer term, the emergence of competitive LFP materials produced without reliance on Chinese technology could give battery manufacturers more sourcing options.

The LFP race is therefore not only about battery chemistry. It is also about building a supply chain that is large enough, competitive enough and diversified enough to reduce dependence on a single source.

Reference
1. BatteryTechOnline, "Evolution of LFP Cathode Materials: A 2026 Update," 11/8/2026 (Maria Guerra). 
2. BEST Magazine, "Epsilon's Gen 3.0 LFP cathode material enters global customer validation," 8/2026. 
3. Motoring-Trends, "Fifth International Transportation Electrification Conference" (dẫn thông cáo báo chí gốc của Epsilon CAM). 
4. The Elec, "LG Energy Solution Signs More Than 5 Trillion Won in LFP Cathode Supply Deals With China's Lopal Tech," 9/8/2026. 
5. Energy-Storage.News, "LG Energy Solution's US$4.3 billion agreement with Tesla, and LFP manufacturing with GM," cập nhật 23/3/2026.