Sodium-ion batteries now in mass production, a shift in low-cost EVs should follow

Until recently, sodium-ion batteries were the subject of research, and you could only find them in labs. However, the commercialization happened faster than we anticipated and now Pret - a company that produces sodium-ion batteries, said that mass production of multiple sodium-ion products has already started.

Sodium-ion batteries are now being used for energy storage, backup power, vehicle start-stop systems and specialty vehicles. Due to rising demand, the company is investing in another production line with 2 GWh capacity. It will begin operations toward the end of this year.

CATL has also signed a three-year supply agreement with HyperStrong. The agreement includes 60 GWh of sodium-ion batteries. Additionally, CATL's subsidiary Fuding Times has announced a new battery expansion project that costs $735 million and adds another 40 GWh to the total capacity.

At this stage sodium-ion batteries can't compete with lithium-ion or lithium iron phosphate (LFP) batteries in terms of performance, but they are cheaper to make. More importantly, the materials needed to make them are easier to source than lithium and are not subject to high volatility.

This means sodium-ion cells are the perfect solution for smaller, more affordable vehicles where the profit margin is tight. When the source materials' prices are predictable, it makes it easier for companies to plan and optimize budget-friendly, compact vehicle production costs. And compact vehicles now account for 15% of the total EV sales in China.

LFP batteries will remain the staple for higher-end and large vehicles due to their superior energy density, but analysts believe sodium-ion packs will reshape the budget EV segment. They will enable lower, more stable battery costs, ensure better pricing flexibility and open up the door for higher profit margins in the segment.