Tesla co-founder JB Straubel has built an EV battery colossus

In other words: brand new factories make a lot of mistakes. Leach, from BNEF, said Redwood’s numbers led him to take another look at his models, which assumed that about 15% of factory output ends up in the recycling bin. But in the U.S., where so many factories are coming online simultaneously, that scrap rate could be as high as 25%, he said.

The competition for battery materials will be intense. Despite billions in EV manufacturing incentives from the Biden administration, China continues to outpace U.S. battery production, flooding the global market with cheap supplies. After years of demand outstripping supply, there’s suddenly a global glut of both batteries and materials, making it difficult for new entrants to survive. Lithium prices have crashed more than 75% from their highs in November 2022.

Some of Redwood’s competitors have already been burned, notably Toronto-based Li-Cycle, which announced plans in March to lay off 17% of staff as it scales back expansion plans. Albemarle Corp., the world's biggest lithium producer, said prices were unsustainable and halted development on a refinery in South Carolina that could also handle recycled black mass.

Meanwhile, ambitious plans to build new U.S. cathode plants from Massachusetts startup Ascend Elements, South Korean battery maker LG Chem, and Tesla will take years to fully materialize.“China has had 10 years of seriously prioritizing EVs, so they are just ahead of the game,” said Lachlan Carey, U.S. program manager at RMI, an energy think tank. “There is a heck of a long way to go to catch up and a lot that could get in the way.”

But having Straubel at the helm of Redwood is a selling point for investors who want to take a leap of faith today. He was the mastermind behind Tesla’s battery strategy and his connections from Silicon Valley to Wall Street helped the company raise $2 billion in private funding and secure a $2 billion loan commitment from the Department of Energy that it can tap once certain milestones are met.

One recycler in the U.S. won’t be enough to build a U.S. manufacturing base for EVs, though. Straubel acknowledged that reality as well as the daunting math ahead.

“The simple truth of it is that it’s a damn hard thing to do," he said. "It's just shocking to me, given how much battery capacity is either online now or being built, and yet 100% of its supply chain is imported.”