Redwood Wins $2 Billion Federal Loan To Scale Up Production Of Battery Materials For Electric Cars

Redwood Materials, the battery recycling and components maker created by Tesla cofounder JB Straubel, has been awarded a $2 billion federal loan to help build up a U.S. supply base for essential components needed to make batteries for electric vehicles that are currently imported almost entirely from Asia.

The Carson City, Nevada-based company got a “conditional” commitment for the low-interest funds from the Energy Department’s Advanced Technology Vehicles Manufacturing program as it expands operations in its home state and prepares to build a second campus near Charleston, South Carolina. Redwood started processing recovered battery materials a few years ago in Nevada, has begun making copper foil for battery anodes and plans to make battery cathodes, using recycled minerals in both. It’s already raised over $1 billion and expects to invest about $5 billion in its Nevada and South Carolina operations.

“The vote of confidence this represents in Redwood as a business, our technology and our customers is significant,” Straubel told Forbes. It’s also financially beneficial. “This is very different than a VC investment or an equity investment. This is a favorable approach for us partly because it’s a competitive interest rate.”

Straubel has been a key player in the push to electrify transportation since Tesla unveiled its initial battery-powered vehicle, the Roadster, in 2006. Working with CEO Elon Musk, he oversaw the EV company’s motor and battery development programs as Tesla’s CTO until 2019, when his focus shifted to battery recycling. Redwood initially sold some of the lithium, nickel, cobalt and other metals it recovered from used batteries and electronics, but these days is using them for anode and cathode production—a battery’s negatively and positively charged elements that transmit electricity. Companies including Tesla, General Motors, Ford, Hyundai and Toyota are investing tens of billions of dollars into new U.S. battery plants for electric vehicles, but the anodes and cathodes needed for lithium-ion batteries currently come mainly from China, South Korea and Japan.

Redwood’s award follows a $2.5 billion loan for GM to set up three U.S. factories to make its Ultium battery system. The Energy Department said this week it’s evaluating 126 proposals for ATVM loans for projects totaling $126 billion. The federal program started more than a decade ago during the Obama Administration when Straubel was at Tesla, though it was enhanced by the Inflation Reduction Act signed into law last year. (Straubel said Redwood began the loan application process in 2021, a year before IRA was enacted.) Tesla was among the first recipients of the original program and used the $465 million loan it received in 2010 to start EV production at its Fremont, California, plant. The company repaid the loan by early 2013.

Redwood’s investors include Ford, Fidelity, Bill Gates’s Breakthrough Energy Ventures and Amazon’s Climate Pledge Fund and it will be raising additional funds beyond the federal loan, Straubel said without elaborating.

The company has 800 employees but expects to have several thousand more after scaling up its facilities in Nevada and South Carolina. Its goal is to be able to supply at least 100 gigawatt-hours of anode and cathode materials annually within a few years, or enough for a million electric vehicles a year. Panasonic, a key supplier to Tesla, is an initial customer, though Straubel says Redwood is in talks with numerous other companies that he didn’t identify.

“There’s a lot of capital and a lot of projects announced and under construction in (battery) cell manufacturing—over 800 gigawatt-hours per year in just the U.S. before the end of this decade,” Straubel said. But that’s not for anodes and cathodes.

“Business-strategy-wise, there’s a gap and a problem in the supply chain,” he said. “It may not be the sexiest part of the whole (EV) realm to invest in but I think it’s urgent and may become more of a bottleneck. So we’re very focused there.”