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Tesla co-founder’s battery recycling start-up raises $700m

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Tesla co-founder JB Straubel’s ambitious battery recycling start-up Redwood Materials has raised more than $700m in a funding round as it seeks to upend the US supply chain for electric vehicles.

The fundraising, which is more than six times bigger than the electric carmaker achieved in its first six equity rounds combined, values the start-up at $3.7bn, according to two people familiar with the matter. Redwood declined to comment on the valuation.

The Nevada-based company’s ultimate aim is to create a “closed-loop supply chain for electric vehicles” in the US, with the renewal and re-use of car battery materials eliminating the need for the environmentally damaging process of mining for new raw ingredients.

“It’s pivotal to the future of batteries and keeping the supply chain thriving domestically,” Straubel told the Financial Times. “It seems hyperbolic but I really feel like if we can’t do this, if this doesn’t happen, then the US has lost — we’ll lose this whole transportation market.”

The group has partnerships with Amazon and Panasonic to break down their electronic waste into powder form, treat it with chemicals and send it back into the supply chain as a raw material.

According to the US Department of Energy, less than 5 per cent of lithium-ion batteries — demand for which is set to boom as carmakers such as Mercedes lay out goals to go “all-electric” — are currently recycled.

Redwood’s growth comes amid US political concerns over China’s dominance of the electric vehicle supply chain, a situation US Secretary of Energy Jennifer Granholm has warned poses national security risks.

The Asian country controls “80 per cent of the world’s raw material refining, 77 per cent of the world’s cell capacity and 60 per cent of the world’s component manufacturing,” according to BNEF intelligence.

When Redwood announced expansion plans a month ago, saying it would add more than 500 people to its 130-member team and that it had purchased a 100-acre site at the Tahoe-Reno Industrial Center that is home to Tesla’s Gigafactory, Granholm applauded the effort.

Production line workers at the Tianneng Battery Group facility in Huzhou, Zhejiang province, China © Qilai Shen/Bloomberg

“America has a clear opportunity to build back our domestic supply chain and manufacturing sectors so we can capture the full benefits of an emerging $23tn global clean energy economy,” she said. “Private sector investment like this is a sign that we can’t slow down.”

Straubel, who co-founded Tesla in 2003, was its chief technology officer for 15 years, playing instrumental roles in everything from the creation of Tesla’s first powertrains to building the Gigafactory.

Straubel said last month that in Tesla terms, Redwood was in the “Model S” stage of development — suggesting the group had already achieved the fundamental technology and was now ready to scale up.

Redwood previously raised a $2m seed investment in 2017 and $40m in a Series A round last year. Amazon’s climate fund also invested an undisclosed amount last year.

The Series C financing was led by T Rowe Price, with support from Goldman Sachs, Baillie Gifford, Canada Pension Plan Investment Board and Fidelity. All Series B investors, including Capricorn, Breakthrough Energy Ventures and Amazon’s Climate Pledge Fund, also participated.

Joe Fath, portfolio manager at T Rowe Price, said on Wednesday that the world’s need for battery materials would “grow exponentially” in the era of decarbonisation, adding that Redwood was “well-positioned to be at the forefront of tackling this emerging and critically important problem”.

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