JB Straubel, co-founder of Tesla and CEO of battery-recycling company Redwood Materials, has both good and bad news for those who believe electric vehicle sales are about to take off.
According to Straubel, demand is increasing, but the auto industry isn’t moving fast enough to keep up with production.
“This is catching people off guard,” Straubel told CNBC during a interview. “There has been a significant shift. From declining internal combustion engine sales to nearly 100 percent increase in EV sales in various regions.”
According to Straubel, industry sales projections that EVs will account for 12.7 percent of total U.S. auto sales by 2025 may be too low. “If you look at how quickly adoption is growing in parts of Europe and other parts of the world, I believe it points to a path of potentially even higher percentages by mid-decade,” he said.
That demand is driving Redwood Materials’ $1 billion investment in a new plant in McCarran, Nev., he said. When finished later this year, the facility will produce anode copper foil that Panasonic will use to manufacture battery cells that will eventually go into battery packs manufactured at the Tesla Gigafactory in Nevada.
Redwood Materials anticipates that the plant, which will eventually employ over 500 people, will produce enough anode copper foil to supply 1 million EVs per year. According to the company, its plant will be the first in the United States to supply anode copper foil, with the majority of the supply currently imported from Asia, primarily China and South Korea.
Meanwhile, lithium-ion battery manufacturing is attempting to keep up with EV automakers. According to AlixPartners, an automotive industry consulting firm, global capacity for lithium-ion battery manufacturing was 713 gigatonne hours last year. AlixPartners expects that figure to more than triple to 2,273 gigatonne hours by 2025, with US EV battery production more than quadrupling.
With so much capacity coming online, conventional wisdom holds that the cost of battery cells and battery packs will fall, lowering the price of EVs and increasing profit.
According to ESource, a Boulder, Colorado-based consulting firm that tracks battery cell prices, the cost per kilowatt hour of an automotive battery cell will fall from $147 in 2022 to $98 by 2025. While those forecasts are encouraging, falling prices are dependent on the battery supply chain expanding and being able to support increased demand.
“With such high battery demand expected over the next decade or so, the raw materials that go into those batteries may be in short supply,” said Stephen Brown, senior director at Fitch Ratings.
Straubel, on the other hand, is skeptical that the EV battery industry will be able to meet the increased demand.
“There is absolutely a risk that we will see a repeat of the semiconductor type of shortages, which may reduce and impede EV growth,” he said.
Straubel admits his nameake company is racing to catch up with the transition from gasoline-powered to battery-powered vehicles as he stands next to the framework for a plant Redwood hopes to have operational soon.
“We are working around the clock, literally 24/7, building facilities like the one behind us to make that supply chain happen and to try to get ahead of that bottleneck before it happens,” he said.