Tesla co-founder JB Straubel takes on battery recycling

Tesla Inc. co-founder JB Straubel wasn't content with simply reinventing the automobile for the 21st century. He left in 2019 feeling he needed to redesign the global supply chain for the electrified future, too.

That's exactly what he's been doing for the last five years. The company he built, Redwood Materials, is now the largest battery recycler in North America, and it's using those recycled materials to manufacture complex battery components that have traditionally been imported from abroad, largely from China.

Straubel recently opened the doors for a first peek at the 300-acre industrial campus he's built in the western Nevada desert. He said it hasn't been easy.

"It feels like we're going at breakneck speed, but we need to do a whole lot more," he said. "It's a damn hard thing to do."

Straubel, 48, drives a Tesla Cybertruck emblazoned with his company's green infinity logo, but he's careful to note that the flashy ride is a personal vehicle: "Too expensive for Redwood". Often seen as a countervailing force to Musk while they were building Tesla, Straubel returned last year to take a seat on the electric vehicle maker's board. He wouldn't talk about his oversight job there, other than his general motivation for doing it.

"I want it to succeed. I love the team there, it's close to my heart - always probably will be," he said.

Straubel spoke to Bloomberg Green on March 22, the day Redwood commissioned its first commercial-scale line to produce cathode active material, a black powder that's largely responsible for a battery's range and longevity - and cost. He reflected on what it's taken to build Redwood to this point, and his plans for what comes next. What follows is an edited transcript of the conversation.

Some EV manufacturers are tapping the breaks on expansion plans right now. What's your reading of the EV market and how it looks five years from now?

Personally I think the EV transition is kind of a slow, steady, and inevitable future course that we are going to go through - and have to go through. When we started Redwood, I was really looking at the 10, 20, 30-year horizon and how we were going to affect sustainability and transportation. I don't see any change in my long-term thinking on this.

What will a mature recycling industry look like in the US? Will it be distributed like it is in China, or a few big players that dominate?

I don't have a one-size-fits-all, monopolistic view on this. It's really how we can best architect a solution for the country to get as much material recovered and recycled, as quickly as possible. There may be more smaller companies at different parts of the value chain. That would be great if they can compete, and we're happy to work with a lot of small companies.

But there weren't really any other companies that I saw doing what was needed, so that's kind of why we jumped in with the scope we did. There was a little bit of a gold rush that went on, when people saw what we were doing and thought it would be easy. I wish them well, but this is a long road. It's something we need to be building for many years, maybe decades.

How necessary are government subsidies for making the numbers work on recycling?

Today, we don't have a single dollar from the federal government. Everything we've built to date has been funded by either our investors or from money that we've made recycling and selling. We've had to bootstrap and move things along as we go.

I don't expect that to be the case forever. Programs like this ATVM loan [a $2 billion loan commitment from the Energy Department] can be very helpful, but that money is not here yet. It's a very long process.

During this election year, EVs are becoming a real wedge issue between the two parties. Are you feeling that in Nevada? In the industry?

We're in the middle of a hurricane, no question. We need to be able to grow this business whether Trump or Biden is elected.

Some people have forgotten the other aspects of why EVs are actually helpful things for a country beyond just greenhouse gas reductions. The energy security aspect of it is pretty phenomenal. We can literally use a diverse set of energy sources to power the whole transportation fleet instead of just oil. It's the first time that's ever been possible.

I try my best to be a voice of explaining the varied benefits and not making it a partisan issue. People should really just look at: What's the overall economic impact to the country? What's the security impact to the country? And what's the environmental impact? We're not a Democratic company, we're not a Republican company, we're a company to serve our customers and do something that creates economic benefit for our country.

What's the toughest challenge you've faced at Redwood?

It's never one single thing. It's the ever-constant juggling. Maybe it's fundraising one day, it's technical ramp another day, it's construction, it's customers. We're trying to build the template and build the whole industry as we go.

Right now you are a substantial majority of the recycling and materials industry in the US. Do you worry about what happens if you fail?

That responsibility weighs on me. I remember feeling that very much at Tesla, when the other manufacturers hadn't done crap yet, and we had a very palpable sense of holding the flag and running out into the field and saying "EVs are the future!" We felt that if it doesn't work, nobody is going to follow. This is a little dA(c)jA vu, but I feel we do have that responsibility at Redwood.

How have you been affected by falling commodity prices? You may have a steady supply of recyclables coming in, but that doesn't do you much good if prices are so low it's unprofitable to process.

Lithium is down 87% from its peak last year, it's extraordinary. If you're a pure-play lithium mine, that is really, really hard. Their economics ride exactly with the commodity price. But we are not a lithium mine. In our case, we have quite a lot of diversification in our profitability that buffers us.

Part of what we're doing is bringing material in, refining it and selling it. But we're also adding value through manufacturing. Copper foil is an example: We sell it as one unit of copper material plus the manufacturing work that we did to it to make into a foil of the right quality. That's where a lot of the value is.

You're still in spending mode as a company overall, but for the operations, you have running and scaled. Are they profitable yet?

We have good revenue growth happening in our recycling business. We have solid economics on that - the unit operations are profitable today. But that's wrapped into a much bigger vision of continued processing and growth. The company as a whole, we are not profitable because we are spending to grow and increase R&D and accelerate.

But a decent part of our balance sheet now is able to self-fund and generate profit. We're now a sizeable percent of the nickel supply in North America, and as far as I'm aware we're the second operating lithium producer in all of North America.