Redwood Materials, the battery recycling startup founded by former Tesla co-founder JB Straubel, will recycle production scrap for batteries used in General Motors electric vehicles.
On Thursday, the company announced its collaboration with Ultium Cells, the joint battery manufacturing venture between GM and LG Energy Solution. Redwood will handle the recycling of cathode, anode, and cell scrap from their facilities in Warren, Ohio, and Spring Hill, Tennessee.
Battery recycling is gaining momentum as automakers and battery manufacturers aim to secure their battery material supply independently of China, the global leader in this sector.
The U.S. and regions like Europe are offering increasing incentives for recycled and domestically produced critical battery materials such as lithium, nickel, cobalt, manganese, and graphite.
President Joe Biden’s Inflation Reduction Act, signed in August 2022, offers a tax credit for battery manufacturing and critical mineral processing.
In February 2023, Redwood benefited from this bill when the Department of Energy provided a $2 billion loan to build its battery recycling facility in Nevada. Additionally, the DOE granted Ultium Cells a $2.5 billion loan to develop its cell manufacturing facilities in the U.S.
Recycling EV batteries is a long-term process since most of these batteries are currently in production and won’t reach the end of their lifespan for many years.
Therefore, deals like the one with Ultium to recycle scrap are crucial. Redwood, which also has partnerships with Toyota and Panasonic (which produces batteries for Tesla), has already established itself as a leader in EV battery recycling.
However, any startup in this space needs a near-term strategy to sustain itself on the long path to profitability.
And handling scrap production is no small task. A Redwood spokesperson told TechCrunch that the average battery factory generates 5% to 10% in scrap. This means Redwood manages around 10,000 tons of material annually, equivalent to daily truckloads of scrap.
Redwood will recycle Ultium’s scrap and process it into high-quality battery materials. The company then supplies these materials back to cell manufacturers as domestically produced anode and cathode components.
Processing the materials, not just recycling them, aligns with Redwood’s long-term strategy. As material prices fluctuate regularly, the significant revenue will come from processing materials, which are typically sent to Asia for processing before returning to the U.S.
In August 2023, Redwood raised $1 billion to expand its battery recycling facilities.
This expansion aims to boost anode copper foil and cathode active material production capacity. At that time, the company expected to produce around 100 gigawatt-hours of annual capacity for cathode active materials and anode foil by 2025, enough to power 1 million EVs.
By 2030, Redwood hopes to scale production output to 500 GWh per year, powering 5 million EVs. However, the company has not confirmed if this timeline remains accurate.
Ultium Cells’ two facilities, each spanning 2.8 million square feet, will supply scrap to Redwood. These operations are expected to produce over 80 GWh of combined battery cells annually, and Redwood will receive the majority of that scrap.
In 2021, Ultium partnered with Canadian battery recycling firm Li-Cycle to recycle scrap, but according to GM, that deal was mutually dissolved. Ultium is also building a third facility in Michigan. Redwood did not specify whether it will receive scrap from this new factory as well.