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by Steve LeVine

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Why Elon Musk Has Bet on Asian Battery

Good evening and welcome to the second issue of The Electric! (The first issue can be found here.)

In 1980, John Goodenough, an American professor running the inorganic chemistry lab at Oxford University,
discovered the lithium-cobalt-oxide cathode, a battery electrode whose unusual capacity to store energy
vastly eclipsed anything invented before then. But the invention didn’t interest the university, which saw no
obvious practical use for the cathode and refused to spend the money to patent it. A U.K. lab outside the
university eventually agreed to pay the patent fee, but only in exchange for Goodenough signing away the
rights to his invention. 

Nothing more was heard about his cathode until 1991, when Sony licensed and released it as the nerve
center of its runaway bestseller, the handheld camcorder. The cathode became a global standard and part
of every major smartphone, wearable device, laptop and other mobile electronics. In 2019, Goodenough
shared the Nobel Prize in chemistry for the LCO breakthrough. But it was battery makers in China, Japan and
South Korea that profited from it.

Remarkably, the same thing happened in 1996 to another invention from Goodenough’s lab, which by then
was located at the University of Texas at Austin: a battery formulation called lithium-iron-phosphate. Since
then, LFP has been produced almost entirely by Chinese manufacturers (who don’t pay a licensing fee, but
more on that later) and is the go-to battery type for electric vehicles in that country, and used by
automakers including Tesla. The same pattern has repeated itself with nickel-manganese-cobalt, invented
in 2000 by a Goodenough protégé at Argonne National Laboratory, outside Chicago. NMC and a derivative
called NCA (nickel-cobalt-aluminium) are the dominant EV batteries everywhere except in China and are
produced almost solely by Asia-based companies.

In sum, every battery in virtually every EV and personal electronic device around the world was invented in
the U.S. or by an American. And virtually all of the upside has been captured by manufacturers in Asia.

Today a set of newly imagined batteries designed largely in the U S could shake up the battery field once
Today, a set of newly imagined batteries designed largely in the U.S. could shake up the battery field once
again. Later this year, some of these new technologies will go into production, opening the possibility for
the inventors and their investors to help the U.S. seize a chunk of the global battery market and avoid the

mistakes of their predecessors. As battery production rises exponentially in the coming years, the U.S.
could use the opportunity to produce the batteries and rehabilitate its manufacturing base, which it has
lost to Asia.

But a battery-led manufacturing renaissance could be cut short before it gets going. The determining factor
is whether automakers embrace the next-generation batteries or largely stick to improved versions of tried-
and-true, traditional batteries—including LFP—and let the new inventors fight over niche markets such as
super sports cars, battery-powered planes and drones. The latter scenario would result in a familiar winner
among battery manufacturers: China. And billions of dollars of investments in next-gen battery startups
would be largely lost.

Gene Berdichevsky, CEO of Sila Nano, in Alameda, Calif. Credit: Sila Nano

View from Silicon Valley

Last week, I spent a couple of days visiting the headquarters of some of the major San Francisco Bay Area
battery startups such as QuantumScape, Sila Nano and Enovix, whose silicon- and lithium metal–based
products, if successful, could fuel a renaissance.

The electronic device and EV industries are eagerly anticipating the delivery of next-generation cathodes
and anodes by these and other battery companies, which would finally provide the capacity for speedy 5G
wireless phone connections, greater EV range, and the ability to substantially charge EVs in 15 minutes or
so. Automakers believe such capabilities would catalyze EV sales, and they’ve invested hundreds of
millions of dollars to help the startups get to the finish line faster.

The first of the next-gen batteries to go into commercial production will likely be from Sila Nano, a silicon-
carbon–anode startup run by Gene Berdichevsky, who was employee No. 7 at Tesla. When I sat down with
him on Friday at his Alameda headquarters, which occupies three buildings in an office park, the lanky
Berdichevsky said his 250-person team had resolved the biggest problem that has kept silicon out of
batteries Silicon swells so much during the charge discharge cycle that it obliterates the batteries To fix it
batteries: Silicon swells so much during the charge-discharge cycle that it obliterates the batteries. To fix it,
Sila, which was founded in 2011, has engineered silicon-carbon particles that absorb the ballooning
internally. Every particle, Berdichevsky told me, has precisely the same chemical content and is identical in

size—necessary precision, he suggested, to reach the desired outcome—a silicon anode that works and
does so for a long time. 

Around September, Berdichevsky says, Sila’s anode containing these particles will power a commercially
wearable device, replacing its current graphite battery and reducing the battery cost by at least 20% (he
declined to reveal details about the device or its manufacturer). Then Sila will begin building a production
facility capable of supplying EV batteries at large scale to BMW and Daimler by 2024 or 2025. (In 2019,
Daimler bought an 11.6% stake in the startup, and earlier this year hedge fund Coatue Management led a
$590 million investment that gave the company a post-money valuation of $3.3 billion.)

“This machinery has scale enough for hundreds of millions of wireless earbuds or hundreds to the low
thousands of cars,” he said, gesturing to the equipment in the buildings around him.

The thing about covering next-gen battery developers is that they all claim they will be first to market and
that they alone have figured out the right chemical or engineering process. So it is with silicon-carbon
anodes. The previous day, I had visited a competitor to Sila Nano: Enovix, based near Tesla in Fremont and
was hosting several dozen investors and analysts to mark its public debut on the Nasdaq stock market. (Its
share price dropped 14.6% after its first two trading days, giving it a market capitalization of $2.6 billion.)
Enovix, founded in 2007, tries to solve the swelling problem by completely reengineering how the battery is
manufactured. This approach violates an axiom of the lithium-ion business, which is that you should stick
to traditional manufacturing methods because the big battery producers—your customers—won’t want to
revamp their factories. But CEO Harrold Rust told me that Enovix’s process requires only a minor adjustment
to factory equipment. In the second quarter of next year, he said, Enovix’s anodes will be in a smart watch,
with other customers lined up behind it.

I left with the impression that both companies would commercialize their technology and help establish a
new bedrock for American manufacturing. And if they are successful, that could be a major problem for
developers of pure lithium-metal anodes, which aren’t expected to go into production until later in the
decade. Lithium metal delivers even more energy than silicon, allowing for much lighter and smaller
batteries, though usually at a higher cost. But if silicon anodes take off with automakers five years before
metallic lithium ones are even ready, lithium-metal batteries might be boxed out from everything but the
highest end of the automobile market.

Another ramification of silicon beating lithium metal would be that the hundreds of millions of dollars
invested by most of the major automakers in lithium-metal battery developers wouldn’t amount to much.
Among them, Ford has invested in lithium startup Solid Power, General Motors in SES and Volkswagen in
QuantumScape..

No part of the battery world is more prone to trash talk than the lithium-metal startups, and QuantumScape
CEO Jagdeep Singh is among the most aggressive shade throwers. Singh, whom I visited on Thursday,
frequently suggests that while a lot of startups are working on lithium-metal anodes, only QuantumScape’s
version will work well enough to get into a commercial EV. Developers of lithium-metal anodes have been
stymied by outbreaks of spiky dendrites that short-circuit the battery. But some battery experts say that if
QuantumScape’s data are to be believed, the company appears to have resolved this issue. That would
mean its primary challenge is scaling up production of large cells for VW.
I spent the last several weeks calling battery companies and consulting firms to ask whether they thought
that if silicon succeeds, it might push aside lithium metal. Broadly speaking, the answer was yes. It’s no

surprise that Singh disagrees. “Our view is, frankly, the opposite of your premise,” he told me. “If an anode-
free lithium-metal architecture becomes available, it is not clear to us that silicon has a place.” 

Side note: QuantumScape went public in November via a special purpose acquisition company and is worth
nearly $10 billion after its shares dropped 83% from their peak in December. That seesaw is more a
reflection of the spectacular rise and fall of retail investor enthusiasm for EV-related SPACs than sentiment
about QuantumScape specifically or metallic lithium anodes generally.

A Chinese facility of CATL, whose customers include Tesla. Photo by Bloomberg

Musk’s Next-Gen Distrust

But what if not silicon, not lithium-metal, but the entire next-generation battery edifice is propped up on
crumbling legs? That is, what if clever improvements to plain-Jane lithium-ion batteries end up taking over
the EV market and shutting out both lithium metal and silicon? In that scenario, companies like Sila Nano
and Enovix would be hobbled. 

Consider the aforementioned LFP, a cathode generally viewed as inferior because of its comparatively low
energy density. It’s true that LFP can’t compete with NMC and its NCA cousin by that measure. But it has
other qualities, including much lower cost, much longer endurance—it lasts for hundreds of thousands of
miles of driving—and safety (it’s much less volatile than other battery chemistries).

Over the last year, China’s top battery makers, BYD and CATL, showed LFP batteries that appeared to be
comparable in performance to the middle range of NMC, known as NMC622. At the Auto Shanghai show in
April, BYD said its LFP-powered “Blade” battery could power a vehicle for 433 miles per charge. BYD is
reportedly speaking with Toyota and Hyundai about licensing the Blade. 

If BYD isn’t exaggerating its results, LFP could sweep away NMC as well as the next-gen battery crowd in the
low- and middle-range EV market, all the way up to the edge of the ultrapremium luxury category. “The
Blade battery to me is uniquely transformative,” said Dan Blondal, CEO of Nano One Materials, a Canadian
 y q y , , ,
high-manganese–battery startup. “I don’t think the world sees it yet. No one quite gets it yet.”

There is yet another, related development worth considering: A dozen of the core LFP patents are expiring in
September. The patents are held by a Swiss-based consortium that governs three families of intellectual
property, including those assigned to Goodenough, the father of LFP. Until now, Chinese companies have
enjoyed a virtual monopoly on LFP manufacture thanks to an arcane decision by the consortium a decade
ago to allow Chinese companies to make LFP with no licensing fee as long as they sold their batteries only
to the local market.

The patent expiry coincides with a surge of planned LFP use by major Western automakers: VW, Ford and
Stellantis are among the companies that have announced plans to equip at least some of their vehicles
with LFP. Tesla has already shipped LFP-based Model 3 and Y vehicles in China and to Europe. Logic tells me
these two developments—the patent expiration and the new automaker interest in LFP—should trigger an
LFP manufacturing rush outside China. But, checking around, I found nearly no plans by Western or even
South Korean companies, which dominate the global battery market along with China, to try to do so. By
appearances, they appear prepared to cede the market to the Chinese and put their hopes in the next-gen
technologies.

The only non-Chinese company I could find that is making a play for LFP is Lithium Australia. Its CEO, Adrian
Griffin, told me he is raising $115 million in either equity or debt to build an LFP plant in India, Vietnam or
Australia in order to produce 10,000 tons of the cathode material per year, enough for roughly 90,000 EVs.
Still, if cheap and powerful LFP ends up beating almost every other type of battery for the bulk of mass-
market EVs, China’s CATL and BYD will be the likely winners.

After a decade of steady work on manufacturing LFP, CATL and BYD have the lowest cost of production, said
Jon Regnart, a battery analyst at the Advanced Propulsion Center in the U.K. LFP made by CATL currently
costs $80 per kilowatt-hour, meaning vehicles that are powered by it could cost the same as conventional
combustion cars. “Does Europe really want to compete on a cost-down trajectory with Chinese
manufacturers?” Regnart said.

Tesla CEO Elon Musk is among those who, so far at least, is largely deflecting the next-generation battery
developers. From the start, he has used off-the-shelf, traditional lithium-ion formulations and cells, and he
continues to follow that strategy. That includes equipping made-in-China Model 3 and Model Y cars with
LFP bought from CATL. Some of those vehicles are sold in Europe. Meanwhile, he is attempting to drive
down the cost of his NCA batteries. Last September, he unveiled a cost-cutting plan that included only the
barest touches of the next-gen methods. Mostly, he described improvements in how traditional lithium-ion
is processed, how it is packed into the car and how the frame of the vehicle itself is constructed. He
unveiled the possibility of adding relatively cheap silicon to his graphite anode, but not re-engineering the
entire electrode the way Sila and Enovix do. And he said nothing about lithium metal.

Musk’s strategy reflects a distrust of next-gen promises. So far, he has been well served by doing so, since
the entire last decade went by without a single major battery breakthrough going commercial. The winner of
the competition between the next-gen battery developers, and their collective race against traditional
lithium-ion batteries including LFP, may be decided on the factory floor. That is, who can get their chemistry
into mass production and into the greatest number of EVs first? 

“It’s not whose breakthrough science works,” said Sila’s Berdichevsky, “but who gets to scale.” He was
ki b t th h f hi d t b th i ht ll h b d ibi th ti
speaking about the chances for his own product, but he might as well have been describing the entire
colossal contest.

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About Steve LeVine

Steve LeVine is editor of The Electric. Previously, he worked at Axios, Quartz and Medium, and before that
The Wall Street Journal and The New York Times. He is the author of The Powerhouse: America, China and
the Great Battery War, and is on Twitter @stevelevine

Email Steve