This Is What's Hard About Building a US Domestic Battery Industry

SPEAKER_1 (0:03)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:25)

And I'm Tracy Alloway.

Joe Weisenthal (0:26)

Tracy, I feel like a few years ago, there was a lot of talk about, okay, this EV battery boom is coming, and we don't have yet the raw materials, the basic commodities necessary to supply all the demand for that.

Tracy Alloway (0:41)

Yes, I would say even before a few years ago. Do you remember, there was a time, I guess it must have been like early 2010s, or maybe even before then, when rare earths were all the rage, and everyone was talking about like, oh, put your money in rare earths. The clue is in the name. There aren't that many of them.

There won't be enough to go around.

And then that kind of came and went, but then you're right, it resurfaced in recent years, because of course we do have this pressure or desire, depending on your viewpoint, of shifting to electric vehicles, which require batteries, which require a whole bunch of materials to actually make them. And there was a lot of hand wringing over whether or not there would be enough of these materials to go around. Where the materials actually come from, that was a big point of contention and concern. If you're dependent on one source, i.e. China, to get all the stuff you need for battery making, then what happens when China starts to restrict those materials, which is fast forward to 2023, exactly what we saw happen.

Joe Weisenthal (1:46)

Yeah, I think that was a great summary. There's a lot here for us. This story touches on a lot of our themes because one of the things we talk about is that, so you mentioned there's sort of the replacement of one set of commodities in oil and gas, et cetera, a brand new set of commodities that are also potentially gonna be quite scarce. There's also just the question of what catalyzes investment, because as we know, when it comes to raw materials, there is a lot of upfront cost.

And there's also the future is wildly uncertain in terms of like how much we'll need and how much demand there will be. So we've talked with Jigar Shah, for example, of the Department of Energy's Loan Programs Office multiple times on the podcast about why, for example, when it comes to sort of new energy investment, traditional private sector financing vehicles maybe aren't up to the task completely, why there are other market mechanisms or non-market mechanisms that might be necessary.

Uncertainty about demand, supply, what is even the future of battery technology, right? Because there are competing visions of what the batteries that will power EVs will look like, and whether it's solid state or lithium ion or something totally different. So how do you catalyze investment with so much upfront cost, so much uncertain return at a time of a highly uncertain future?

Tracy Alloway (3:07)

I find that an absolutely fascinating question because again, these are things that a lot of people would argue we actually need, but are they being naturally incentivized by the market to actually have more of them? Or do they come through government initiatives such as the Department of Energy and the loan programs office? Or do they maybe come from the companies themselves? We've seen Tesla move to build up its own supply of the things it needs for batteries. So there are all these interesting questions of how this stuff actually gets financed. And also, just to take a step back, I have a bunch of questions about what this stuff actually is. Because I see words like graphite and manganese and things like that thrown around, germanium.

And like, okay, I get that they're used for making batteries, but I don't really know the specifics. So I would love to know more about that.

Joe Weisenthal (4:00)

One of my worst moments when I was a TV host several years ago is I was interviewing one of our reporters here at Bloomberg, and I just like blurted out, like she was talking about cobalt prices. And I was like, what is cobalt?

And I felt so bad because I'm making a reporter answer, like, what is this basic, but she nailed it. But there was like this sort of-

Tracy Alloway (4:19)

She told you like the elements.

Joe Weisenthal (4:21)

Yeah, she nailed it, but I felt so bad because I didn't mean it as a gotcha question. I was like, what is oil? What is cobalt? Anyway, the other thing to mention how, okay, there was all this talk about, do we have enough?