Catalyst with Shayle Kann - The EV market’s awkward teenage years

Episode Date: July 25, 2024

Automakers got ahead of their skis. EV sales are up globally and in the U.S., but growth has been slower than expected and uneven. After enjoying a wave of growth driven by early adopters, automakers overestimated demand of more cautious consumers and ended up producing more than buyers wanted. Now auto dealers are slashing prices to move cars off the lot. So how did the market get here? And how can EVs appeal to the next wave of consumers? In this episode, Shayle talks to Gene Berdichevsky, co-founder and CEO of anode material manufacturer Sila Nanotechnologies. Shayle and Gene cover topics like: How high-performance cells can lead to lower-cost batteries Why Gene says lithium-iron-phosphate may hit a ceiling in the market The potential of sodium-ion batteries Who can take advantage of production overcapacity The limitations of the Inflation Reduction Act in the face of weak demand  How manufacturing is competing with other major loads, like data centers, for electricity  Solving the challenges of vehicle-to-grid Recommended resources Bloomberg: The Slowdown in US Electric Vehicle Sales Looks More Like a Blip The Wall Street Journal: EVs Are Cheaper Than Ever. Can Car Buyers Be Won Over? Catalyst: What’s really happening in the US EV market? Catalyst is brought to you by Anza Renewables, a data, technology, and services platform for solar and storage buyers. Anza’s real-time market intel equips buyers with the essential data they need to get the best deals. Download Anza’s free Q2 Module Pricing Insights Report at go.anzarenewables.com/latitude  Catalyst is brought to you by Kraken, the advanced operating system for energy. Kraken is helping utilities offer excellent customer service and develop innovative products and tariffs through the connection and optimization of smart home energy assets. Already licensed by major players across the globe, including Origin Energy, E.ON, and EDF, Kraken can help you create a smarter, greener grid. Visit kraken.tech. Catalyst is brought to you by Antenna Group, the global leader in integrated marketing, public relations, creative, and public affairs for energy and climate brands. If you're a startup, investor, or enterprise that's trying to make a name for yourself, Antenna Group's team of industry insiders is ready to help tell your story and accelerate your growth engine. Learn more at antennagroup.com.

Latitude Media, podcast at the frontier of climate technology. I'm Shayal Khan, and this is Catalyst. So I think what's happening generally is that we're in sort of the second trough of disillusionment of EVs, which means that we are just past the second hype cycle. This week, I sit down with Gene Bertashevsky from CILA Nano to diagnose exactly what's wrong with the EV market. When utilities need flexible capacity they can count on, turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility built for the moments when utilities can't

afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. Predictive, verifiable, and designed to perform when it counts. Learn more at energyhub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy. Tune in as we unpack how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcast.

Catalyst is supported by Fish Tank PR. An award-winning PR firm focused on climate and energy tech, renewables, and sustainability. Fish Tank is known for generating prominent and effective media coverage for the brands they work with. If you want a PR partner that's thoughtful, shoots straight, and gets results, you'll like Fish Tank PR. To learn more about Fish Tank's approach, visit fish tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. I'm Shail Khan. I invest in revolutionary climate technologies at energy impact partners. Welcome. All right. So I own an EV. Regular listeners will appreciate that that was actually not true until

somewhat recently. I didn't really like to talk about it much for obvious street credibility related reasons. But then my partner at EIP, Cassie outed me on this pod a while back. So it was public. Very uncool. I should say that she did that. Anyway, I fixed it. And as of a couple months ago, I have a Kia EV-9, and I'll start by saying, I do love it. It is amazing. No complaints. That said, I have a couple observations. One, when I was getting the car, the dealer offered a big rebate on the vehicle and said it was because they have too many in stock. Obviously, dealers say things like that, but I actually think it is true based on the data, adding yet another data point to the narrative that has now taken hold that EV sales growth has really started to slow down.

You see this in the sales data, but you also see this in manufacturer announcements, and, you know, the gloom over the EV market is real. And the second observation that I had is that as much as I do love the car, the technology, and especially the battery, does still feel like it's not entirely mature, as if, and this is actually true, I think, we haven't yet fully gotten to the end state. We haven't reached the promise land with EV batteries. Charging is a little too frequent and a little too slow. And even with the rebate, the cost was higher. Which is all to say, I kind of get why the market is in the state that it is in. We're in these awkward teenage years of the EV market. We've got to figure out how to grow up and get out of the house and get a job.

Well, if the EV market is a teenager, then my buddy Gene Britshevsky helped birth it or something like that. Anyway, he was employee number seven at Tesla long, long ago. And then he left to start his own company, CILA Nano, which is making silicon anode materials for EV batteries, and hitting real commercial scale just now after, oh, 14 years or so of work. Gene is just incredibly smart on EV battery technology and EVs in general, which is, I suppose, what you'd expect from someone who has been working on it and thinking about it since the beginning of George W. Bush's first term.

Anyway, here's Gene. Gene, welcome. Thanks, Shail. Thanks for having me. Okay, so let's start with a little bit of history. What year did you join Tesla? What year did you first get involved with EVs, I guess? I assume that was when you joined Tesla, but tell me if it was before that.

No, no, it was before that. I got involved in EVs in 2001, building a solar car at Stanford. The Stanford Solar Car. So that was like the genesis of Tesla dates back to that Stanford solar car project, which is wild. There's like a bunch of people who have gone on to amazing things from that project. There's a lot of people, yeah. You know, J.B. most notably, of course, but, you know, folks at electric hydrogen, CELA, all kinds of places. Yeah. Tesla, of course. Yeah. Okay, so, but that's 2001. So we're 23 years hence from that, which is bananas. And then you joined Tesla early on,

so that must have been like 2004 or something? That's right. Yeah, 2004. Okay. And then, and then, you left and started SELA, when did you start SELA? So I left in 08 after we shipped the Roadster, and then I spent a couple years studying material science, really trying to understand the science of energy. And then SELA we got started with in 2011. So I did my master's, and I spent about a year after that looking at different technologies, storage technologies, other energy technologies before I found this tech. All right, so I think the most interesting version of this question is to ask it relative to when you started SELA, like what was your, so this is, we're now in 2010-ish, what was your view at that

time on like what was, what was going to happen in the EV market and then where there was going to be a gap that you thought needed to be filled? Like, what was the founding thesis of SELA, basically? So I think there were a couple things. One was that, you know, so 2011, when we, when we incorporated, there were about 2,000, 3,000 electric cars sold worldwide, right? Not 100,000. 200,000, but just 2,000, 3,000. So, you know, we're talking, you know, almost no vehicles. It was a novelty, but we certainly, all the early folks, so Tesla had the belief that all cars were going to go electric.

And I think that looks sort of nutty in retrospect, but it's kind of obvious today. And the thing that made that possible was the improvements in batteries leading up to 2004 to 2008, right? Really starting in 1991 as lithium ion got much, much better in performance, and the costs dropped a lot. The gap that I saw was that lithium ion was already hitting its theoretical performance limits. So the high kind of, you know, the high energy densities that drove down the cost. You were starting to really reach those limits and the scale was already really large. You know, there were maybe 50 gigawatt hours of lithium ion produced that year.

So my view was that if the chemistry didn't improve, the performance would stop going up and the cost would stop. going down at some point in the near future. And you would be kind of left with a gap where, you know, systems were cheap enough for many, many types of cars, but not not cheap enough and not performant enough for every single use case. So, you know, I kind of, in my head, I thought, look, EVs might top out at, let's say, 20% of global cars, if not for better technology. Can you explain a little bit more?

Like, I think it's probably counterintuitive to people the idea that back in that long ago, you would have seen us already starting to approach a ceiling in terms of performance of the existing chemistry. So, like, what was the chemistry at that time? And then, I guess, bringing us forward to today, like, how much have we seen performance improvement relative to that time? Have we broken through the ceiling by shifting chemistries or whatever? Or, in your view, has the improvement to date been, like, marginal? Yeah, it's really been marginal when you look at the chemistry level. So back then, the chemistry was lithium-cobalt oxide. and graphite. And that really was the, I mean, that was the chemistry from 1991, you know, all through the first Tesla Roadsters were built on lithium-cobalt oxide chemistries. And cobalt's actually the highest performing of the oxide cathode. So you have your cathode, right? We talk about high nickel cathodes. We talk about LFP cathodes today. But cobald cathodes are actually the highest performing. And the reason we're on nickel is because it's meaningfully cheaper. And the reason we're on iron is it's yet cheaper still. But both of those are actually lower performing. than the cobalt-based cathodes.

Could I just pause for one second? Can you define performing? Like, what metric are you referring to? So my view, the most important metric for EVs is energy density. Defined is watt hours per liter, volumetric energy density. You know, people sometimes mix up watt hours per kilo, call that specific energy. What, hours per liter is the most important. And the reason watt hours per liter is the most important is it translates to how many cells you need

to build a certain capacity pack. So back when we were using little tiny 18650s in the roadster, you know, it had 6,900 cells or so. But if the performance was 2x, if your energy density was 2x, then you'd only need 3,400 cells. And it would be a lot cheaper to make those cells and a lot cheaper to package those.

So I think about performance about energy density. And then because a lot of your costs are fixed on a per cell basis, right? You need to make a single cell no matter what energy it's stored, you have a lot of fixed costs, the higher amount of storage in a cell, the lower the cost goes in general. Yeah. So performance and cost are very related. Okay. All right.

So I interrupted you, but that's helpful. So you were talking about how we went, you know, cobalts and nickel to iron because cheaper and cheaper, but less performant. And in this case, what you mean by less performant is lower watt hours per liter. And therefore lower range for vehicles, right? So iron-based vehicles have lower range, the nickel-based vehicles today.

They're really kind of marginal, but they're good enough for some markets. They're good enough for some consumers, but they're not great for everybody. That speaks to a bigger thing for us to talk about because I want to get to what's happening in the EV market today. But it's an interesting, if you think about it in that frame, right, like the trade that we've been making broadly over time, as you said, is toward lower cost, shorter range, all things equal, right? because we've gone from cobalt to nickel, nickel to iron.

So now, like, LFP is on the ascendant path. And that presumes that trade is worth making. That, like, the downside, which is lower range or needing to put in a bigger battery in order to get the same range, was worth doing in order to get to, like, a cost point that maybe brings more consumers into the market. So there's this implicit trade that the industry has been driving toward for a decade plus, do you think that that's a false trade, or do you think that, or do you think

it's the right thing to do, I guess, for the industry? I think it's necessary, but not sufficient. You know, I think, you know, if you're really trying to replace all combustion fuels for transportation, you know, some consumers, for some consumers, a 200-mile EV is perfectly fine to get around the city. It's certainly much better than the Nissan Leaf back in the day that had 100 miles. But, you know, for a lot of consumers, it's not good enough. And I think you see this by virtue of the fact that even high-end vehicles are still mostly combustion, right? Even people who can afford to pay a premium for their vehicle are still not buying EVs for a number of reasons. I think there's, I think there's really three reasons. Range being one of them. Folks, you know, we live in the Bay Area.

A lot of folks want to just be able to get up to Tahoe without having to stop to recharge, right? Like, You cannot do that without like hypermiling it in a, you know, in most Tesla vehicles today. And those are the best, right? You know, two, recharge time. People don't want to wait around for a long time. If you could do 15, 10 minute recharge, that would help things. And three, infrastructure. People don't trust the charging network, although I think with the recent Tesla opening up,

the supercharger network, I think that's a complete game changer for that one. So those are your three reasons why high-end vehicles aren't going. On the low end, folks are certainly willing to replace, you know, a city car with a 200-mile-range EV. So I think it's necessary. I think LFPs, you know, and I did not expect to be, to be honest, in 2011, that LFP would play such a big role. But I think it's because I also expected that we would continue to improve performance and drive down cost of high-end selves. Almost nobody, or maybe nobody predicted LFPs rise in EVs, right? I think it was more predictable that we were going to see LFP for stationary storage,

but because of the penalty that you pay on energy density, I think the expectation was that that wasn't going to make sense. And even when it did show up in the market, it was initially, you know, it was like low-end, really cheap Chinese EVs. I think the biggest surprise, at least for me, has been that we're starting to see, like, major automakers, Western automakers using LFP in commercial passenger vehicles for mainstream adoption. And so again, to me, it's like, okay, the bet there is cost is the fundamental constraint on EV adoption over and above at least one of the three things that you mentioned, which is range anxiety, which is tied to the other two, obviously. Again, I think, I agree.

You need to lower cost, right? There are two ways to do that. You can use cheaper batteries that give you kind of less range, and you can use better batteries that ultimately come down in price as well, higher performing batteries that you use fewer of. So ultimately, the game is to reduce cost. And if you reduce cost, then for high-end vehicles, you can also increase range without increasing the cost of the car. If the battery gets cheaper, you can use a little more of it for those folks that want it. So again, I by no means I'm saying we need to, you know, LFP is the wrong direction. I think that's a, it's going to be a huge part of the market, but it can't be the only thing we do because if it's the only thing we do, we may replace the, you know, we may replace half of half of,

half of the ground fleet with EVs, but not 100%. Right. And so we're dancing around, obviously, what you're doing at CELA and what other folks are trying to do, which is like innovate on the anode side such that you can get, you could still use LFP potentially, but get a better performance out of the vehicle anyway. So it's like it's not an inherent trade. Although, am I wrong to think that, look, you're going to, if you do a silken anode, which is what you guys are doing, that improves performance regardless of the cathode chemistry. And so really, it is still a fundamental trade.

Like, LFP is still going to be lower energy density than NMC, all things equal. If both had a silicon anode, that would still be true. You just bump yourself up on the curve. Correct, correct. And, you know, there's some interesting nuances to that. You bump the high-performing cathode cells more than you bump the LFP. So, yes, LFP maybe gets, you know, 15 to 30 percent better in the long run, and nickel gets, you know, 20 to 40% better in the long run, right?

So you're sort of, you're moving the floor, but you're advancing the high end more. And then from a go-to-market standpoint, when you're introducing a new technology like this, you know, introducing the new technology, if you were to bring silicon anos to LFP, you start to approach graphite nickel battery energy densities, but not quite. And why does somebody want to buy that when they can just buy the low-risk nickel-based battery anyways? So for a new technology, you really want to bring it into a place where you can deliver performance no one else can achieve. And that's exactly kind of what we're doing with Mercedes. That's what we're doing with Panasonic.

We're delivering cells that deliver performance that no one else can achieve. That lets you build a vehicle that you can't build with today's technology. That lets us get to scale. And as we get to scale, we get to drive down cost. Before we move on from talking about battery chemistry stuff and start talking about the broader EV market, it, you know, on this trajectory of cobalt to nickel, to LFP, to iron, you know, a lot of people are starting to talk about, is there a next logical step in that chain, which is a sodium ion battery? I just want to get your take on, because sodium ion, it's a similar story to the LFP story in the sense

that it is less performance in exactly the metric that you're describing, but also potentially, and this is, I think, to be proven, but theoretically it could be even cheaper. than LFP, and then has these side benefits of like, oh, you avoid like the lithium price volatility and stuff like that. What's your view on sodium ion? I think sodium ion makes a ton of sense for the grid. I don't think it makes any sense for EVs. You know, it's hard enough to convince consumers to buy a 200-mile or 250-mile EV with LFP. It's going to be really hard to convince them to buy 100-mile EV. I feel like that's really kind of going backwards, even if it's a bit cheaper.

So, you know, it's not, there may be markets in the developing world where, you know, 100 miles or 50 miles is totally fine because you're using it for, you know, say a daily route of delivering, you know, delivering food or something like that. And you're just looking for the absolute lowest cost. But I think LFP serves that need pretty well. And we are so overcapaceted in the world on battery production today of LFP, which is part of the reason why the costs are so low that I think sodium. sodium would struggle to compete there. On the grid makes a ton of sense, and I think we're going to see it on the grid for sure. Virtual power plants are becoming a reliable way for utilities to manage capacity, but enrolling devices is just the start. What really matters is confidence,

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That's why more than 170 utilities rely on Energy Hub to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks like at energy hub.com. We're living through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them.

I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital, as I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. Are you tired of overpaying for big-name PR firms, but not really knowing what they're delivering? Is your comms team wasting time reviewing lengthy messaging briefs and decks, instead of engaging journalists or producing content? Are you wondering why your competitors are getting press and you aren't? Fishtink PR is an award-winning climate and energy tech, renewables, and

sustainability-focused PR firm dedicated to elevating the work of both early stage and a established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, fish tank can help. Check out fish tankpr.com. That's f-i-s-c-h-fish-tankpr.com. All right, so you just mentioned the next thing I want to talk about, which is the state of EV batteries and this manufacturing overcapacity. And you see these, you see these, you see these announcements or reporting, I guess, like you've seen reporting that LFP batteries are like $50 a kilowatt hour in China, that kind of thing. I guess I have two questions there. The first one is,

what's your sense of what's going on in the battery manufacturing world generally? And the second one is I feel like in those announcements, it's never clear to me who can take advantage of that. Like who's buying batteries on spot in China versus long-term contracts where you just aren't exposed to those kinds of price volatility anyway. So, like, what's happening generally and what are those numbers, the spot prices for batteries really mean? So I think what's happening generally is that we're in sort of the second, like, trough of dissolutionment of EVs, which means that we are just past the second hype cycle.

You know, I remember the first hype cycle when, you know, Tesla was launching, you had sort of Fisker come, you know, Fisker 1.0, not 2.0 coming on the scene. And there were reports that said, you know, 20% all costs. by, you know, 2015 are going to be electric. And it was sort of laughable when you really drilled down because the amount of just factories that would have to get retooled for that to be true, it was just nuts. And so when that didn't kind of come to pass, everyone sort of said, oh, this is going to take a lot longer, right?

And it took until really 2020, you know, or 20, I guess 18 or so, 2019, when the Model 3 took off that everyone said, oh, wow, no, EVs are going to be for real. And so that started the second kind of wave of excitement. And in that wave, again, the projections were all, half of all cars are going to be EVs, battery cost will continue to plummet at an insane rate. And it just didn't happen. Consumers didn't adopt as quickly as folks wanted. Battery prices dropped some, but not so much. And again, even with LFP being 50 bucks a kilowatt hour, it's not making everybody buy EV.

So it's not just a cost problem. So the world just overbuilt in a massive way, especially in China, but also kind of everywhere in the expectation that, you know, there would be this huge demand. And the way the, you know, a lot of the off-takes were structured, the automakers were protected. If the demand wasn't there, they weren't going to be forced to buy cells from these battery makers. And the car makers were very hesitant to sign sort of binding taker pays. And even if they did, if the cell maker was late on a factory, which they were all

bidding with really aggressive timelines to win the deals, the Nautermaker could get out of that, right? And we're seeing some of that in the market today. So we're just, we're going through a wave. It's very, very hard to predict when a market is going from, you know, 2% to 10% penetration, as we're doing with EVEs globally, the rate of that. It becomes much easier to predict going from 10% to 20, and it becomes incrementally easier to predict how it'll go from 20 to 30. So I think these shocks of supply demand shocks will start to be smaller and smaller, but it'll take us a few years and may take many years to use up the capacity that's already online. And that's what's leading to the battery prices that you're talking about. So the way that you're describing the contractual

relationships between the auto OEMs and the battery suppliers implies maybe that actually they are sort of able to be exposed to spot prices because they're not signing these long-term. take-or-pay contract. So is it true that like when we see, if it's, if you could go buy, you know, tier one or tier two LFP batteries for 50 bucks a kilowatt hour in China right now, will we start to see that flow through to consumer prices or to auto OEM margins? Like either way, are they taking advantage of that? Maybe. I think some of those, some of those contracts, they may well be long-term contracts, but the reality is if the cars aren't selling, these carmakers are going to find a way to renegotiate and get out. So it's, it's sort of they,

you know, if everything goes well, yes, it's a long-term contract. If everything doesn't, like, you know, there's no one, there's no one to buy it anyways. And, and they're not going to, you know, stockpile, you know, a million cars worth of batteries, right? Like, the parties work out a negotiated agreement. I think to your question of, like, are carmakers able to take advantage? There are oftentimes indices baked into these contracts for spot prices of materials and, or, or, you know, or some kind of trailing average prices of materials that allow them to get a lower price if, you know, the cost of inputs goes down. And the reason for that is because the cell makers want to protect themselves in a way that allows them to increase the price of the cells if the cost of the inputs go up. So, you know, the volatility of global raw commodities is something the cell makers certainly try to avoid. And so there's usually escalators and de-escalators that sort of track with those indices. So it's not that they're necessarily buying spot batteries, but the indices will lower the cost of the batteries that they get. Now, who can really take advantage of it is grid. Grid has very, very short buying times.

If the U.S. Interconnect queue was not as long as it is, you know, you could put a lot more storage on the grid at a very low cost. You know, the challenge, of course, is once you start transporting the batteries, once you start adding in tariffs, those type of things, the costs aren't necessarily 50 bucks a kilowatt hour. That's in China, right? You know, kind of X works at the factory. And so, you know, the folks that can really take advantage of it is, you know, grid developers in China is the best folks to take advantage of it. Right. That actually gets to the next thing I want to talk about. So, you know, there's this geopolitical dynamic to the battery market that I find really interesting. And it's complicated, right? Because, you know, there's China has emerged as a huge supplier.

Obviously, CATL, largest battery supplier in the world. So it's not exactly a China versus the West in some ways. It's sort of like China versus other Asian countries. And then there is sort of the West in and around the market. But of course, there are trade barriers that have emerged and, you know, come and go, as you mentioned. So what's your sense of like what the geopolitical landscape in battery world as it stands? today. And what prospects do you see for Western, let's call it, like North American or European suppliers to maintain any kind of long-term advantage?

I think one good thing about batteries, if you can call it that, is they're really heavy and they're a very, very big part of the value of a car. And so those two factors make it challenging to produce them on one continent for consumption, so to speak, for assembly into vehicles on another, it becomes a lot more effective if you can at least produce them on the same continent so that your transportation times are much shorter. And because they're so heavy you can't fly them, they're also hazardous to transport, so it's more expensive even when you ship them. So there is a lot of value to building battery factories on every continent. And I think that'll lead us to a natural distribution that's going to be a lot healthier than what we have with fossil fuels,

which are sort of naturally concentrated by geology. Or like solar for that matter, by the way, which is pretty easy to ship around the world. Solar cells are very easy to ship around the world in particular. Yeah, that's right. That's right. Once you add glass, it gets a little harder. But solar cells are incredibly valuable. And I did a little bit of this math before. There's like a 10x difference in the value per kilo of the good between batteries and solar. So it's still, a lot more efficient and effective and faster to ship solar around the world than it is with battery. So I think that's good. That's sort of a natural thing that's driving. And then I think the second piece driving, like you said, is geopolitics. No country wants to have its energy supply coming from

another country. And many respects, battery production is a supply of the energy. Now, you have to think about the whole supply chain, which oftentimes people don't. They sort of say, okay, well, if you've assembled the battery here, it's all good. Okay, but if all the components come from, you know, from less friendly countries, you're still in trouble when the supply chains break down. So I think that's really healthy. And so what we're seeing is, you know, the same Asian battery producers going to the other continents and building those factors. The U.S. has a lot of gigafactories being built by, you know, Korean, Japanese, Chinese battery producers. Same in Europe, right?

I mean, I think CATL is building something like a hundred gigawatt hour plant in Hungary, if I'm not mistaken. And that's huge, right? a million vehicles worth of, you know, one to two million vehicles worth of production right there. So I don't see that changing anytime soon in terms of who are the biggest players, but they're going to have to get local. They were right, you know, and the sort of geopolitics of trade are forcing that to happen faster and maybe even more balanced than a natural kind of state would be. Related to that, obviously as the EV market was starting to take off,

then particularly in the wake of the IRA, which provided all of these incentives, both like carrot and stick, for either domestic or friendly country manufacturing, where you can get tax credits for the production of stuff, but you can also, you have to, you have to produce stuff either domestically or in friendly countries to qualify for the EV tax credit. There's been this just mega wave of announcements of new manufacturing capacity of various kinds, particularly in the U.S., do you think that that all,

I mean, given what you're describing about the dynamic of the market, where like adoption is a little slower, adoption growth, I guess, is a little slower than expected, and we have this huge overcapacity in places like China. Like, do, does that jeopardize

this new wave of manufacturing, do you think? Absolutely. You know, the IRA can subsidize, you know, the startup cost of building these plants, but they have to run for 30 years. They have to be compensated. And in the first five or seven years, while they're going to be able to get benefits from the IRA, there still has to be demand.

Like, you still have to have customers to buy. So if you build, you know, if you build five million EVs worth of production, of battery production in the U.S., but there's only one million of demand, you're in trouble. You know, there's nothing, you know, if there's no revenue, there's no, there's no amount of subsidy that can, that can save you. So I do think some of these projects are still are not going to go forward at certain states. pages. You know, and that's kind of classic. A lot of times, you know, maybe half the announced projects end up getting built. The pipeline is way bigger than the demand today. And so some of them will get, we'll get mothballed for some amount of time. But I do think overall the IRA is helping bootstrap domestic production of batteries, battery materials. I think,

you know, it could be tweaked to do that even in a way stronger way, but it's certainly having a good tailwind effect for us and for other. in the field. This is sort of an unrelated question, but you have interesting insight into it, which is the other thing that's happening in America right now is this like boom, this load growth on the grid, which is caused first and foremost at the moment by data centers, but also impacted by all this manufacturing expansion that we have been seeing. And, you know, one thing that I've been trying to understand a little bit is

is the fact that there is such urgency to build data center capacity, which is sucking up like all the locations that have available power capacity at the kind of scale that you would need, actually going to make it more difficult to build new manufacturing in places where you have sufficient power and where it's cheap enough. So you guys set up a big factory in Moses Lake, Washington. How much power do you need for that factory? So today we're using, we have about 20 megawatts plum to the,

and 20 MVA plum to the site. we'll get to 60 in the next two years. You know, as we scale, we may need 200. So the numbers get big, depending on how big a plant you build. But you're absolutely right. The build out of that power was already slow. And, you know, we see, you know, folks wanting to put Bitcoin mining or some other kind of, you know, there's their data centers, you know, down the street or in cities nearby because it's hydro power. It's very low cost electricity.

You know, I think the pessimistic view is these things are going to come in huge conflict, for sure. The optimistic view is it's now such a problem and there's going to be such a concert of voices saying, hey, we got to fix that. And if, you know, if big techs, you know, machinery can help solve this, whether it's politically or through supply chain, you know, increases of key components, you know, that could be the silver lining in it, is you're bringing to bear, you know, these huge. economic players in the big tech world to that may actually help if if we kind of work together. Going to Washington State, and especially for manufacturing, I immediately am thinking, oh, you wanted like a lot of cheap power, right? Like, was that a big factor for you? Huge factor. Not only that, we bought a site with 20MVA, so we didn't have to wait in the queue for getting power. And we know of companies, you know, that may miss their entire

factory startups by a year because they can't get power in time and there's just nothing you can do. I mean, our ability to expand at that site is constrained first and foremost by power. And so, you know, we're working really hard with the local community to make sure that we're able to expand there because if we're not, we're going to go to, we're going to build the factory. We just would build it in a different state. And that's not good for us and that's not good for local community. And so working through all of the like state, federal, local elements of getting power to these manufacturing sites, I think is really critical and can frankly be a competitive advantage for states and a competitive advantage for local communities that are able to sort of

operate, you know, faster. You don't have to, you know, you don't have to be really fast, but you just have to be faster than everybody else. Right. You have to be faster than the slowest competitor. Back to battery world. So here's the other thing I wanted to get your take on. I think you know that I was until recently not an EV owner. I am now an EV owner. I got the EV-9.

And the EV-9 has 100-kil-I-I-Guard-hour battery. So it has 100-kill-odd-hour battery. So I've got a big-ass battery in my car. And I don't yet have a power wall or home storage. I do live in the Bay Area. And so I've thought about it. But the more that I think about it, the more I think V to G actually, or Vita H, right? Some version of using my 100 kilowatt-hour battery that's just sitting in my car makes sense for me to power my home.

And I know one of the reasons why that has been slow to take off, it's starting to, right? Like the F-150 lightning you can use for V2G or whatever. It's bidirectional. But I know one of the reasons historically has been concerns about the battery. Like if you're going to do all this bi-directional charging, actually, maybe. you wear the battery out sooner? Do you have a view on that? Do you think there's a technical limitation to bi-directional charging with EVs, or is it really just like a market structure problem? I think the technical limitation can be overcome fairly readily if there's market

signal that there's the value to overcoming that technical limitation. So what I mean by that is, you know, yeah, cycle life in EV batteries is limited, but it's set as a specification for a certain type of service life for the vehicle. You know, 200,000 miles, 15 years, you need to stay above, you know, 70, 80 percent kind of state of health. So, you know, pretty extreme. Two hundred thousand miles, you know, is a lot. And most vehicles beat that, right, because that's like the warranty that they never want to hit. And most vehicles don't live in quite as hot environment as the limits. They don't drive as aggressively as the limits of the warranty. So most vehicles do way better than that. I think Tesla Model S is out there that have gotten over a million miles on their packs.

So I don't think it's technical, there's a little bit there, but it's much easier to overcome. I think if the market signal exists, that that's worthwhile. I agree with you completely. I mean, you know, we have a fairly large household. We have like 300 kilowatt hours of batteries sitting in our driveway, right? We could be off grid. But I think the other constraint you have to really consider is kind of use. How does someone use the battery?

Right? So one of the challenges is, let's say you have solar on your home and you want to kind of use it to, you want to use your vehicle to load shift. Well, you're not home with your vehicle during the day. You're at work. So I think there's both market structure, but I also think it's, you know, you have to really think through. Now, huge power outage. Right. Backup power is really mostly what I'm thinking.

I'm not yet thinking about using my car to load shift. That feels aggressive. and I do have some concern about like, I don't want to use all the capacity in my battery and then not be able to drive when I really need to. So it feels to me like at least as a starting point, we're talking backup power. That to my mind is a no-brainer.

Now, the question there is, what do you have to do in your electrical panel to kind of get that to work? So you start to kind of, how does a car maker ensure that your electrical panel is well set up to serve as backup power? I don't know, but I agree. And coming back to it to kind of EV adoption, one thing to remember is, you know, people aren't going to buy EVs just because they're cheaper than gas cars.

People are going to buy EVs faster if they're just better cars. And this is one of those things that EVs can offer that your combustion car just could never offer. Like, I mean, I remember, you know, during winter storms when I was a kid, we would run, you know, the car's engine, right? And then we'd have like a 1500 inverter plugged into like the 12 volt of the car running, you know, gasoline engine to like power a little bit of lights during, you know, during a multi-day outage. But that's, you know, that's, that's ridiculous, right? A terrible idea. I mean, it's, the whole thing is nuts, right? And so you're like, EVs are amazing because, yeah, look, power goes out.

Like, but your home doesn't, the lights don't go off. And we have to sell consumers on sort of all these other things that EVs can do. that are just better. You never go to a gas station. It's more fun to drive. All of those things, right? I imagine you enjoy driving your EV a lot more than you did your prior car. It's the best. I love it. It's embarrassing that it took me this long. You know, we've talked about this. It's embarrassing that it took me this long to get an EV, but obviously it's better. It's just like so much better. Yeah, so we just have to make them better cars. We get so obsessed about cost. We forget about what it is consumers really care about, which is like great products.

You know, how much does your, do you use an iPhone? You use an iPhone, right? I use an iPhone, yeah. Yeah, why don't you use the cheaper phone? Because an iPhone is better. I guess it's because an iPhone is better, but there's also, I mean, you're making me think about this in the context of EVVs, but like, it's like the, it was like the lowest activation energy to get an iPhone in some ways where I was just like, oh, like, okay, I guess,

I need a phone and I guess I want a cool or a good phone that, like works. And like, I guess that's an iPhone. I haven't done the research. I don't know anything about the alternatives, to be honest. It's like not where I'm spending my time and my effort. It's interesting to consider what it's going to take to get to that point with EVs. It's the default option, basically. I mean, Elon made it way easier to buy a car, right?

And I think that's a lot of people bought it because it was just way easier. You don't have to go haggle with a dealer or all of that. And then it is easier, lows to activation energy, and it's a great product, right? There's a lot of products that are low activation energy and you never go back a second time. Right. Okay, so I guess to wrap it up then, You know, you talked about what you think the barriers are to EV adoption today and why we haven't seen the like continued inflection, why we're going from 2 to 10, but it's not like going from 10 to 20 as fast as it's gone from 2 to 10. Do you have in your head a benchmark for like what the tipping point might look like?

And if there's one of the specs we need to see, either from the vehicle itself or from, I don't know, availability of charging or something like that. Like, what is enough? It's a great question. You know, look, I think some of that is going to come down to great cars getting out there. It's not just the technology. It's not the specs. You know, go back to, again, like, think of the Tesla Model 3 as, you know, the iPhone, right, of EVs. Like, everyone knows it's the future. Everyone changed their roadmaps. Everyone's building the new thing. But how do you get to the kind of iPhone 3G where sort of everyone's like, okay, now it's great?

And so some of it is a combination of price reduction. Some of it is, okay, for a compelling price, a compelling range, really fast recharge, maybe 15 minutes, right, tops to, you know, from, let's say 10 to 80. And the confidence in the infrastructure. I actually, you know, the, I just did a trip where, what are we, maybe 500 mile kind of one-way road trip and back. And we were able to use the Tesla network. and you know, you just get in the car and you go. Like, you just have enough confidence where you just don't worry about it. But if you're not on the Tesla network, and I've done that trip as well, you're really worried about it.

If you try, you know. And so, you know, I think that, again, it's got to be a little bit of a switch. So I think the density that exists and of superchargers today is probably sufficient. But if you can, no, you can recharge faster and know you don't have to recharge unless you're really going on a long trip, I think those are the two things for a compelling price. So we'll see. It's going to take a carmaker. It's not enough to just have great technology.

We're like an enabling piece. You know, if you don't have, if the radios aren't good enough, if the screens aren't good enough, if the batteries weren't good enough, you weren't going to have the smartphone revolution that we've had. But you also need someone to put it together and make that really next-gen vehicle. All right, Gene.

Fun as always. Thanks for coming back on. Thanks, Shail. Gene Berteshevsky is the co-founder and CEO of Cila Nanotechnology's. This show is a production of latitude media. You can head over latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. Pralood Backs Visionaries, Accelerating Climate Innovation

that will reshape the global economy for the betterment of people and planet. Learn more at Preludeventures.com. This episode was produced by Daniel Waldorf and Sean Marquan. Mixing by Roy Campanella and Sean Marquan, theme song by Sean Marquod. Stephen Lacey is our executive editor. I'm Shao Khan, and this is Catalyst.