Welcome back to The Electric!
This Friday: Who is the Most Aggressive EV Company Not Named Tesla? It’s Volkswagen. For the next Live Chat, I’m excited to welcome Thomas Schmall, VW’s head of technology and member of the company’s board of management. Friday at 10:30 a.m. ET. Register here to get your link.
For weeks we’ve been discussing the weak position the auto and battery industries have created for themselves by neglecting their supply chain. Today we turn to a bright spot—a cottage industry of graphite anode companies that has sprung up in the U.S. and Europe.
Some six years ago, Syrah Resources, an Australian mining company that owns the world’s largest known natural graphite deposit, thought it detected clues of a coming boom in the sale of electric vehicles and resolved to be part of it. Specifically, Syrah (pronounced SYE'-ruh) decided it shouldn’t just be a miner—it would try to manufacture the high-grade, engineered graphite that goes into the battery of every EV. And not only that—it would sell its new product to U.S. carmakers, among the most discriminating buyers in the world. In 2018, Syrah built a graphite processing plant in Vidalia, La., 140 miles north of the Gulf Coast, where it found skilled laborers from the oil industry, and two years later it began to ship samples to about a dozen potential customers.
Last month, Syrah hit pay dirt: Tesla agreed to buy out virtually its entire initial production from the Louisiana plant for four consecutive years, starting in 2023. Syrah’s share price has surged 65% since, bringing its market capitalization to around $758 million. Now, CEO Shaun Verner told me, Syrah is working to expand and parlay the Tesla coup into sales to the other auto- and battery makers.
In recent months, doubts have emerged regarding U.S. and European readiness for the expected steep rise in consumer demand for EVs this decade. The major auto manufacturers, spooked by the massive growth of Tesla, have rushed to scale up their own battery-making capabilities, but they have largely neglected to arrange for local supplies of the critical processed metals that make the batteries work—the cobalt, nickel and manganese sulfates, the lithium carbonate and hydroxide, and more. A growing shortage and steep price rises in these metals have left the automakers, including Tesla, largely dependent on the dominant China-based suppliers.
But amid the rising worry, a little-noticed cottage industry of nimble producers of graphite—the most prominent ingredient in EV batteries—has bubbled up in the U.S. and Europe. Syrah and a few other young graphite companies are a rare bright spot in an otherwise grim landscape. They share a distinction: having anticipated the EV boom and made the investment needed to be ready for it.