JB, thank you for joining us. Is this a special moment for you right now, receiving this award? I would imagine it's up there. This is pretty cool. Thank you. I really appreciate the recognition. It's a great honor, and as you said, incredible company with some of your previous recipients here. I'm used to staying a little bit behind the spotlight sometimes. I prefer to be one step behind things and just get stuff done and make it work. It's unbelievable to see how this industry has grown and what the scale is today, and also where we're going. We're not done yet. So thank you so much. This is humbling and I really appreciate it.
More than welcome. Did you think my thoughts on the election were too optimistic? I echo your optimism, actually. As we were joking beforehand, I'm an optimist by heart as well. I think we kind of have to be in some of these markets where we're trying to create change and innovate. I am cautiously optimistic about the future of this industry in the US in particular, and what this administration can do here. We can't change the current reality of what we have in the country. As you've highlighted, the Republican states stand to gain a huge amount from this. This is fundamentally an industrialization activity that we're in right now. We're scaling up, building mines, refineries, manufacturing sites. That's a different shift than where we were even four or five years ago, when we were trying to figure out the incentive structure to accelerate this. That's happened now. We just need to make sure it's going in the right direction and is balanced.
When you built the original Gigafactory in Nevada, you were saying most of that happened under the Trump Republican administration. Walk people through that story.
Absolutely. Tesla, prior to Redwood and even Redwood, we've gone through multiple cycles of Republican and Democrat administrations. This is a bipartisan issue if there ever was one: energy security, jobs, the environment. In the beginning with the Gigafactory, it was linked to a supply chain necessity for the EV, for the Model 3 at the time. It was an audacious, amazing thing to have the concept to go and build several hundred thousand EVs, which was 10 times more than anyone had ever done successfully. The first big question was if anyone would even buy that many EVs. But we also knew that if we wanted to succeed, we would have to have the battery supply, which didn't exist. So we had to preemptively start the Gigafactory project before even knowing if the customers or sales would come. That was a nail-biter. We literally had to bring the supply chain in. Panasonic was the first real battery maker to take that leap and commit to that factory and supply chain before knowing what the customers were going to do. I specifically remember the launch event for the Model 3. It's a distant memory now, but it was a pivotal turning point. There were lines around the block, like an Apple iPhone launch. Over the course of maybe three or four days, there were several hundred thousand reservations. It blew all expectations away, even from inside Tesla at the time. I remember coming back to the office and thinking, 'Holy crap, we need to make this thing bigger.' We had gone as far as we could with our risk planning, and we doubled it, almost from one week to the next.
Can I pick up on that, JB? I'm really interested. I think a lot of people in the room will be interested. What you described at Tesla was creating a whole ecosystem for the company. I think we're starting to see some of that around your plans at Redwood. I'm eager to hear what you think the importance of creating that ecosystem is. We have a very fragmented, diverse supply chain with lots of people specializing in lots of different areas. But there's an argument that to push things forward at speed, which we need to do, you need to create that ecosystem yourselves under one roof.
In the beginning of the journey at Tesla, some of that was by necessity because there was no supply chain. We couldn't go out and buy a battery module, a motor, or a charger from other companies. That supply chain didn't exist. We were forced to figure out how to design and build it ourselves. That actually led to a really inherent strength that endured for decades: tight integration and excellent engineering optimization across all the physical components. That benefited Tesla massively. It's a tightly integrated architecture across that whole vehicle and all the vehicles they make today. But that's now extending to not just the functional components but the batteries, the materials, the active materials, even the minerals. As we get to these scales, that dependency and the risk of having a supply chain that is global and subject to geopolitics and tariffs, which could be highly volatile, really hit home through COVID. That seems like ancient history now, but it highlighted the massive risk of the supply chain that was even outside of the dysfunctional module ecosystem. Tesla was one of the companies that took some of that to heart and launched initiatives to begin to make a more tight ecosystem. But at Redwood, one of the opportunities I saw early on, back in 2017 or 2018, was to help architect that for the whole industry. I think this is a fundamental opportunity across the whole electrification industry—cars, trucks, even stationary—to architect that business ecosystem, figure out how to technically refine and reintroduce these materials. I saw a huge gap. There were no companies owning that; there was no incumbent technology or business architecture for it. But you could look at the physics and say that in 20, 30, 50 years, this will be the majority of the material flow. Most of the nickel and lithium atoms in that ecosystem will be flowing in a loop. How would it work? No one could say.
Why do you think that was? That people just didn't connect the dots. Is that a wider culture of not building stuff for so long, or something else?
I think it's twofold. One, it's far away. It seems infinitely far in the future. When you think about something relevant as the whole EV market matures and starts to reach a steady state and turnover, people say that's maybe 10 years away before a car comes back. It's too far to think about. That put blinders on people. The other was just that it's unintuitive that these materials can get reused with such high efficiency. We're so used to a petroleum and fossil fuel ecosystem where things go from extraction to refining to consumption and that's the end. Then we worry about CO₂. But this is fundamentally different. It's actually quite simple, but it's unintuitive that these minerals go into an application and just stay there. They don't get lost. They're 100% contained in the application, so they are all available to get remanufactured and reused. That is a fundamental difference with the electric infrastructure and ecosystem we're building now versus the fossil fuel or petroleum ecosystem.
With the concept of recycling being so new and people just coming to terms with the fact that we need to figure out a full life cycle for these materials, I'm curious what you think the opportunity is for the US. You see China doing bits and pieces around this, but there's a lot more work to do to get an efficient closed loop for the battery supply chain. Do you see the US taking the lead? In so many parts of the supply chain, the US is playing catch-up. Is this an area where we can take the lead? And going back to politics slightly, do you think one of the positives from the election is that the focus on doing stuff within our borders will mean we're not trying to take technology or partnerships overseas to fill IRA criteria, but can actually do it ourselves?
To your first question, I do think this is a huge opportunity for the US. If there's one thing we're good at, it's consuming. This is an incredibly powerful consuming market. It's an incredibly strong automotive market. We're buying a lot of these batteries. When you look at the graphs of who's buying all these batteries and where they're going, the US is a large portion. China is a big chunk, but the US is large. That in and of itself creates the opportunity. That's the beginning of the chain that allows us to own, control, and reuse those same materials we bought the first time again and again. That's unintuitive because we're used to thinking that importing something is a bad thing. But in this case, I think of it almost as an investment. We imported it, now we have it. We should work very hard to benefit from the strategic value that we bought and took control of—the minerals in the battery, the battery itself, the ecosystem around that. This can be an incredible opportunity for the US to shift its position on this. It'll be very hard, but not impossible, to ever fully meet demand with domestic mining for all these materials. I am supportive of it; I hope and want it to happen. But the geology just isn't that favorable for enough nickel or copper within US borders. You can get some, but it would be hard to close the loop entirely. With recycling and reprocessing over time, that can be one of our most strategic ways to compete with external supply chains. If we're not constantly importing the same material, that gives us a leg up to invest in refining and midstream manufacturing here. To your second point, that is missing today. Even if we recycle material today and refine it again, we're missing a lot of the industries along the way to benefit from that. We have to figure that out to realize the benefit and capture the economic value. Otherwise, we risk being a consumer and importer and then exporting our scrap and waste for someone else to benefit from. That would be a shame.
What do you see as the role of Redwood? We've seen you move into that midstream and show what you're targeting. I'm curious what you think the optimal role of a company like Redwood is, and beyond that, speak about the partnerships with automakers and the big deals over the past 12 months. Is that the model—plugging into automakers? Where do you stop along that midstream?
We're building into cathode active material. That's one of our big initiatives: to manufacture CAM. Our partnerships on the outgoing side are with cell makers and automakers who are stretching into battery manufacturing. Our biggest key customers are people like Panasonic, Toyota, and their battery manufacturing arms. That's our initiative to bridge that midstream. But it's tricky for one company to do all this. We need more of an ecosystem growing in the US. This is where the implementation and interpretation of the IRA missed the mark a little bit. It de-incentivized midstream investment in the US. There was incredible success in incentivizing battery assembly and final manufacturing in the US. That was targeted at exactly what the incentive said, and people cherry-picked where the incentive existed and invested there to capture the $35 per kilowatt hour incentive. But as the implementation adjusted, it said the vehicle tax credit doesn't need local CAM production or local mineral extraction, mining, or refining. All of that investment quickly moved to other parts of the world where it was cheaper, more geopolitically favorable, or where more incentives existed. That is one shortcoming in my view of how the IRA got implemented. It's also a pathway for how the new Trump administration might reconcile the IRA to make some adjustments and reduce the outflow of money, which is one of their stated goals.
