The increasing sales of electric vehicles (EVs) globally are paving the way for the growth of EV recycling businesses. Recognizing this potential, a leading EV recycling franchise recently secured a significant investment to meet future demand.
On Tuesday, Redwood, the EV materials company founded by Tesla’s J.B. Straubel, announced a successful $1 billion capital raise in its Series D round. The funding was led by prestigious firms such as Goldman Sachs, T Rowe Price, and Capricon, a private-equity player focused on sustainable investment.
While Redwood did not provide immediate comments regarding a potential stock listing, the company revealed that the $1 billion deal values it at over $5 billion. Although Redwood shares are not yet available for purchase, investors can still explore opportunities in Li-Cycle, another battery recycling and materials company. Shares of Li-Cycle saw a 2.5% increase in Tuesday’s trading.
It’s worth noting that while the significant surge in stock prices of Li-Cycle can partly be attributed to the overall market performance (with the S&P 500 and Nasdaq Composite up 1.1% and 1.5% respectively), the valuation of Redwood likely played a role as well.
Li-Cycle, with a market capitalization of approximately $800 million, has already started generating revenue. In the second quarter alone, the company reported sales of $3.6 million. Analysts project that Li-Cycle’s sales will reach around $15 million in 2023 and surge to $155 million by 2024.
Financial information about Redwood remains limited at this time. Nevertheless, both Redwood and Li-Cycle present promising investment prospects for individuals interested in capitalizing on the growing demand for EV recycling.
The growth stories of Redwood and Li-Cy often overlook a crucial aspect – the recyclability of EV battery metals such as lithium, iron, cobalt, and manganese. Unlike gasoline or oil, these metals are not consumed but can be recycled repeatedly, much like scrap steel, aluminum cans, or old copper wires. It is the very nature of metals to be reusable.
Currently, there is a robust infrastructure for recycling steel, with junkyards expertly crushing traditional cars. However, the infrastructure for lithium and cobalt recycling is still in its early stages. This is precisely what companies like Redwood are focusing on – building EV junk-processing businesses. These companies deal with a component that resembles the fuel tank of a conventional car more than the gasoline used to power it.
While gasoline and the oil used for its production are finite resources that are consumed once, the same is not true for EV battery metals. Approximately 4.5 billion tons of oil are burned worldwide each year, contributing to irreversible depletion.
In contrast, the combined total annual mining yield of copper, aluminum, cobalt, manganese, and lithium stands at less than 120 million tons at present. To put this into perspective, steel alone accounts for a staggering 2 billion tons annually. However, only a small fraction (around 10% to 15%) of steel production is utilized for car manufacturing. The majority finds application in buildings and construction projects.
When investors compare electric vehicles (EVs) to traditional cars, it is essential to shift the focus from comparing batteries to oil and instead consider electricity as the counterpart to oil. Although coal and natural gas are still extensively used for electricity generation, there are also various non-carbon-emitting sources available. In fact, approximately 40% of energy production in the United States comes from such sources.
While EVs made up approximately 8% of all new car sales in the US during the second quarter of 2023, they still constitute less than 1% of the entire vehicle population on American roads.
It is evident that the future of EV battery metals holds immense potential. With a growing focus on recycling and renewable energy sources, these metals can play a pivotal role in mitigating carbon-dioxide pollution and combating global climate change.
