U.S. Battery Manufacturer Tempted to Establish Presence in the EU

An American startup says it can cut reliance on China for key parts of electric vehicle batteries. European Union money means it will build its first factory in Europe instead of the U.S.

Rochester, N.Y.-based GDI will announce on Wednesday it is getting a €20 million, or $21.8 million, loan from the European Investment Bank, the lending arm of the European Commission. The battery-part manufacturer said the funds will allow it to build its first manufacturing plant in Lauenförde, Germany, which is expected to start producing from 2025 and be scaled up to a gigafactory by 2028.

The company produces anodes—a key component of EV batteries—but makes its product with pure silicon rather than graphite, a material that currently comes primarily from China.

GDI’s use of silicon instead of graphite was a key reason for the EIB investment. “It does not need any graphite, which makes us less dependent on countries like China to get our materials. We’re trying to avoid them [China] having that stick in the future,” said Bert van der Toorn, senior investment officer at the EIB.

China doesn’t actually control graphite mining but it does control its processing, according to Andy Leyland, managing director of battery consulting firm SC Insights. He said about 55% of natural graphite is sourced from China, but the country controls 90% of graphite processing. “It’s a big supply chain risk as you have a single point of failure,” making companies like GDI important, he said.

GDI’s decision to set up in Germany runs counter to the trend of European firms setting up manufacturing hubs in North America, attracted by the generous Inflation Reduction Act tax credits. Last year, German auto giant Volkswagen and Swedish battery maker Northvolt both said they would be building battery plants in Canada.

The IRA is an important focus for Europe because it is attracting businesses to move to the U.S., according to van der Toorn: “This is a counter argument to that.” Since 2016, the EIB has invested roughly €1.5 billion in technologies related to the energy transition.

GDI is one of two recent EU wins to keep production for batteries and clean technologies within the bloc. On Monday, it approved €902 million in state aid funding for Northvolt to build another battery factory in Germany. “Without the aid, Northvolt would establish the plant in the United States, where support was offered, in particular under the Inflation Reduction Act,” the EU said in a statement. The bloc wants to use its funds to spur more than €372 billion worth of additional investment from both public and private sources in clean technologies by 2027.

Leyland said GDI’s decision to build in Germany is a signal the “pendulum is swinging back to Europe ” despite the subsidies provided by the IRA. He added that more Chinese firms could set up in Europe, given U.S. politicians’ concerns about Chinese companies.

GDI said by layering silicon on top of a copper foil in its anodes, the energy density of the battery is increased by roughly 30%, leading to a longer battery life and cutting the charge time to 15 minutes.

The company said its process is similar to how reflective coatings are applied to skyscraper glass. It is partnering with a German glass manufacturer, AGC Glass Europe, to produce its silicon anodes. GDI will source silicon from silane gas produced in Butte, Mont., and copper from German producer Schlenk.

GDI is also working with the U.S. Defense Department to explore possible use of its anodes in military equipment after its product recently passed an industry-standard test of the cell’s safety and performance when pierced with a nail.

Write to Yusuf Khan at [email protected]