The Exchanges

Q Yeah, maybe contextualize. So back when Northvolt was getting founded in 2016 or thereabouts, who were the dominant players in the lithium ion battery market then, and how does that compare to today?

A Um, I think it's, it's close to today, what, what, what it was in, in 10 years ago, uh, with the exception that, that the, the, the, the clear leaders were the Koreans and Panasonic, so that by the Koreans I mean LG, at that time I was called LG Chem, now it's called LG ES, and, uh, Samsung SDI, and, um, to a lesser extent SK SDI. Uh, which is now referred to as SK On. And then Panasonic, of course, had the, the, the Tesla contract, and was, was probably the, at that point, was probably, because the Gigafactory had been built and was up and running, was, they might have been the number one producer at that point. The Chinese were there. CATL was, was producing in large, uh, amounts, and BYD. I think the biggest, uh, Uh, change in the industry today is that there were probably close to 100 Chinese battery manufacturers, and today there's, there's 10 that, that matter and that do it at scale, and really there's two that, that completely dominate the industry, and that's BYD and CATL. Um, so China was, was definitely producing batteries, was definitely part of the overall competitive mix, um, But it was a little bit different landscape at the time.

AI assessment note: “the clear leaders were the Koreans and Panasonic... biggest change in the industry today”

Q which was How we were going to define rules around foreign entities of concern and battery sourcing therein. So I want to, I want to talk about what that latest guidance is and then what it portends about qualification for EVs for this credit and like all the rejiggering of the global battery supply chain that comes with that. Um, so let's start with what, what was the latest guidance?

A So essentially they're, they're defining the term foreign entity of concern for For the purposes of the, the tax credits, and, ah, they, they list out what makes a foreign entity of concern, which is essentially a company in China, Russia, North Korea, or Iran, and they, they go into some more detail about that, such as the percentage ownership of the, of the, ah, Communist Party in China, or, or, you know, if it's a joint venture, for instance, how much is owned by the Communist Party, how much is owned by the Chinese government, Um, and what would qualify, and that, that number is now 25%, so it can't be, it can't be a Chinese ownership having, Chinese company having an ownership of 25% or more, or else it becomes a foreign entity of concern, and therefore disqualifies you for the tax credit.

AI assessment note: “they're defining the term foreign entity of concern for For the purposes of the, the tax credits”

Q and complex set of rules. But despite the complexity of those rules, I think you at the time, and this was soon after the bill passed, you were pretty bullish on The impacts that it would have on the domestic supply chain in the United States for battery, everything from battery minerals to battery manufacturing. So bring me up to speed from then to now. What have we seen happen?

A So we've had a lot of activity. On the guidance perspective, we've had the Treasury Department issue a white paper in December that, that talked about this concept of constituent materials. So it's kind of an interim step between Strategic minerals, which is one half of the, of the tax of the EV tax credit and component battery components, which is the other half of the EV tax credit. And in between, there's this constituent materials, and they said, we don't know how we're going to handle this. We'll let you know by the end of March. And then this morning, they issued their full guidance on how constituent materials will be, will be qualified. Um, so the, that's, that's on the, uh, the update and guidance of, of the IRA. Um, in terms of, of, of the actual progress of building out a supply chain in North America, there's been enormous amount of activity. And I still think there, there's going to be another, uh, big, uh, jump in activity over the next six months with this guidance. So among that is the announcements of several large cathode production plants, most of which are going to be located in Canada. Um, we have the Tesla, uh, factory in Mexico that was announced and a new gigafactory and car factory that will be built in Mexico. Um, Um, we have the CATL Ford battery plant. Uh, it's, it's not, it's, it's really a Ford battery plant with CATL, uh, technology guidance, but,…

AI assessment note: “the announcements have just been coming fast and furious throughout the entire supply chain.”

Q were, they were getting pushed. I think both by our free trade agreement countries, possibly by auto manufacturers, maybe Tesla included on this. And so they were sort of trying to figure out what the right solution was. They fell on this, on this side of it and We'll see what happens. Is this the, this is guidance? Is this what comes next? Like what's left to be done here?

A So, I think that this, there is one big hole in, in what we don't know, which is, um, foreign entity of concern, and they did not give guidance on how they define foreign entity of concern for the purposes of the EV tax credit. Um, and, and, you know, they, they, they didn't give any guidance. They, they were asked very specifically, is, is a country a foreign entity of concern? Do you have to name the company itself as a foreign entity of concern? And they wouldn't even say that. So there's, they still have another six months or so to, to provide that guidance. Um, and that's important because if you are today shipping your spodumine to China to be made into lithium hydroxide, um, then that's, if, if, if, if, if China does turn out to be a foreign entity of concern, that will, that will disqualify that material for, for the tax credit. So right now, it, it, it is going to be qualified, but as soon as they, they name specifically what they mean by foreign entity of concern, that could change.

AI assessment note: “there is one big hole in, in what we don't know, which is, um, foreign entity of concern”

Q right. So I think we'll come back to that because the significance of, um, what the Treasury guidance today is impacted by these countries and what exists in these countries. Before we get to that, maybe let's just do a quick refresher. Um, can you just walk through the two components of the EV tax credit, what it takes at the high level from the bill to comply with each?

A Sure. So there are two parts to the EV tax credit. One is battery components. And one is strategic minerals. Strategic minerals is, are the minerals that are extracted from the ground and then processed into battery materials. The battery components are the finished electrolyte where the electrolyte slurry is put onto the foil, which happens at the battery factory, as well as the separator, the electrolyte, the foils themselves. And, um, in, in the case of the strategic minerals, You, the, there is a percentage requirement of the total value of all the strategic minerals that must come from the US or free trade partner countries, and that percent starts at, for, for strategic minerals, it starts this year at 40% of the value has to come from the US or free trade partner countries, and that goes up 10% a year till eventually you get to 80% requirement. Um, for the components portion, Uh, it's starting at 50% this year, has to be made in North America, and it goes up 10% a year until eventually a hundred percent. So, in other words, you have to make the battery cell itself has to be manufactured in North America, U.S., Mexico, or Canada, um, and the minerals have to come from the U.S. or free trade partner countries. Um, now, interestingly, there's a big Gap. There's a big hole in the donut there between minerals and components. And that's what today's guidance really laid out wa…

AI assessment note: “there are two parts to the EV tax credit. One is battery components. And one is strategic minerals.”

Q other direction and said constituent materials are more like critical minerals, it is U.S. or free trade agreement countries. And critically, I think, Korea is a free trade agreement country. And correct me if I'm wrong, Korea is where a lot of cathode manufacturing or anode material manufacturing takes place. So does that Basically remove the incentive for domestic cathode and anode material manufacturing that otherwise would have been there?

A I wouldn't say it removes it, but it, it, it does place it on a level playing field with building a new plant in Korea or, or with Japan in the case of the new, uh, the new treaty with Japan. Um, so now if you, if you are going to build a new cathode plant, you have to choose, do I do it in North America or do I do it in Japan or Korea? Basically, um, you could do it in any one of those 14 countries that we have free trade agreements with, but there's not much advantage Else, elsewhere to do it there. Um, what it does do is existing facilities in Korea and Japan will be able to qualify for, for this, um, for this agreement. And that's, that's a big deal, because if they had to rebuild that production capacity in North America in 2023, they wouldn't have been able to do that. And that goes back to the Japan agreement. Um, essentially, my, my conspiracy theory, Is that essentially this was a, a bone that was thrown to Tesla. Because Tesla makes its battery cells in North America with Panasonic. It makes some of its materials in North America. The, the, the, uh, the electrolyte is made here, the, the separator, the cans, some other things are made in North America. But the cathode, which is by far the most expensive part of the battery, is made in Japan by Sumitomo Middles Mining. And by, by, by sneaking this, this free trade agreement in, they allowed Tesla to qualify for the com…

AI assessment note: “I wouldn't say it removes it, but it, it, it does place it”

Q actually don't have that many EV models that hit all the criteria, is it, is the ramp in these requirements, you know, the, how, how low it starts sufficient such that it will have a glide path into that big market, or is it actually going to be more like, You know, is there an, is there a possibility this is going to short-term hurt EV adoption, long-term help it?

A Short-term, it definitely hurts EV adoption. It's, it's a net negative because nobody qualifies for it. Now, keep in mind, I mean, we, we've got a lot of cars and, and look at Hyundai, for instance, they, they were just racking up sales of the, the Kia EV six and the Ioniq five, uh, In, in the U S which were reasonably priced. They were still overpriced because demand was so great, but they were in the, you know, 50,055 thousand dollar range and they were, they were doing really well and they were starting to creep up on Tesla sales numbers. And now all of a sudden they don't qualify for the EV tax credit cause they're not made in America. Um, so they are scrambling to, to accelerate their plans For production of their cars in America and start doing it by twenty-twenty-four, but there's no way they could do that by next year, by twenty-twenty-three. So they're, they're, they're getting hurt, for instance. They're going to get hurt significantly. But it's, you know, when, in our, in our EV forecasts, we didn't make tremendous short-term changes because, uh, remember the context that we're in. Every, we're, every, any EV you want, you're on a one, uh, In some cases, two-year waiting list to get it. So we're in a, a, a period of extreme supply constraint to begin with, and the, the EV tax credit going away in twenty-twenty-three is not necessarily, it, it, it makes it, it's going…

AI assessment note: “Short-term, it definitely hurts EV adoption. It's, it's a net negative”

Q Sam. So we're going to talk about the impacts of the Inflation Reduction Act on electric vehicles in the US and on the EV battery world and EV battery supply chain and all the nuances therein. Let's start by just laying out what's in the IRA as it pertains to EVs and batteries. So let's start with the EV tax credits. What, what are they and how will they apply?

A So first of all, they got a lot more complicated. It used to be that it was a straight up 7500 dollar tax credit if you make an EV and sell it in the US. And it was quantity limited. So if you sold 250,000 of them, then you start to draw down and eventually not, not qualify anymore for them. So there, you, you only had a certain number of, of EV tax credits to, to offer. And that limitation is no longer there. Now it's time limited, so this is gonna expire in 2032, but through that time you can sell as many cars as you possibly can. You'll get the tax credit for it if you qualify for all of the qualifications you need to, to, uh, jump through. So, and there's a lot of hoops to jump through. Um, first of all, it's two separate tax credits. There is a, uh, components tax credit, Which is half of that 7500 dollars, so it's 3750 dollars for the components tax credit, and that components tax credit basically says if you make the components that go into this battery, including the battery itself, in North America or free trade partner country of the United States, Then you qualify for this tax credit.

AI assessment note: “it's two separate tax credits. There is a, uh, components tax credit”

Q for the investment tax credit is being paired with solar or wind. Um, that is no longer true. Now you can build a battery project on the grid and you can qualify for the ITC and then ultimately the production tax credit as well, or the technology neutral credit, I believe, beginning in 2025. What impact do you think that has sort of further up in the battery supply chain?

A It's going to have an enormous impact. I think when we look at the interconnection queues and the ISO RTOs of the United States, of the US and Canada, we saw, we, we saw this enormous logjam of standalone storage projects that had been put in as placeholders just in case this passed. And when I talked to developers, they say we were pretty much break even on most of the projects that we were proposing to do Um, with this standalone ITC, we're gonna make a lot of money. Which means these, they want to build these projects. And now the question is battery availability. How do we get our hands on these batteries? It now becomes a battery availability problem, not a, um, financial spreadsheet problem. They, if they can get their hands on the batteries, they will build out. And essentially what we're expecting to see next year now is a doubling of the entire installed capacity Of US energy storage, um, in twenty-twenty-three alone. In other words, everything that's been built and installed in the US is about to double in what's installed next year alone. And assuming there's battery availability, that could again triple the following year. And keep in mind, most of what we have has been installed in the last couple years anyway. You know, California has about five gigawatt hours worth of batteries, almost all of which have come, come in the last 36 months, and essentially kept Calif…

AI assessment note: “It now becomes a battery availability problem, not a, um, financial spreadsheet problem.”

Q So I guess final question, like what What's important that we don't know yet? There's all this treasury guidance that still has to come out. Is it all pretty nuanced and detailed, or is there anything that could, like, really swing the impacts of these provisions, depending on how it's interpreted?

A Um, I think the, the details of how the EV tax credit proportional numbers are going to be calculated are going to be really critical, and they, and, and understanding and getting guidance on that. What does 40%, 40% of what is gonna be really important, and how that's calculated will be, will make a big difference in, in how successful these programs will be. Um, the other thing that we haven't touched on is foreign entity of concern. So in addition to everything else, there is a specific language about, you can't participate in these if you are a foreign entity of concern. Which essentially means a Chinese company, but it has to be specifically listed as a foreign entity of concern. And what, and so getting more guidance on which company, which Chinese companies are foreign entities of concern, and, and what's expected is state-owned companies would be a foreign entity of concern, or companies that have significant minority shareholdership from states. From government enterprises. And what you're, and that's getting, going to get really complicated and, and ugly. So for instance, Goshen, which is a private Chinese company, just announced a three billion dollar investment in a, a new battery factory in Michigan. What if they're placed on foreign entity of concern? And, and then if, if they are, then they still don't They won't qualify for the EV tax credit, and all of that bec…

AI assessment note: “details of how the EV tax credit proportional numbers are going to be calculated”

Q different applications from the IRA. There's the wind and solar production tax credit. There is the hydrogen production tax credit. And then there's these manufacturing production tax credits, which are 45 X. So we'll, we'll refer to these as 45 X. Um, but these are the, the pure carrots that say, look, we'll, we'll give you a bunch of money if you manufacture stuff here. So how are those structured?

A Yeah, and, and the other way I think about it is push versus pull. If you think of the EV tax credits as pulling market demand by, by incentivizing the customer to purchase a car and pulling that market demand, this is the production push part of it. You're actually giving money to somebody to produce a good, and that's, again, this is new, a new Way of subsidizing something in the U S it hasn't really been done this way before. Um, and essentially what they're saying is you produce a specific good that we have clearly defined in this law, such as batteries and do it in the United States. So this is not in a, in North America, this is not in a free trade partner company, but specifically in the U S and we will give you if in the case of batteries, They say, we will give you 35 dollars a kilowatt hour to produce a battery in the United States. And by the way, this is not just for EVs. This is a battery that could be for stationary storage also. So, build a battery factory in America under this program, and you get 30, you get 35 dollars if you produce and sell a battery in, in the US.

AI assessment note: “we will give you 35 dollars a kilowatt hour to produce a battery”

Q And to be clear, sorry, it's not 100% of the components, right?

A It's, there's a threshold number starting at, for the components, it starts at 50% and goes up 10 percentage points each year after that. So, um, by, and until it's a full hundred percent by, I think, twenty-twenty-seven or twenty-twenty-eight. So, so, um, you need to get to a certain Proportion of the value of your components have to be made in the United States or in free trade partner countries. And free trade partner countries can include, that includes our North American neighbors, Mexico and Canada, but includes 12 other countries, including South Korea, Colombia, Chile, Australia, and a host of other countries. Um, interestingly, none of which are in Europe. But that's, that's, those 12 partner countries can be the host, can be the place where these components are manufactured.

AI assessment note: “it starts at 50% and goes up 10 percentage points each year after that.”

Q might be. At the same time, they, they figure they're probably not going to sell directly because the auto OEMs aren't going to buy directly from some startup in most cases. So do they also need to engage with the LGs of the world or CATL or whoever it might be? Like what's the, how, how is the, um, supply chain for batteries and sort of who dominates it evolving?

A Well, I think, you know, from a, from a startup company's perspective in the battery space, it's everybody has the same sad tale, which is, I've developed this miracle powder that makes batteries great. Here, let me sell it to you, car company. And car company says, no, talk to our battery company. Battery company says, no, talk to our cathode company. It turns out the secret is, They're all involved, and you have to have deep relationships with all, each layer of the supply chain in, in developing that. But it gets, it gets, it gets, the tail gets sadder, because your miracle powder is, a battery is a, you know, it's a very complex ballet going on between multiple components inside that battery. The anode, the cathode, the electrolyte, the separator, um, and Anytime you make one small change to one of those with your miracle powder, the everything else changes too. So a company that develops a new anode material, for instance, quickly finds out we have to become electrolyte experts because you're going to change your electrolyte formulation to optimize for this anode. They become electrolyte experts, and then they realize this is changing the cathode interface too. We have to become cathode experts, and pretty soon You're, you are becoming a battery company, even for, you know, a company that, that is still focusing on one component of the battery, they have to become complete…

AI assessment note: “you have to have deep relationships with all, each layer of the supply chain”

Q Excited to have you on because there is, as always, I think, so much to talk about in the world of EV batteries. Let's start with the lay of the land. Can you kind of walk me through a journey through the current world of EV battery chemistries? What is dominant? Who's doing what? Like, why, why did we end up where we are today?

A So the very first The first EV batteries in that T-Zero, that, that sports car that was, they essentially took laptop batteries and put them in and made it, made the very first electric vehicle run, were laptop batteries. They were lithium cobalt oxide. Lithium cobalt oxide is basically a big hunk of cobalt, which is one of the most expensive materials you can mine out of the earth. Um, and, but it works. It makes laptops run, and For about half an hour, it made a car run. Um, but you want something that's more, uh, that's cheaper, first of all, that is not gonna, we're not gonna run out of the raw material that makes it, i.e. the cobalt, secondly, um, and that is energy dense enough to make the car run, uh, for, uh, uh, uh, an appreciable and, and necessary amount of range. So, uh, where the, where the world moved towards was in two directions. Um, one was lithium iron phosphate, which is usually, uh, the acronym used for that is LFP, F being for ferro, lithium ferro phosphate, ferro, another word for iron. But it's essentially a big hunk of iron with some phosphorus in there and a It has, it's very cheap, earth-abundant materials, and, um, the problem is it's, it's, uh, it's not very energy-dense compared to other options. The other direction that we headed in was towards what are called in the industry ternaries, and they're called ternaries because they're usually a conglom…

AI assessment note: “where the world moved towards was in two directions. Um, one was lithium iron phosphate”

Q but then also, you know, there's been a bunch of reporting of companies who are trying to build domestic cathode manufacturing who've come out strongly with, uh, opinions about this as well. So let's talk about what the controversy has been and then where Treasury has landed on it. So what is a constituent material as Treasury has defined it, and why do we care which category it goes into?

A So in the battery supply chain, you go from the mine, where you extract the minerals, to multiple steps of precursor materials, in, in most cases, for each one of these minerals. Um, to the battery component itself, to the battery cell, right? And it's that middle part of all those precursor materials, uh, that, that is not, has not been clear what, where, where it falls. So, and it's different, a little bit different for each of these materials. So for instance, with, um, with lithium, you start, let's say you're mining the hard rock in Australia, then you process it into lithium hydroxide. That's the actual mineral that's, that's defined as a strategic mineral in the law, the hydroxide or the carbonate, the lithium hydroxide or lithium carbonate. Then you take that and, um, you're gonna, you're gonna add it to a precursor cathode active material or PCAM to turn it into a cathode active material, and that's the actual cathode powder that's gonna go to the battery factory. And that PCAM Is not a mineral. It is a chemical. It's a precursor chemical, and the, when you add the lithium to it and make the cathode active material, that, what, what is that? Is that a, a strategic mineral or a battery component? It's, it's not, not entirely clear from the law, the language of the law itself. You go into something like electrolyte, and it gets even more complicated, because now you have…

AI assessment note: “it's that middle part of all those precursor materials... has not been clear”

Q So are there, you know, can you think of this guidance in the context of winners and losers here? Like, is the winner basically anybody who's producing any battery-related EV battery related thing outside of China with no Chinese influence and loser is anyone who is? Is it as simple as that?

A I think that the, the winners are those, those companies that are trying to build a U.S. supply chain. And, you know, if, if there were leaks that allowed the Chinese, uh, to, to come in through, through, you know, various side entrances or back entrances, um, it makes that job that much harder. And so, I think that that's the, the significant winners. I think the car manufacturers are, are, are subtle winners in the sense that there is a two-year time frame to get this to work. They, you know, they can build a tracing, a tracing process and a way of ensuring that their, all of their materials come from the right sources. So, I think the car manufacturers were afraid that if it was January Then they wouldn't have a chance. So they're, I think they're relieved from that perspective.

AI assessment note: “I think that the, the winners are those, those companies that are trying to build”

Q a super complicated set of Uh, qualification criteria that you are trying to kind of wrap your head around and figure out, like, what changes in your supply chain do you need to make? What changes in your supply chain can you make? Uh, and what, what is the, you know, what's existing capacity you can tap into and what would need to be new capacity for you to qualify?

A Well, existing capacity is pretty easy. There's next to nothing, you know. Um, there's very little chemicals production going on in the U.S. for battery materials. There's very little mining going on. It's, this is all about new capacity build out for the, in the, in the processing space, in the mining space, in the chemicals refinery space, um, and in the battery manufacturing space. So, You said earlier, what, is this a strong enough signal? And, and I think it is. I, I mean, the, the, keep in mind that the United States has never subsidized manufacturing in this way before. This is all new to us. And I think that in, in my opinion, this, this is probably going to work. That we, this will spur a U.S. supply chain and a U.S. and partner country supply chain. For battery, batteries and battery materials. Um, but there is a scenario, a reasonable and possible scenario that it doesn't. It's overly complex, and people will, will analyze it and just say, you know what, there's too much risk involved. I'm not going to build a factory. Um, and, and so, you know, I'm not, I'm not saying it's a sure thing, but I do think it's a strong enough signal. And, um, It's not just a signal of, do we, we're, we're telling you to build this or not, but it's also a signal of, you gotta build this fast. There's a speed element to this too, because there, this is a 10 year program, and you're gonna,…

AI assessment note: “Well, existing capacity is pretty easy. There's next to nothing, you know.”

Q these domestic content provisions, and the second being even domestically, where as the guidance has started to come out, um, there's been sort of an internal fight in the United States about are we taking this, the domestic content, uh, Intent of the legislation seriously enough. So can you kind of walk me through the, like, how you think about all the noisy fighting that has taken place about this?

A Yeah, I think internationally, there's certainly been a big, uh, disagreement from coming, especially from Europe and Japan, from Western Europe and, and, and Eastern Europe, uh, the UK and Japan, which are, all of which are strong US allies, uh, But do not have free trade treaties. And, um, interestingly, uh, Biden slipped in just, just, just before the, uh, the, the shot clock, uh, went away. He slipped in a Japan battery materials free trade agreement through executive order. Um, and we, we can come back to that because I think there's significance in that, but, but that clearly there, there are international disputes between allies. That have to be, um, that are, that are going to be, uh, handled and, and probably negotiated through. Um, I think that the, the, the, the biggest winners, though, of the, of the other countries that are involved, Australia and Korea and Chile are the, are by far the biggest winners. They all have free trade agreements with the U.S. and are going to come out looking very good from this.

AI assessment note: “internationally, there's certainly been a big, uh, disagreement from coming, especially from Europe”

Q And to be specific, you're saying just silicon anode, right? Over 60 just in that space, right? Set aside everything on the cathode, all the other chemistries, just silicon anode.

A Just silicon anode. Over 60 companies that we track and try to make an analysis of, this is where they stand within the competitive market scape. Um, and that's really hard to do with that many Contenders. So the, uh, but I was able to cheat because the, the rank in our ranking matrix, the single most important factor was how much money have you raised? Not how good is your technology, but how much money is, have you raised? And, and there's inevitable pushback saying, well, wait, what, how does, what does, how does that speak to their technology or whether it's going to work or not? And, um, The answer, I would answer, it doesn't matter because it, the, the fact that you've raised money gives you a way to solve problems that other people that haven't raised money can't solve problems. So it gives you an inherent competitive advantage. Um, and so I could kind of cheat on the analysis by saying the ones that raise money are in the lead because they raise money. Um, That, that, that went away in the last two years because everybody raised money with a handful of companies that have gone out of business. It's true. But, um, pretty much everybody, uh, has raised some amount of money. Some of them have raised obscene amounts of money. Um, and I, I shouldn't say obscene because I, I would, I, I, I wish every startup, um, Founder has the problem of, of having obscene amounts of money.…

AI assessment note: “Just silicon anode. Over 60 companies that we track”

Q should be comparing all these different chemistries. The, I think the other things that people care about as they evaluate new types of batteries and new configurations are fast charging ability and durability. Uh, how long will the battery actually last? Do you, are those the right additional Metrics to be looking at. Am I missing anything in terms of sort of like the core Comparative dynamics between these batteries?

A I think there are strings attached to those two requirements. Um, in terms of fast charging, most people that buy electric vehicles, their demand for fast charging gets, gets pretty watered down once they're used to driving an electric car, charging it at night on a, on a level two charger. And The, their use of fast charging is few and far between in, in actual real world usage. So, um, fast charging is something that a, a, a new is going to appeal to a new buyer that's never owned an electric vehicle before, but once they get used to it, they realize this is, this is a, a, a nice to have, not a requirement. Um, And how does that boil down into actual specs of the batteries and, and the priorities of the car makers of how they make the batteries is still to be determined because obviously the faster you can charge, the more attractive the car is no matter what. Um, but I, I'm just questioning where you're, when you're going to sacrifice other things such as cost, such as Uh, energy density and, and other, other elements in order to, to bring about a fast charge, uh, a truly fast charge battery. Um, so yes, the, if, if you can give me a faster charge and I don't have to sacrifice anything else, I will definitely take it and be with a smile on my face. Um, but I'm, I'm questioning whether it's the Whether we're moving towards a world where that becomes a primary requirement.

AI assessment note: “I think there are strings attached to those two requirements.”

Q America or a free trade agreement. Country. What comprises more than 50% of the Value of a battery. Are there like a couple of categories here that are like, look, if you source your, if you make your cathode materials in North America, you're basically there. Or if you do the battery assembly, or is it like you kind of need each little individual component and step to add up?

A So there's things we know and there's things we don't know. And what that means, what that question that you asked is, There's a lot that we don't know yet, that we're still waiting on guidance from the federal government and the various agencies that are going to oversee the implementation of this and the, uh, and, and the, the oversight of this, um, to, to define and precisely say how this is going to work. So within the wording of the IRA, it says the, the value, it has to be 50% of the value of the components and the material. And components are strictly defined as electrodes, which means cathode and anode, electrolyte and electrolyte components, which means the salt and the solvents that go into the electrolyte, um, and also module. So once, and, and, and, and the cell itself, so the manufacturing of the cell, and then once the cell is made, put into a module. Interestingly, they don't define the pack, but I think they just decide, um, Once, if you've made the module here, you're going to make the pack here. You're not going to ship it to another continent to make the pack, and then ship it back here to put in the car. So, what does value mean? What does that word mean? I'm still waiting for guidance to, to specifically define what they mean by the value of that. Does it mean all of the things are put in a bucket, and 50% of the value of everything in that bucket has to, h…

AI assessment note: “components are strictly defined as electrodes, which means cathode and anode, electrolyte and electrolyte components”

Q So what's the rough split today in the EVs that are coming off the line between LFP and the ternary batteries? And is it just, is it simple enough to think of the heuristic as being lower cost, lower range vehicles are probably going to use LFP, higher cost, higher range vehicles are probably going to use NMC or one of the ternaries?

A It's not because there's also a geographical split too. And again, it goes back to this history, and let, let, if you can bear with me, I'm gonna try to, to, to go back to the dawn of time, or the dawn of lithium ion time. And, you know, the, the, originally we had lithium cobalt oxide, and then, and the NMC's and the other ternaries were the clear, um, next step. But then, um, John Goodenough at the University of Texas discovered LFP. And it looked like it might be a, uh, kind of a, you know, a, a, um, a leapfrog over the traditional methods of, of, of making cathode materials. And this was, um, back in the nineties. And at the time, China, China Inc. was planning its, its ascension into the lithium ion space. At that time, Very few batteries were made in China. They were mostly made in Korea and Japan. And the, the Chinese, um, uh, technocratic state made its decision, hey, we're gonna, we're gonna go all in with LFP, and we're gonna, this is gonna be the, the Chinese cathode. And so they put all of their development effort and all of their capital allocation towards LFP. And then, and that, uh, Worked reasonably well. So you had a lot of the first cars in China were LFP based cars. Um, and you had a lot of the Chinese battery manufacturers Essentially putting all their poker chips on the LFP spot. Um, but then you, you saw Tesla be so successful with using the NCA ternary ch…

AI assessment note: “It's not because there's also a geographical split too.”