Silicon's Malaise Reflects an Auto Industry Ceding Momentum to China
In May 2022, two rival U.S. battery startups announced similar coups.
Group14 Technologies, a developer of silicon anodes that promised greater driving range and faster charging in electric vehicles, said that within two years—in 2024—its product would be powering EVs made by Porsche. It was big news because, despite years of trying, no Western battery startup had managed to break into any major EV model.
Weeks later, Group14’s main U.S. competitor, Sila Nanotechnologies, said Mercedes-Benz would start using its silicon anodes just a bit later—in 2025.
But now both deals have been scotched, and Western-made next-generation batteries seem little closer to powering a major EV: On Monday, Porsche, already a year late to use Group14’s anodes, effectively shut down the division that would make the batteries. The automaker laid off 200 workers at battery-making subsidiary Cellforce Group, leaving only a skeletal research and development team. Sila CEO Gene Berdichevsky told me Mercedes’ plans were also off the board.
In separate statements, both German automakers blamed poor EV sales in the U.S. and China for their decisions; Porsche said it was also responding to U.S. tariffs.
But in abandoning their first-mover advantage in powerful new batteries, Porsche and Mercedes—long known for engineering-first cultures—reflect a Western auto industry that has generally gone cold on its strength: raw innovation. The moves illustrate how Western EV and battery companies are ceding ever-increasing ground and momentum to Chinese rivals, which have led the industry’s most recent technological advances and dominate production.
“As Western companies stagnate, Chinese firms are turning the page.…Options for U.S. battery manufacturing are narrowing,” Katherine He, an investor with TDK Ventures, wrote on Linkedin this week.
The EV and battery industries are in a malaise. Major carmakers have pushed back their timelines for adding next-generation batteries to their EVs. And most battery startups are struggling financially as venture funds have dried up for companies lacking commercial revenue.
Last week, for instance, Group14 said it had raised $463 million in a Series D round. But the round, led by South Korea’s SK, an industrial group that has a battery-making division, appears to have included in-kind assets: In the announcement, Group14 said that in addition to the fundraise, it had obtained full ownership of a South Korean battery plant in which it already held a 25% stake. It bought the remaining 75% from SK. I asked Group14 CEO Rick Luebbe whether the $463 million included the in-kind value of that 75% share. He told me the companies were not releasing the terms of the acquisition.
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Ironically, the current industry gloom seems in large part the result of a massive miscalculation. Starting about 2020, investors and the EV and battery industry’s main players announced combined spending in the hundreds of billions of dollars to prepare for the consumer EV bonanza that everyone (aside from Toyota) expected.
Starting in 2022 and 2023, however, Ford, General Motors, Volkswagen and the battery makers that hoped to power their EVs noticed pronounced consumer resistance to the new EV models, and sales that did not take off as hoped.
That’s when the narrative of an industry “slowdown” took hold, and it’s been that way ever since.
But that narrative isn’t quite right: It should never have become industry dogma that consumers would pay thousands of dollars—in some cases, tens of thousands—more for an electric version of basically the same car. I previewed the fuzzy math behind such EV forecasts as far back as early 2021.
The truth is, consumer appetite for EVs in the West hasn’t been genuinely tested yet. That test will start in two or three years, when prices are lower. Most average consumers won’t need $20,000 or $25,000 EVs to look more longingly at EVs, but they won’t pay more for one—they will fork over more or less the same regardless of whether a car is electric, combustion or hybrid.
And if it’s an EV, it will have to compete. By then, what Chinese EV makers are offering will be widely known.
The signs thus far are that Western carmakers are just as complacent as they were in the 1980s and 1990s, when high-quality Japanese competition arrived in the U.S. and ate Detroit’s lunch. Today, it’s Chinese carmakers like Xpeng, Nio and Geely that have barreled ahead with batteries that charge in five minutes and power long-range EVs with heated massage seats, minirefrigerators, high-grade leather upholstery, voice-controlled electronics and superb sound systems.
So far, Western automakers haven’t gotten the memo. China’s BYD, for instance, currently offers autonomous advanced driver assistance systems as standard equipment in 21 models. But Stellantis recently killed its effort to develop hands-off-the-wheel, eyes-off-the-road ADAS, Reuters reported this week, saying consumer demand is too low. That was a surprising assertion from Stellantis given the wild popularity of ADAS in U.S. consumer surveys. The reality is that automakers everywhere will likely have to match BYD on free ADAS if they intend to compete.
Against this backdrop, Sila Nano’s Berdichevsky said that while Mercedes’ EV was off the table, he was tailoring silicon anodes for another major automaker, which he declined to name. Sila is almost finished building a production plant in Moses Lake, Wash., capable of manufacturing those anodes at large scale. Given qualification timelines, Sila’s anodes would be in this new automaker’s EVs by 2028 at the earliest, he said. Those anodes will contain low percentages of silicon; in terms of high-silicon anodes—the ones that will significantly boost range and charging time—that’s not likely until the early 2030s, he said.
Berdichevsky is holding out hope for a wild-card event that could accelerate the timeline for silicon’s commercialization—for example, if China overplays its stranglehold on battery supplies and cuts exports of graphite, the conventional anode material silicon hopes to replace.
“Imagine having a gigafactory and suddenly you can’t get graphite, but you can get silicon carbon anodes domestically,” he said. “That could drive adoption and road-map acceleration.”
Short of that, look for next-gen EV performance in a little over five years.