The U.S. government has stepped up efforts to reduce China’s grip on the global battery supply chain by funding a large-scale synthetic graphite factory in Tennessee. The Department of Energy has conditionally approved a $755 million loan to Australian company Novonix to support construction of the new Chattanooga factory, marking an important step toward securing domestic production of critical battery materials of electric vehicles.
Once operational in 2028, the facility is expected to produce enough synthetic graphite to power 325,000 electric vehicles per year, becoming the first large-scale synthetic graphite plant in North America. Chris Burns, CEO of Novonix and former Tesla engineer, highlighted the urgency of diversifying supply chains, highlighting China’s overwhelming dominance in graphite production, where it controls more than 95% of global market share .
“Recent announcements from China to take a closer look at the export of battery-grade graphite to the United States highlight the importance of domestic production of high-performance synthetic battery-grade graphite,” Burns said.
China’s dominance in the sector includes both natural and synthetic graphite production, holding 86% of natural graphite supply and 80% of synthetic production. Additionally, it exerts even greater control over advanced processing technologies further down the supply chain. The stranglehold has sparked concerns among global electric vehicle (EV) makers, especially as Beijing recently tightened export restrictions in response to U.S. technology controls.
The Tennessee project comes at a time of growing pressure to secure critical materials outside of China. Among the key components in electric vehicle batteries, graphite is the hardest to obtain domestically, a challenge that threatens automakers’ eligibility for up to $7,500 in U.S. tax credits under the President Joe Biden’s Inflation Reduction Act (IRA).
Novonix, which produces synthetic graphite valued for its ability to improve charging speed and battery life, is also backed by major industry players. South Korean company LG Energy Solution has a stake in the company and Novonix has supply agreements with Panasonic and Stellantis. Following the funding announcement, shares of Novonix rose 9% on Tuesday.
The decision to fund Novonix aligns with broader U.S. efforts to strengthen domestic clean energy supply chains and reduce reliance on foreign sources. Meanwhile, other graphite producers, like Syrah Resources, are grappling with challenges. Syrah began negotiations with U.S. lenders after protests at its Mozambique mine disrupted production and led to a default.
Burns pointed out that concerns about China’s monopoly on battery materials were evident when he worked at Tesla. “Reliance on a single territory for critical components is a glaring problem for the global electric vehicle sector, regardless of geopolitics,” he said.
To alleviate short-term challenges, the US government introduced a grace period until 2027, allowing electric vehicles using Chinese graphite to qualify for subsidies. However, uncertainty remains over the future provisions of the IRA, particularly in the run-up to the US presidential election. A reduction in these subsidies under a possible Trump administration could strain electric vehicle makers, deepening the financial losses of Tesla’s competitors.
Burns, however, remains optimistic. He noted that funding for the Tennessee facility is “fixed” and stressed that initiatives to strengthen domestic supply chains and create U.S. jobs remain “bipartisan issues.”
“If you step back from the noise, we continue to see that the battery and critical minerals sectors will be supported,” Burns added. “The question is how.”
Novonix’s new project not only represents a critical step for U.S. energy independence, but also highlights the strategic effort to build a resilient battery supply chain amid growing geopolitical tensions.
