Epsilon plans $650 million EV battery material plant in North Carolina

Epsilon Advanced Materials, an Indian battery materials supplier, said Thursday it will spend $650 million to open a factory in North Carolina that will eventually produce 50,000 tons of synthetic graphite anodes annually for electric vehicle batteries.

The 1.5-million-square-foot facility near Wilmington, N.C., will employ about 500 people, Epsilon said. Groundbreaking for the new factory is expected in 2024, with its opening slated for 2026 and a ramp-up to full capacity by 2031.

It is the first major investment by an Indian company in the growing U.S. market for EV battery components, according to the company.

The investment comes as automakers and battery cell manufacturers look to localize their supply chains in order to be eligible for benefits under the Inflation Reduction Act, which incentivizes companies to build vehicles in the U.S. using locally sourced content. Epsilon's largest customers include Korean and Japanese battery cell companies, some of which have announced joint ventures with automakers to build EV batteries in the U.S.

"By 2025, customers want to be buying from a non-foreign entity of concern to get IRA credits, and they have an obligation to have a certain amount of local content to get IRA benefits," said Vikram Handa, managing director of Epsilon Carbon, the parent company of Epsilon Advanced Materials, in an interview with Automotive News.

By producing graphite anodes in North Carolina, Handa said Epsilon's customers will get a significant boost in the amount of local content in their vehicles or batteries.

Graphite is a crucial component in lithium ion battery anodes, the negatively charged portion of a battery. But sourcing graphite locally could prove to be a challenge for North American automakers and battery companies. China dominates most of the world's supply of natural graphite, including virtually all of the natural graphite used in EV batteries.

China last week moved to curb exports of the material by requiring export permits for some graphite products as of Dec. 1, including spherical graphite used by automakers.

The market for synthetic graphite, meanwhile, is expected to grow more than 40 percent over the next five years to $4.2 billion in 2028, according to research firm Mordor Intelligence.

Synthetic graphite is often purer and promises the possibility of faster charging and higher battery life with a lower overall carbon footprint than mined graphite. But because it is generally more expensive, suppliers often blend natural and synthetic graphite.

The new North Carolina plant will have the ability to produce anodes with natural and synthetic graphite, but it will primarily focus on the synthetic version of the metal to cater to local demand, Handa said.

"We feel like, especially in the Western market, OEMs will require synthetic in their cells, as you have bigger cars and you have commercial vehicles coming into this space," he said. "That requires higher capacity cells, which leads toward synthetic graphite."

Handa said Epsilon chose North Carolina in large part because of its utilities, which he said can provide enough power for energy-intensive manufacturing. It will additionally have access to electricity generated from green sources.

"That's a big challenge in North America right now, to get this kind of power," he said.

Epsilon considered about 100 potential sites in the U.S., including locations in Texas, Alabama, South Carolina and Tennessee, Handa said. Other factors in selecting Wilmington, N.C., included access to the city's port and to auto suppliers and assembly plants in the region, he said.

When the plant opens in 2026, it will have capacity for 30,000 tons of graphite anode annually, expanding to 50,000 tons when it is fully ramped up. The company expects its anodes to supply 1.1 million EVs by 2030.

Epsilon also plans to build similar facilities in India and Finland, and could include future opportunities in the U.S., Handa said, noting that its production plans account for a "drop in the ocean for what the U.S. needs."

He said a similar plant in China will open with about 100,000 tons of annual capacity.

Reuters contributed to this report.