The U.S. government has intensified efforts to reduce China’s grip on the global battery supply chain by funding a large-scale synthetic graphite facility in Tennessee. The Department of Energy has conditionally approved a $755 million loan for Australian company Novonix to support the construction of the new plant in Chattanooga, marking a significant step toward securing domestic production of critical EV battery materials.
Once operational in 2028, the facility is expected to produce enough synthetic graphite to power 325,000 electric vehicles annually, becoming the first large-scale synthetic graphite factory in North America. Novonix CEO Chris Burns, a former Tesla engineer, emphasized the urgency of diversifying supply chains, noting China’s overwhelming dominance in graphite production, where it controls more than 95% of global market share.
“Recent announcements from China to further scrutinize the export of battery-grade graphite to the United States highlight the importance of domestic production of high-performance, battery-grade synthetic 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 output. Additionally, it commands even greater control over advanced processing technologies further down the supply chain. This stranglehold has raised concerns for global electric vehicle (EV) manufacturers, particularly 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 key EV battery components, graphite is the hardest to source domestically, a challenge that threatens automakers’ eligibility for up to $7,500 in U.S. tax credits under President Joe Biden’s Inflation Reduction Act (IRA).
Novonix, which produces synthetic graphite preferred for its ability to improve battery charge speed and lifespan, is also backed by major industry players. South Korea’s LG Energy Solution holds a stake in the company, and Novonix has secured supply agreements with Panasonic and Stellantis. Following the funding announcement, Novonix’s shares rose 9% on Tuesday.
The move to fund Novonix aligns with broader U.S. efforts to bolster domestic supply chains for clean energy and reduce dependency on foreign sources. Meanwhile, other graphite producers, such as Syrah Resources, are grappling with challenges. Syrah entered talks with U.S. lenders after protests at its Mozambique mine disrupted production and led to a loan default.
Burns highlighted that concerns about China’s monopoly on battery materials were evident during his time at Tesla. “The reliance on one territory for critical components is a glaring issue for the global EV sector, regardless of geopolitics,” he said.
To mitigate near-term challenges, the U.S. government has introduced a grace period through 2027, allowing EVs using Chinese graphite to qualify for subsidies. However, uncertainty lingers over future IRA provisions, particularly with the upcoming U.S. presidential election. A rollback of these subsidies under a potential Trump administration could strain EV manufacturers further, deepening financial losses for Tesla’s competitors.
Burns, however, remains optimistic. He noted that funding for the Tennessee facility is “set” and underscored that initiatives aimed at strengthening domestic supply chains and creating U.S. jobs remain “bipartisan issues”.
“If you step away 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 milestone for U.S. energy independence but also underscores the strategic push to build a resilient battery supply chain amid rising geopolitical tensions.
