Defense dollars are keeping US battery startups alive

The electric vehicle market in the U.S. has hit a rough patch, but the nation's battery startups are finding a surprising new patron: the Pentagon. With EV incentives stripped away, defense contracts and new federal grants are emerging as a lifeline for companies that build the cells powering everything from drones and torpedoes to infantry radios and fighter jets.

A $500 million lifeline

The Department of Energy announced Thursday it is awarding $500 million in grants to strengthen the U.S. battery supply chain. The program's stated goal is to “reduce reliance on foreign sources, bolster national security, and advance American energy dominance.” Much of the money is going to startups.

The move comes after the One Big Beautiful Bill eliminated battery and EV incentives, undercutting a chunk of future demand. The Trump administration, despite its open disdain for EVs, acknowledges that batteries are an inescapable part of modern life, and is leaning on national security as justification for its recent decisions.

Startups cash in

Among the recipients is Coreshell, a battery materials startup, which received a $50 million award to expand manufacturing for its metallurgical silicon anode material. A spokesperson for the company told TechCrunch that defense applications of lithium-ion batteries are “absolutely playing out in discussions.”

Coreshell recently brought on ADS Ventures as an investor; the strategic VC’s parent company, ADS, is a defense supplier, and it’s working with another supplier of autonomous systems.

Lilac's lithium play

Lilac Solutions, which extracts lithium from brines, landed $100 million to build a processing facility on Utah’s Great Salt Lake. The plant is expected to produce 5,000 metric tons of lithium carbonate annually by 2028. Lithium carbonate is a key precursor used in battery production.

Nth Cycle told TechCrunch that it received $100 million to build a facility that will refine black mass from recycled lithium-ion batteries, producing lithium and nickel compounds that can be used to make new batteries.

Demand drivers

“We’re seeing clear demand drivers from the defense sector.”

— Megan O’Connor, co-founder and CEO of Nth Cycle, told TechCrunch. “But there’s still that in the automotive space as well.”

That dynamic is unlikely to change. Though EVs have been dealt a setback, automakers are still rolling out new models and expecting years of growth, albeit further out than expected.

The numbers behind the pivot

• $500 million in DOE grants to bolster the U.S. battery supply chain.
• $50 million award to Coreshell for metallurgical silicon anode material manufacturing.
• $100 million to Lilac Solutions for a Utah lithium processing facility.
• $100 million to Nth Cycle for a black mass refining facility.
• $200 million annually spent by the U.S. Defense Logistics Agency on batteries as of 2021.
• $18 billion expected to be spent by the automotive industry on battery manufacturing in the U.S. this year.

Defense vs. automotive

Defense will continue to be a significant player, though exact numbers are hard to come by. Even in 2021, the U.S. Defense Logistics Agency was buying $200 million worth of batteries annually. But that’s dwarfed by the automotive industry, which is expected to spend nearly $18 billion on battery manufacturing in the U.S. alone this year, according to Mordor Intelligence.

As battery companies undoubtedly know — and the Trump administration appears to tacitly acknowledge — the future is electric, but the timing is anything but settled.

A tacit admission

In the meantime, soldiers and drones still need lightweight and capable batteries from U.S. sources. A few years ago, those batteries could have come from domestic factories that sprung up in the wake of the Inflation Reduction Act. But after the One Big Beautiful Bill gutted battery production incentives, the Pentagon may have had to start looking for alternatives.

These new DOE grants might amount to an admission that efforts to kill the American EV industry went a bit too far.