InMotion Ventures has invested $1.2M in Energy Source – an early-stage Brazilian startup offering solutions for the repair, reuse and recycling of lithium batteries.
Sam Nasrolahi, Principal at InMotion Ventures, explores why we invested.
The market
Electric vehicles (EVs) are a crucial component of the clean-energy revolution. Governments worldwide are rallying behind them in an effort to mitigate the environmental consequences of global warming. The UK government has set a mandate for all new cars to achieve zero emissions by 2035, the Biden Administration has proposed new standards that will require EVs to make up 67.5% of U.S. vehicle sales by 2032, and the Euro 7 emissions standard will dramatically increase the number of electric vehicles on European roads.
Other markets are following in the wake of these policy driven initiatives. Analysts predict Latin America to achieve an annual growth rate of 16.51% for EVs, reaching a projected market volume of $2.2Bn by 2028 (1). Brazil, the largest market in the region, expects sales of fully electric and hybrid vehicles to increase by 60% this year from 2023 (2).
As we move from the early adopter to mass market phase global sales will inevitably fluctuate. Yet whilst exponential growth is unrealistic, a long-term upward trend is inevitable. This trajectory presents the automotive industry with a pressing challenge: efficiently and sustainably managing the end-to-end lifecycles of the cells powering our vehicles.
For OEMs, ineffective battery repair offerings have significant impact at the retailer level, particularly in nascent markets, where manufacturers are forced to invest large sums retraining specialised technicians who typically only repair a handful of EVs before they move on. A lack of robust second and end of life strategies lead to high disposal costs, compliance risks and missed revenue opportunities. Furthermore, we cannot overlook the upstream impacts of electrification. Ineffective circulatory options mean key minerals are disposed of instead of re-used. This leads to increased levels of mining activity and the associated emissions, air pollution, water contamination and land degradation, all of which are felt most severely by communities at the top of the supply chain. All indicators point towards a need for significant investment in technologies across the entire post-production battery life cycle.
What Energy Source does
Energy Source provides solutions across the three primary in-and end-of life battery value chain activities: repair, re-use and recycle. They originally established their platform to serve the collection and recycling needs of the consumer electronics market. Since then, they have refined and expanded it to meet the demands of the increasingly profitable electric vehicle sector.
Utilising their full stack proprietary software, Energy Source is able to test the health of EV batteries. By training their technicians on multiple OEM technologies the startup allows automakers to support customer diagnostics and repairs in low volume markets, without the expense of training their own retailers.
Once a battery no longer meets automotive grade standards the team continues to extract value for manufacturers. Ex-EV batteries with high residual capacity are repurposed to capture and store solar energy, offering manufacturers new revenue streams and energy reduction opportunities, such as installing charging stations at retailers powered by second-life batteries.
An impressive recycling operation completes the stack. Energy Source uses a unique hydrometallurgical process to extract high-value materials like lithium, cobalt, and nickel from the black mass of shredded cells These materials are fed back into the supply chain for use in the manufacturing of new products, increasing circularity and reducing the need to mine virgin material.
The team has expanded this recycling offering by partnering with manufacturers to capture waste directly at the point of production. Many gigafactories suffer from a scrap rate above 30%, which in turn leads to increased energy consumption and material losses. Partnerships with Energy Source allow manufacturers to dramatically lower the environmental impact of waste management.
There’s no shortage of capital flowing into startups in the repair, reuse and recycling sectors, however Energy Source is one of the few companies taking a holistic approach to battery optimisation and lifecycle management. Whilst battery feedstock remains relatively low, investing in these technologies in silo is an inefficient use of capital. Energy Source’s end-to-end approach, combined with an interest in new areas such as solar panel recycling, allows them to insure against supply issues therefore enabling a clear path to sustainable growth.
Why we invested
Energy Source marks our first investment in Brazil as we look to capitalise on innovation in ecosystems beyond the UK, Europe and the US. Our investment followed a successful collaboration between JLR and Energy Source, leading to the creation of Brazil’s first sustainable EV charging station. Unveiled in October 2023, the proof of concept demonstrated the startup’s ability to harness solar energy using decommissioned I-Pace batteries. The charging station is now powering EVs at the LandRio dealership in Rio de Janeiro.
One of the primary drivers behind our equity investment and collaboration with Energy Source was the strength of the leadership team. Serial entrepreneur David and his business partner Bruno are highly driven with strong track records. Their ability to navigate the company through various strategic shifts has been impressive, and we’re confident in their ability to build Energy Source into one of the leading climate-tech startups in Latin America.
The company’s market leadership and low cost differentiation were additional decisive factors for our participation in this round. Their first mover advantage has enabled David and his team to establish key go-to-market partnerships, attract the best local talent, foster strong government relationships and secure crucial customers. Additionally, battery regulations and cell composition standards differ between Latin America and the UK, EU and US, greatly limiting the ability of foreign companies to penetrate the Latin American market without significant changes to their technologies and processes.
Energy Source strengthens its position further through a lower cost base and reduced lead times, achieved by using local components and infrastructure. Its vertical integration across the battery value chain compounds this advantage even more. This combination has allowed them to build deep defensibility against new entrants within the region and for Western companies looking to compete with them, domestically or abroad.
InMotion Ventures funds startups with the potential to accelerate the transformation of JLR, and the repair, reuse and recycling of lithium batteries play a pivotal role in delivering the company’s Reimagine strategy. Congratulations to everyone at Energy Source for their impressive traction to date. We’re excited to see the impact that backing from a global OEM will have on their trajectory, and we look forward to supporting the business further as they scale their operations and team.
We always enjoy speaking with exceptional teams setting new benchmarks in quality, technology and sustainability. If you are a founder, or know a company in the space, please do get in touch with the InMotion Ventures team, either via LinkedIn or through our investment form.
________________________________________________________________________________________________________________________
Footnotes: