U.S. battery startups are turning to an unlikely source of demand as the Trump administration rolls back incentives for electric vehicles like the Pentagon.
The battery industry took a major hit when the One Big Beautiful Bill eliminated key battery and EV incentives, putting a dent in the growth prospects that startups and manufacturers had been counting on.
But defense companies still need lots of batteries for drones, torpedoes, radios, aircraft and other increasingly electrified military systems.
The shift is already showing up in Washington’s spending decisions.
The Department of Energy said Thursday that it will award $500 million in grants to strengthen the U.S. battery supply chain.
The program is explicitly framed around national security, with the DOE saying the money will help “reduce reliance on foreign sources, bolster national security, and advance American energy dominance.”
Much of that money is going to startups.
Defense demand for lithium-ion batteries is “absolutely playing out in discussions,” a spokesperson for battery materials startup Coreshell told TechCrunch.
The company recently brought on ADS Ventures as an investor. Its parent company, ADS, is a defense supplier, and Coreshell is also working with a supplier of autonomous systems.
Coreshell received $50 million from the DOE to expand production of its metallurgical silicon anode material, which is designed to improve battery performance.
Other startups received even larger awards.
Lilac Solutions, which extracts lithium from brines, received $100 million to build a processing facility at Utah’s Great Salt Lake. The facility is expected to produce 5,000 metric tons of lithium carbonate annually by 2028. Lithium carbonate is a key material used in battery production.
Battery recycling company Nth Cycle also received $100 million. It plans to use the money to build a facility that will process black mass from recycled lithium-ion batteries and produce lithium and nickel compounds for new batteries.
“We’re seeing clear demand drivers from the defense sector.”
“But there’s still that in the automotive space as well,” Megan O’Connor, Nth Cycle’s co-founder and CEO, told TechCrunch.
That distinction is important. Defense is not big enough to replace the automotive market, which remains by far the largest source of potential battery demand in the U.S.
The U.S. Defense Logistics Agency was buying about $200 million worth of batteries annually as far back as 2021.
By comparison, the automotive industry is expected to spend nearly $18 billion on battery manufacturing in the U.S. this year, according to Mordor Intelligence.
But defense can give startups something the EV market no longer can: a customer whose demand is driven by national security rather than consumer adoption.
The Trump administration has sharply criticized EVs and moved to unwind policies designed to accelerate their adoption.
Yet its national-security agenda is pushing it toward supporting many of the same battery companies that benefited from the country’s EV manufacturing boom.
That creates an unusual dynamic for the battery industry.
The factories and supply chains built to support the expected growth of electric vehicles also created domestic capacity that could serve military applications. Now, as EV incentives disappear and automakers adjust their plans, defense spending could help keep some of that capacity alive.
See also: Starcloud Raises $250m, But Faces Rocket Shortage
For battery startups, the timing matters. Building mines, processing plants and factories requires billions of dollars and years of investment.
Losing expected EV demand could make that investment harder to justify.
Defense contracts and federal grants won’t solve the industry’s problems on their own. But they can provide a bridge while the automotive market adjusts.
The broader trend is unlikely to change: modern technology — whether it is an electric car, a drone or a soldier’s radio — increasingly depends on batteries.
The Trump administration may be backing away from electric vehicles. It is becoming harder, however, to back away from the batteries themselves.
For U.S. battery startups, that may be the lifeline they need.
About the Author
Cecilia Attah is a tech analyst with a degree from Benue State University. She covers tech news and startups at TechRegard with a focus on how technology is transforming Africa and shaping the global landscape.
