Billionaire Koch Brothers Are Betting Big On An Electric Future

Koch Industries has been investing substantial sums in electric vehicles and batteries, the Wall Street Journal reported this week. There is nothing special in this news, except Koch Industries is among the companies that were the slowest to respond to the changing energy tides.

Koch Industries, the Wall Street Journal's Amrith Ramkumar notes in his report, has been funding organizations that question climate change and has been opposed to tighter environmental regulation. Now, it appears that the company's once firm position on the matter of climate change and environmentalism is shifting.

At least 10 investments totaling $750 million is what Koch Industries has poured into the EV battery supply chain and EVs themselves, the report revealed, citing regulatory filings, news reports, and FactSet data.

"It's stunning just how many different battery supply chain players they've taken a stake in," one former Tesla manager told the WSJ's Ramkumar.

The shift of the conglomerate that started as an oil refiner is telling. What it tells us is that even the most conservative businesses are joining the energy transition drive. With annual revenues of over $100 billion, Koch is one of the largest privately-owned companies in the United States. And it is investing close to a tenth of these revenues in EVs and EV batteries. The ownership of the company makes the move into batteries even more important. Public companies such as Exxon only started setting emission-reduction targets and making other plans to reduce their carbon footprint after pressure from shareholders. Koch does not face such pressure. And yet it is investing in batteries.

The reason for this is quite likely pragmatic. Demand for EVs is projected to increase massively as governments continue to incentivize EV ownership. According to U.S. automaking giants GM and Ford, people won't be buying anything else but electric cars in ten years or so, which is why both are preparing for an all-electric future.

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GM plans to go all-electric from 2035. Ford is a bit more guarded, but it also has big all-electric plans for its near future. GM sold 2.2 million vehicles last year. That was down 13 percent from 2020, but still quite a number. In the best-case scenario, it will be selling at least as many EVs in 10 years. 

Ford, meanwhile, is the second-largest electric vehicle seller in the United States, behind only Tesla. Even though sales numbers are modest-a little over 13,000 units in January, including hybrids-this should increase thanks to government support and EV promotional campaigns, not to mention higher gasoline prices.

What all this means is that a lot more EV batteries will need to be manufactured. And the supply of raw materials for batteries is quite tight, meaning prices are high, too. And they are going to climb much higher in the future, according to all forecasts. In every situation where demand is projected to outstrip supply as it is in the case of electric car batteries, there's a lot of money to be made.

Koch Industries has a reputation for being pragmatic. It is currently being criticized for not upping and leaving Russia as so many other U.S. and European businesses have due to the war in Ukraine. Just like that decision is likely driven by pragmatism, it is likely this one is too.

Pragmatism is not really trendy these days. Loud moral stances are. Yet it is often the pragmatists who are the best weathervanes of future trends. If the pragmatic, climate skeptic Koch brothers are investing hundreds of millions in EV batteries, the chances of these batteries actually being needed are very high.

By Irina Slav for Oilprice.com

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