Image: Redwood MaterialsAs reported by the US blog TechCrunch, Redwood Materials has laid off approximately 135 employees, representing 10% of its workforce. These cuts follow a reduction of around 5% of its staff just five months earlier.Despite this, the startup, founded in 2017, has otherwise been on a successful trajectory: it is considered the market leader in battery recycling in North America and claims to process over 20 GWh of batteries annually through its end-of-life battery supply chain. This volume roughly equates to 250,000 electric vehicles and, according to Redwood, accounts for 90% of all lithium-ion batteries and battery materials recycled in North America. Additionally, just a few months ago, Redwood secured $425 million in funding from investors, including Google and a subsidiary of Nvidia.Founder and CEO JB Straubel, who co-founded Tesla and served as its CTO until 2019 as the second-in-command to Elon Musk, sees no contradiction between the company’s success and the layoffs.“Redwood today is the strongest it’s ever been,” TechCrunch quoted him as saying in an internal email to remaining employees. However, he added: ‘Parts of the company have expanded faster than needed to support the direction’ Redwood is headed in.’The layoffs follow this assessment. According to the email, all affected employees will receive severance pay, paid health insurance, and support for their professional transition. An insider told TechCrunch that employees across multiple departments, including engineering and operations, are affected.“We are confident that we can deliver on our critical projects with a smaller team that is more focused,” Straubel continued. “We have successfully adapted to changes in the market that have bankrupted many of our competitors.”Battery storage may outpace recycling in importanceWhile the recovery of critical battery materials such as cobalt, nickel, copper, lithium, and cathode materials has been the primary focus of Redwood Materials in the past, it is now clear that its new subsidiary, Redwood Energy, could become a significant new revenue stream—even surpassing the recycling and materials business.Launched in the summer of 2025, this division develops Battery Energy Storage Systems (BESS), or stationary battery storage systems. A large proportion of these systems use retired electric vehicle batteries that still have a too good a state of health for recycling but are instead given a second life in BESS.The importance of this new business area is also reflected in the redesign of Redwood Materials’ homepage. Note the order of their self-description: “We’re providing domestic energy storage at scale, securing U.S. critical materials, and powering the next era of American energy.”These energy storage systems are primarily intended to supply power to (AI) data centres and the national grid. JB Straubel addressed this in his email to employees, stating he is ‘more excited than ever with our path ahead as we build the most integrated and cost-effective critical materials and energy storage business in the world.’ Just recently, Redwood announced it had secured an order from Rivian for a second-life battery storage system for its plant in Normal, Illinois.techcrunch.com