Factorial Energy: The Bold Solid‑State Bet in a Battery Race America Can’t Afford to Lose

In this episode of On The Horizon, Dr. Siyu Huang, Founder and CEO of Factorial Energy, joins host Tim Gerdeman and WTR analyst Eric Goldstein to discuss why solid-state batteries are finally crossing from lab to road. The conversation covers Factorial's two platforms — FEST® for drones and defense, Solstice for robotics and energy storage — joint development agreements with strategic partners including Mercedes-Benz, Stellantis, Hyundai, and Kia, a strategic investment from IQT, the venture arm of the U.S. national security community, and why defense and drone markets may generate revenue well ahead of the automotive ramp. Dr. Huang also explains the company's capital-light business model and how it plans to scale without building its own gigafactories.

Transcript

SPEAKER_01 0:03

Welcome to the WTR on the horizon podcast. I'm your host, Tim Gerdman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research. In today's podcast episode, I have the pleasure of being joined by C. Yu Huang, founder and CEO of Factoral Energy. Also joining us is my Water Tower Equity Research colleague, Eric Goldstein. Factorial Energy is a development stage advanced battery company focused on designing, developing, and commercializing next generation solid state batteries for electric vehicles and adjacent markets. Factoral's two proprietary solid state platforms, FEST, which stands for Factorial Electrolyte System Technology and Solstice, utilize electrolyte innovations that enable safe and reliable cell performance with high-capacity cathode and anode materials. The company's technology is 80% drop-in compatible with existing lithium-ion production lines, allowing OEM partners to leverage current manufacturing infrastructure with minimal disruption or additional investment. Factoral has established joint development agreements with Mercedes-Benz, Stellantis, Hyundai Motor Company, and Kia Corporation. So without further ado, welcome CU and Eric to today's podcast.

SPEAKER_02 1:26

Thanks, Tim.

SPEAKER_00 1:27

Thank you, Tim.

SPEAKER_01 1:29

CU, let me start by asking you to provide our listeners with a very high-level overview of factorial energy and its focus on next generation batteries, please.

SPEAKER_00 1:38

Absolutely. Yeah, thank you for taking me on a show. My name is CU. I'm the founder and CEO of Factorial. I got my PhD and MBA from Cornell. Uh, built actually my first company in the battery material manufacturing space. I saw early on that lithium ion battery is hitting a hard selling. So instead of like working on incremental GANs, we set out to build technology that goes beyond it. We found the Solid State battery technology about 10 years ago, and it's really meant to build a technology that's higher energy density, which means you have a lighter, smaller battery pack and translating to increase the payload, better range, and higher power. And for today's energy storage market, there are a lot of applications, such as from drones to robotics and to data center potentially, which in addition to automotive, which is also going to be the holy grill in the future. We're backed by uh Marquee customers from Mercedes, Solantas, Hyundai, and IKEA. Um, and also recently in QTAO, which is the uh venture capital arm of US government uh apparatus, has made investment into Factorio as well.

SPEAKER_01 2:43

Those are some pretty big sponsors to state the obvious. So uh congratulations on that. And with that, I'm gonna turn it over to Eric to ask a few questions.

SPEAKER_02 2:51

Okay, thank you, Tim. And thank you, CU, for joining us uh on the podcast. So, CU, you have a PhD and an MBA, which is a pretty unusual combination. Can you kind of take us back to the beginning? And what was the moment or the insight that made you say, you know, solid state batteries are the problem, or perhaps, you know, the opportunity that you wanted to spend your career solving? And how did that lead you to start factorial?

SPEAKER_00 3:19

Yeah, that's a great question, Narik. Uh, you know, the PhD and an MBA combination was quite a coins for me. Um I actually finished my PhD in chemistry at Cornell in three and a half years. It's a little bit earlier than I thought when my advisor told me you can graduate. At the time, my husband was well, very well on track to finish his PhD in five years. And, you know, have been very interested in business. I wanted to build my own business. So often I venture over to business school to take classes when I was even at graduate school. And Johnson School also happened to have a one-year accelerated MBA program. And my GRE hasn't expired yet. So I decided to take an easy path and apply for only one school, which is Cornell. Um we actually started our first business in the lithium mined battery material manufacturing space during a business school class. And later on, we scaled and sold a business. And I saw early on that lithium mine battery was hitting a hard ceiling and there's a physical limitation to break through. Uh, when you increase energy density, which is energy contained in a certain weight or volume, reduce the cost, safety can become an issue. So instead of focusing on increased mental gains in lithium ion batteries, we set out to build a technology that goes beyond it. And you know, traditional lithium ion batteries run with a liquid electrolyte. As you push the energy density higher, the liquid can become volatile and unstable. So solid state battery basically replaces a solid with a with play replace a liquid with a solid, make the system inherently more stable. And this will allow us to push the performance to an entirely new level without trading off anything else that matters.

SPEAKER_02 5:05

Okay, that's great. Um, let's talk about the technology uh in a little bit more detail. You have two distinct platforms, uh FEST and Solstice. FEST is a high power cell and Solstice is a high-cycle, all solid state design. Can you walk us through the difference and what the problems that each one solves and which applications are they best suited for? And how is your approach different from other companies uh pursuing solid state batteries?

SPEAKER_00 5:36

Well, that's a very loaded question. I would say uh both FEST and Solstice deliver higher energy density compared with traditional lithium-I batteries. And you know, this means uh the battery can be smaller, lighter, and last longer, can be also more cost-efficient in the system together. And our FAST system is built for high-powered applications like drones and marines, whereas Solstice is engineered for long cycle life. So it's perfect for robotics and any storage applications, such as data center. And both technologies can be utilized towards automotive applications. And we're not just one solution technology provider, but we have multiple platforms to fit in different needs from customers and different markets. As far as how we are different from other companies in the space, I said that it comes down to this. A lot of solid state efforts are optimizing for what looks good in the lab. And we're being equally obsessed with what works in the factory and for our customers. Historically, we have been backed by chemistry matters, but if you can manufacture it consistently at scale, this also means completely different real-world applications. Um, and the dual focus on both the science and production system is what we really think that sets us apart from others. And that's also what makes our milestone different. And they're not only just the lab results, it's really commercial and also with a real partner and a real uh validation in place.

SPEAKER_02 7:08

That's a great point. Um, we understand that the FEST platform can be manufactured using roughly 80% of the conventional lithium-ion production equipment, which would dramatically lower uh the barrier for existing gigafactory operators to adopt your technology. How important is that compatibility factor in your conversations with potential manufacturing partners?

SPEAKER_00 7:34

Well, this is a very uh conscious decision we made from day one. We engineered FAST to work with up to 80% of existing lithium-line battery manufacturing equipment because we know the manufacturers won't just uh walk away from billions of dollars of infrastructure they have invested over the years. The incremental investment transition is manageable, and the ground-up rebuild is not. So, frankly speaking, we saw this as coming. Our founding team also brought decades of battery technology experiences. For example, our example chairman, Joe Taylor, he's the former chairman and the CEO of Panasonic Americas. He blazed the trial for the world's first gigafactory with Tesla. We knew that manufacturing transition would happen, but we didn't realize it actually coming faster and bigger than we thought. So this is really the challenge that unfortunately uh that takes the way back for a lot of lithium battery players. But for us, we see this as an opportunity.

SPEAKER_02 8:35

Okay, that's great. Thank you. Uh, one of your most cited milestones, which we've spoken about a little bit already, is being the first company to demonstrate an automotive-sized solid-state battery uh cell operating at room temperature. Uh, why is that so significant? And why has that been so hard, do you think, for other companies uh to do?

SPEAKER_00 8:57

Um, you know, one thing people don't always appreciate is that the battery companies don't just face one value of that. They actually face three uh in a pouch format. The first is really going from a small, say, 5 amp power cell is the similar size of my cell phone today, um, to a like full automotive size cell, which is actually on my table here. I can show you. This was the world's first 100 amp power cell uh that's being built by companies being released to public. Um, and this is 100 amp power, and we launched that about three years ago in CES. And you know, that first jump is enormous and it takes years of time. We had our first 5 amp power cell about eight years ago, and this was launched about three years ago. Then the second value of that is really taking the first automotive cell and making thousands of them consistently and the third is really to go from thousands to millions and billions with full automation. And that's where you really need to be a world-class manufacturer. And just to put it in perspective, a pouch cell under 40 and power is actually very difficult to be integrated into a full-size electric vehicle with cost efficiency. So getting past that threshold matters a lot. Um and this is what I'm really proud of. From day one, we made a deliberate decision to design our first generation product to be highly compatible with existing lithium-body battery manufacturing. That was a strategic call that has dramatically accelerated our ability to scale. We also have an incredible team. Uh, they're generally like world-leading cell engineers backed by 150 plus patents that span across material science, cell design, manufacturing processes. It is a pretty sophisticated combination. And when we start looking into the Saudi State batteries back in 2015, a lot of the other technologies out there require heating up to 80 degrees Celsius to hire just to function. That's where coming to this room temperature thing, as you mentioned in the beginning. It's fine to be a research paper, but it's not fine to be a vehicle that needs to operate reliably across different climate and conditions a driver may encounter. Right? So demonstrating room temperature operation in automotive size cell closed the gap. That milestone was meaningful because it combines both the automotive cell dimension and also real operating environment. That's what made it automotive engineering results itself. It's just not only just a chemistry or scientific report.

SPEAKER_02 11:37

That's great. Thank you. Um, and so just building on that, let's talk about uh the development curve. So batteries go through um a series of A samples, B samples, uh, then C sample on the way to production, at least working with uh the automotive manufacturers. So in your investor deck, uh you referenced delivering B sample cells uh to Mercedes. So where is factorial today across your different OEM relationships? And what does the path to C sample and eventually uh volume production look like?

SPEAKER_00 12:11

We see different OEM have different requirements. Recently we received a lot of interest from drone market. You know, the drone OEMs have completely different qualification cycle from automotive OEMs, and somewhere between like nine months to a year or two, like well, automotive will take at least three to five years to qualify a commercial ready product. And you know, automotive A-sample can be as small as say 20 amp power cells, and B-Sample typically will start at least from 40 amp power. So last year, um Mercedes delivered the world's first solid-state battery vehicle made uh by Global OEM that was made with our uh B-Sample cell that was delivered to Mercedes uh two years ago. In January this year, we also just launched the first solid-state battery production program in the US with Karma Automotive, the Arch Luxury Carmaker with the first vehicle on the road as early as 27, 28 time frame. We're deepening that process with our OEM partners, and the nature of the work has shifted. The conversations we're having right now are much more about industrialization and a system integration than about proving the fundamental technology. So that's a meaningful change from where we were a few years ago. And the path forward is about one thing about all is consistency. So performance in the single style is the starting point. And what automotive partners need to see, and what they are focused on demonstrating is that not only factorial can deliver the performance repeatedly at scale, but also to the tolerance that industry demands. And that's the work in front of us, and it's where our energy is going.

SPEAKER_02 13:53

Okay, great. So in uh September of 25, uh Mercedes EQS was uh powered by your cells, and we would talk about this a little bit, drove over 1200 kilometers from Stuttgart to Malmo on a single charge, which is a pretty remarkable real-world demonstration. So, what did the test prove technically for you, and what did it mean for your relationship with Mercedes going forward?

SPEAKER_00 14:21

Yeah, that drive means a lot to us. It's not only just a milestone, but it's a proof point that it's hard to argue with. You know, 1200 kilometers on a single charge from Stuttgart all the way to Malmou in a real Mercedes vehicle on a real road is not a lab resort. It's it's not a control test track, right? That's a kind of number that makes people stop and recalibrate what they thought was possible. Technically, what it demonstrated is that energy density gains were built towards the translating into like a real-world range, into a range that's meaningful to drivers. Range anxiety is one of the most cited barriers to EV adoption. A battery that can take you from Stuttgart to Malmo for two days without stopping in the fast charging that makes the conversion much faster. But what it I value the most is that uh is how we are working with Mercedes. I've been very proud of the relationship that we've been working with Mercedes over the last few years. And that demonstration didn't just happen because we handed them the cells and they figured out the rest. It really came out with deep collaborative engineering, aligning the integration requirements, working through vehicle level constraints, optimizing towards targets that matter in actual automotive systems rather than just a single spec sheet. And that type of partnerships makes us a better company, and I think it makes the technology better too. Demonstration like this matters because they shift the conversation. It's one thing to tell the industry that Sally State can't deliver, it's another thing to drive 1200 kilometers and make the Mercedes history.

SPEAKER_02 16:04

Agreed. So, in addition to uh Mercedes, you also have a very strong and strategic relationship with Stellantis. So you have a demo fleet uh coming up with uh Stellantis tied to their Dodge Charger Daytona, uh, which is on their large uh battery electric vehicle platform. And uh that's a platform designed to potentially support up to 2 million vehicles a year globally. So, what does a successful demo fleet lead to? And what are the contractual milestones that matter the most in terms of uh your relationship with Stellantis?

SPEAKER_00 16:41

Um, I would say we don't build demonstration just for show, right? It's really built for the intent to industrialize. And demo fleets are actually a critical part of the automotive validation process. They gave both us and our partners the chance to validate not only just the cell level performance, but also system integration, the vehicle behavior, the charging characteristics, durability, and manufacturability. And in terms of the contractual milestones, of course, is to deliver the vehicles together. Um, and that's what we have announced and we have released to public. Uh, and what's encouraging is that major OEMs are increasingly engaging directly in the development process because they realize how strategically important next generation battery technology will be.

SPEAKER_02 17:28

Great. So you have an impressive group of investors and partners, some of which we've already talked about, but Mercedes, installantis, Hyundai, uh, but also Postco, IQT, Phil Energy, and Karma. Can you discuss how you work with uh these partners and give some examples of what they might bring to the table for you?

SPEAKER_00 17:51

Yeah, absolutely. Happy to share with you more about that. It's uh actually a lot of years of efforts. And early on, we we made a decision that I think uh has shaped everything since then. We've not only just bring in a partner to make us better, but also uh bigger, but it's really to make us more credible among the industry and be able to be the driving force that pull this coalition together. A great example is this the investment from InquillTel that we announced in March. Uh, for those who don't know, like InquilTel was founded in 1999 and is widely recognized as a non-for-profit strategic investor for the US national security community. And they were early investors in Palantir, Andrew, and SkyDio, a few very big defense contractors for the US. And they have a very clear track of record of banking companies and matters at the national level in the dual case scenario, dual commercial case scenario. And their mission is straightforward, it's accelerating the commercialization of breakthrough technologies across critical domains, anywhere from drones to robotics to autonomous systems and beyond. So what InQtel invests is not only just capital, it's a signal. A signal that solid state battery technology is no longer optional, it's already a strategic infrastructure. And what excites us most is the dual use nature of what's happening right now. Defense, drones, and robotics are demanding that performance today, that automotive is really what scales it for the future tomorrow. And our automotive partners are one of the most demanding customers in the battery industry. Um, you know, they have a deep knowledge of what it takes to integrate a battery into a vehicle platform and manufacture it at automotive scale. Their engineering team, their safety standards, their production requirements, all of that flow into how we develop and refine our technology. It's a feedback loop that makes our products better.

SPEAKER_02 19:50

That's great. So um so let's take a look at uh opportunities beyond automotive. Uh in your investor deck, uh you guys highlight uh defense, um, drones, AI, robotics, and energy storage as potential near-term revenue opportunities alongside the uh longer ramp uh in electric vehicles. Which of the non-automotive markets do you think could be the first to generate uh some real commercial opportunities for factorial?

SPEAKER_00 20:21

Yeah, that's a great question. We actually came up with a term for this internally back in 2020. We call it high spec market. It captures customers that demand high top-tier performance and they aren't really sensitive to price and they move faster through qualification than traditional automotive. So, drones, robotics, data center, support cars, they all fit squarely into that bucket. Outside of automotive, our near-term focus is really in the drone market. Because drone has really changed the modern battlefield, but they're still waiting for the energy density to catch up. And in that word, like weight is everything. Now, adding the geopolitical reality, China controls more than 80% of the US drone market. And they also recently has restricted export control of uh high energy density batteries. And the Trump administration also has moved to the ban for foreign drone batteries entirely. I mean, there are going to be back and forth for some of these regulations on and off, but the trend is very clear. It's not just only a market opportunity, it's a strategic imperative. And we happen to be exactly where the country needs to be. And they also create a vacuum that have a short-term high demand in these applications, but also a less competition globally.

SPEAKER_02 21:43

Okay, great. So your commercialization strategy is built around a capital light model. So licensing your IP uh potentially and process technology to industrial partners rather than building your own gigafactories. We understand that you have a JDA with Power Company, which is part of Volkswagen. Are they an industrial partner? And why do you believe the Capital Light is the right approach?

SPEAKER_00 22:11

Yeah, that's a great question. I would say the capital requirement for battery manufacturing scale is enormous. We're taking billions of dollars per facility. It takes years to build and a significant operating complexity before you produce a single cell per customer. And our view is that a scarce resource in this industry isn't manufacturing capacity. It is a technology and process knowledge to make Solid State battery cells work reliably at scale. So that's where we focus. You know, everything else, the facilities, equipment, operators, the supply chain infrastructure, we access through partners who've already built at a much lower cost of capital. In practice, I would say battery licensing is not as easy as offering an IP and just call it a. Because licensing isn't just handing over a patent and walk away like some of these biotech industries, right? It's really holding hands through manufacturing, optimizing the yield with your partners and solving problems nobody anticipated during the manufacturing process. And if you don't control the material technology, you also lose the innovation edge over time. So that's why we have our business model combining technology license, the engineering services, and the material supply. This is how we can scale without burning billions of dollars of capital. And we're excited that in February this year, we entered into a joint development agreement with PowerCo, focused on the development and validation of our solid state technology. Our collaboration leverages PowerCo's expertise in cell industrialization at large-scale manufacturing. And this partnership is really focused on validating factorial cell technology for industrialization.

SPEAKER_02 24:02

Okay, great. So a meaningful portion of your production capacity is in South Korea. And your supply partner roster is heavily South Korean companies. You have LG Chem, LOAT Chemical, Sungeil, High Tech. Given the current environment around tariffs, export controls, and fiak regulations under the IRA framework, how are you thinking about the supply chain risks?

SPEAKER_00 24:33

Yeah, absolutely. It's definitely on top of the mind for every executive in this industry. I would say supply chain resilience has become one of the defining strategic challenges across the entire industry, especially in the defense sector. We have built one of the strongest supply chain coalitions among all the Southern State players. In March, we announced that we received investment from Postco and Fuel Energy. That was actually in conjugation with Inquel investment. Pasco is one of the largest Korean battery material makers, and they're the only one that produced both cathode and old materials. Fuel Energy is a leading equipment maker in Korea with their extensive experiences in battery gigafactories. And Sunggyu High Tech is a Korean conglomerate in recycling. And of course, we had a historical investment from Locke Chemical, and we also announced a partnership with LG Chem a few years ago. And step back, here's really the big picture. We've always believed that battery innovation doesn't just happen in isolation, it's a supply chain sport. Look at how the Asian cell makers control over 85% of global cell production. It's not just the cell company's technology, it's a decade of deep collaborative relationship with top-tier suppliers built into a cohesive system. And these top-tier supplier relationships are really intended to provide not only supply chain resiliency from cradle to grave, right? From the raw material manufacturing to equipment making to recycling, right? But more importantly, sending strong signal of confidence and support for our technology and in the manufacturing approach.

SPEAKER_02 26:20

Okay, great. Um, last question. So you've been working uh on this technology for over a decade, and the commercialization of solid state batteries uh at true automotive scale is is hopefully just just a few years away now. Um what does winning look like for factorial uh over the next 10 years?

SPEAKER_00 26:44

Well, I would say lithium-mine batteries were invented in the US 30 years ago, and it was industrialized by Sony, Japan, and was mass produced by Korea and China. At that time, US made a conscious decision not to manufacture lithium-mine batteries. It was a very different world at that time.

unknown 27:04

Right?

SPEAKER_00 27:04

Solid State batteries are a chance to write a different story. We're here to look at a multi-billion dollar industry being reborn at this intersection of mobility, defense, and intelligence. The question isn't whether Solid State will reshape the world, it will. And the question is who leads it. In 10 years, I want Factorial to be one of the world's top battery suppliers, not just a technology company, but a company that actually scale it, manufacture it, and deliver it to people's lives. And what keeps me motivated, honestly, is really the magnitude of the problem. This is one of the hardest technical challenges in industry history. And we get to work on it every day. It never gets old. That's the fun part of it. And we started with a vision that most people thought it was impossible. Every milestone, the first cell, the Mercedes Drive, the partnerships proves that it's not. You know, we have a little bit more than $250 million paid in capital. And there's so many other countries, many other companies have invested way more than that, even to different order magnitude. But at the end of the day, what truly drives me is something simple. We believe that the hardest problems are worth solving because the change they change what's possible for humanity. And that's a rare privilege that we gotta work on it and we don't take it lightly. And we're very proud to be the front of this race, and we're blazing the trail uh for the history, and we're very much looking forward that we'll continue pioneering this industry.

SPEAKER_02 28:46

Well, CU, thank you so much for walking us through the factorial energy story and the important dynamics driving your company. Uh back to you, Tim.

SPEAKER_01 28:59

Thanks, Eric, for those uh great questions. And CU, thank you for the thoughtful answers. Um, what an exciting time to be in the company and industry you're in. So, best wishes in the year ahead.

SPEAKER_00 29:09

Thank you, Tim. Thank you, Eric.

SPEAKER_01 29:11

Thank you for listening, and do not forget to subscribe as well as visiting www.watertowerresearch.com to stay up to speed on the WTR on the horizon written research reports podcasts, fireside chats, industry specific symposiums, and conference schedules. We will see you next time for another edition of WTR on the horizon podcast. Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.