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The battery market is huge, having an estimated global market size of USD 108.4 billion in 2019 and expected to grow at a compound annual growth rate (CAGR) of 14.1% from 2020 to 2027, according to Grand View Research. This is no surprise, as many technologies ‘need’ batteries.
There is an ever-increasing demand for batteries, a result of high demand of consumer electronics and clean technologies that requires batteries. Electric vehicles specifically has gained mainstream traction surging the demand for batteries drastically.
A market that is expected to grow at a CAGR of 14.1% in the next five years is quite promising. However, for years, the battery sector has being one of the underperforming sectors in the stock market.
Batteries are not a thing of today, even before EVs became mainstream, traditional vehicles use batteries (and they still do); batteries has long had automotive applications.
And are likewise applied in consumer electronics for long, nonetheless, it still underperforms.
The battery sector had established a track record that scares investors away, but there is a changing narrative that is making the sector looking quite promising today.
Normally, batteries are expensive to produce and battery companies make little profit from their huge revenue. As such, even though, demand in batteries has been increasing, the low profit margin associated batteries makes battery stocks unattractive.
An analysis by research company Bloomberg New Energy Finance (BNEF) shows that the benchmark levelized cost of electricity, or LCOE, for lithium-ion batteries has fallen 35% in the first half of 2018. This is because ‘there has been a dramatic decline in manufacturing costs of Lithium ion batteries’ the BNEF report reveals.
There are publicly traded companies working on battery technologies with the aim of increasing its capacity and reducing cost of production, all of which will make batteries a more profitable venture.
It’s this trend and these companies that are making the once underperforming sector promising for smart investors like you.
Batteries are really the future. Imagine all those growth in market size with an increasing profit margin, battery stocks are going to be winners in the next few years.
Cutting the chase…
If you’re interested in investing in electric vehicle battery stocks, here are 5 promising battery technology stocks:
1. Telsa (TSLA)
It’s no surprise that the winning EV stock is a leading battery stock. Tesla has a dedicated battery technology unit, Energy Generation and Storage, through which it entered the battery market strongly.
Tesla has been developing their battery tech in other to boost their EV range and also to boost the capacity of their energy storage products.
A lot of investors who own Tesla stocks considers strongly Tesla’s potential in the battery sector.
The company has a range of energy storage products, such as rechargeable lithium-ion battery systems for use in homes, industrial, commercial facilities, and utility grids; and designs, manufactures, installs, maintains, leases, and sells solar energy generation and energy storage products to residential and commercial customers.
Tesla has been making strong moves to solidify its position in the battery technology market, moves that includes the acquisition of Maxwell Technologies and Hibar Systems, both of which are battery technology companies.
The company has been sending a strong message to The Street that they are not just about electric cars. And early Tesla investor and CEO of Social Capital, Chamath Palihapitiya echoes this sentiment.
“This is no longer about cars … If you ask me as an investor, [the bet] is in Tesla’s energy business” Palihapitiya said on CNBC TV.
Tesla develops and manufactures its lithium-ion battery cells in a joint venture with Panasonic (a major battery technology company).
2. Panasonic Corporation (PCRFY)
Panasonic Corporation, together with its subsidiaries, develops, produces, sells, and services electrical and electronic products under the Panasonic brand name worldwide. However, they are also major players in the battery technology space.
The company’s balance sheet has been taking a lot of hit from its advancing in developing its battery technology, an investment that will pay off in the nearest future.
Panasonic does not only run a joint battery venture with Tesla (the largest automotive company by market cap), it also runs another with Toyota (the second largest automotive company).
Through its strategic partnership with Telsa and Toyota, the company is strongly one of the leading battery technology companies.
In 2019, according to data from Adamas Intelligence’s EV Battery Capacity and Battery Metals Tracker, Panasonic was responsible for 51% of global EV battery Nickel demand.
It is already an existing partner in supplying batteries for Toyota’s electric vehicles and currently leads the EV battery manufacturers space with a 39% market share.
3. Energizer Holdings (ENR)
Energizer Holdings, Inc., together with its subsidiaries, manufactures, markets, and distributes household batteries, specialty batteries, and lighting products worldwide.
It offers lithium, alkaline, carbon zinc, nickel metal hydride, zinc air, and silver oxide batteries under the Energizer and Eveready brands, as well as primary, rechargeable, specialty, and hearing aid products.
The company also provides headlights, lanterns, children’s and area lights, as well as flash lights under the Energizer, Eveready, Hard Case, Dolphin, and WeatherReady brands.
In addition, it licenses the Energizer and Eveready brands to companies developing consumer solutions in gaming, automotive batteries, portable power for critical devices, LED light bulbs, and other lighting products.
Further, the company designs and markets automotive fragrance and appearance products under the Armor All, Nu Finish, Scratch Doctor, Refresh Your Car!, LEXOL, Eagle One, California Scents, Driven, and Bahama & Co. brands.
It sells its products through direct sales force, third party distributors, and wholesalers; and through various retail and business-to-business channels, including mass merchandisers and warehouse clubs, food stores, drug and convenience stores, electronics specialty stores and department stores, hardware and automotive centers, and military stores, as well as through e-commerce.
Energizer Holdings, Inc. is headquartered in St. Louis, Missouri.
4. QuantumScape Corporation (QS)
QuantumScape is an industry-leading public company (NYSE: QS) that is developing solid-state lithium metal batteries for electric vehicles that provides both high specific energy and high energy density. The company is based in San-Jose and backed by Bill Gates, Volkswagen, Continental AG, and George Soros among other prominent investors.
Arguably, QuantumScape’s all-solid-state battery technology is currently the most advanced. Its prototype battery can charge to 80% capacity in 15 minutes and that’s “faster than either conventional battery or alternative solid-state approaches are capable of delivering”.
One of the biggest challenges of developing all-solid-state batteries is the complication around increasing their capacity and charging time. In other to increase the capacity of these batteries, their energy density per volume and per kilo has to be increased.
The trick is to be able to pack as much energy as possible per kilo of the battery, deliver high rates of power and avoid dendrites formation. Dendrites are formed during the charging process at high rates power and they cause batteries to fail.
As such when normal solid-state batteries are being charged at a very high power rate, in order to speed up the charging time, dendrites are formed and the battery fails, and nobody wants that.
QuantumScape recently announced that it has overcome this problem, a major technological breakthrough, according to its recent data, its solid-state separators can work at very high rates of power while avoiding dendrite formation. This breakthrough enabled its batteries to fast-charge to 80% capacity in 15 minutes.
And the company also announced in February that it was able to produce multilayer solid-state batteries that can charge at high rates of power and get to 80% capacity in 15 minutes while avoiding dendrites formation.
This is a much-needed and awaited breakthrough that puts the company ahead of the pack in the race to develop commercial solid-state batteries that could be used by electric vehicles.
5. Solid Power (NASDAQ: SLDP)
Solid Power is a leading developer of all-solid-state rechargeable batteries for electric vehicles.
Its batteries are extremely energy-dense, 50% denser when compared to lithium-ion rechargeable batteries.
Solid Power’s batteries can also power devices such as portable electronics, aircraft, and satellites.
There have been numerous reports, from China and across the world, of Teslas bursting into flames as a result of battery damage.
Tesla, the most popular EV maker, with all its ‘supposed’ advanced lithium-ion battery technology seemingly can’t stop the trend of its EVs exploding as a result of battery damage.
And the problem is not just with Teslas, every electric vehicle that’s powered by lithium-ion batteries is prone to such explosions, simply because lithium-ion rechargeable batteries have flammable liquid electrolytes.
Solid-state batteries like the ones developed by Solid Power do not contain volatile or flammable liquid components, as such, they are safer.
The company currently produces 20 Ah multi-layer all-solid-state lithium metal batteries on its continuous roll-to-roll production line based in Louisville, Colorado.
However, the all-solid-state batteries it currently produces are dimed as prototypes that are currently being validated by the company’s strategic partners.
Solid Power is expected to sell its all-solid-state batteries this year, however, the batteries for automotive applications are expected to hit the market by 2026.
Henry John is a Stock Portfolio Manager that focuses on companies developing cutting-edge technologies.
Keeping track of cutting-edge techs, companies and stocks is what I do almost everyday. And I love it. Whether it’s artificial intelligence, 5g, or autonomous vehicles; I’m all in.
I’m a self-made millionaire who made most of his money investing in technology companies while working in finance.
Yes! I owe it all to tech and finance.