The EV industry is focused on building a better battery.
Batteries are the linchpin of the electric vehicle market. Competition to create the longest-lasting, farthest-driving and cheapest battery has accelerated, with companies old and new joining the race. There are many pieces in the supply chain that turns lithium into batteries, and it’s not just the electric vehicle manufacturers that offer investors exposure to the growing demand for automobiles without internal combustion engines. From miners and battery makers to the automakers themselves, here are seven EV, battery and other stocks that span the supply chain.
Tesla Inc. (ticker: TSLA)
Clearly one of the top EV stocks, Tesla has the advantage of being an early mover with years of production under its belt. Last quarter, Tesla delivered over 200,000 vehicles, more than double the year-ago figure. Still, it faces some headwinds. A near-term risk facing Tesla and other automakers is a global shortage of semiconductors. Over a longer time frame, competition is a serious risk to its dominance, especially as legacy automakers such as Ford Motor Co. (F) and General Motors Co. (GM) ramp up their own electric vehicle production. Another risk to Tesla is its wildly high valuation. Tesla’s current price-to-earnings ratio is about 390, while Ford’s is roughly 15. But Kunal Sawhney, CEO of Kalkine Group, likes Tesla for two main reasons. “One, it’s built a resilient supply chain in the battery-driven car space, something new entrants and relatively smaller players will find difficult to achieve,” he says. “Two, EV adoption is still in its infancy.”
Nio Inc. (NIO)
This Chinese electric vehicle maker is driving on Tesla‘s bumper in the nation’s vast market. It delivered nearly 21,900 vehicles in the second quarter, more than double its deliveries from the prior-year quarter. The electric batteries in an EV are one of the most expensive components in the vehicle, but Nio has found a revolutionary way to sidestep this issue: battery as a service. By selling a subscription battery service, Nio not only reduces the initial cost of its cars but also keeps customers coming back. The unveiling of its new ET7 luxury sedan is seen as a shot across Tesla’s bow, a declaration that Nio won’t let Tesla’s new Model Y take over the Chinese market. Still, Nio has yet to turn a profit. Further, competition from other EV makers may be more of a threat for Nio than it is for Tesla.
ChargePoint Holdings Inc. (CHPT)
Running out of charge is the new running out of gas. A recent small poll conducted by electronic control solutions company Exro Technologies found that nearly half of respondents said charging infrastructure is the biggest challenge for EV adoption. ChargePoint is trying to change that. “CHPT is an exciting ancillary story and is a leading player in the electric vehicle charging infrastructure space,” says Matthew Tuttle, CEO of Tuttle Capital Management. “Repeat orders continue to be strong and the company is making acquisitions to bolster its leadership position.” In its most recent quarterly announcement, the company raised its full-year revenue outlook to a range of $225 million to $235 million from $195 million to $205 million. “Commercial customers of all types are investing in charging for their consumers, employees and visitors and demand for residential products has grown as vehicle arrivals accelerate,” the company said.
Contemporary Amperex Technology Co. Ltd. (300750.SZ)
This Shenzhen, China-listed company, known as CATL, distinguishes itself among a select group of top battery producers by the number of relationships it has with automakers, including Tesla, says Pedro Palandrani, research analyst at Global X. The company has been rapidly expanding, with more than 77 gigawatt-hours, or GWh, of battery cell capacity under construction and plans for a new 80-GWh plant near Tesla’s Shanghai production base, Reuters reported. “Helped by CATL’s cobalt-free lithium iron phosphate batteries and local procurement, the (Tesla) Model 3 is one of the lowest priced premium midsized sedans in China,” Palandrani says. In addition to the cobalt-free technology, CATL has also unveiled its first-generation sodium-ion battery. If that tech ends up panning out, it could lower the company’s reliance on more expensive lithium components for its batteries.
Lithium Americas Corp. (LAC)
For now, lithium-ion batteries remain the standard for the EV industry. “In the coming years, the automotive industry is forecast to increase its dominance of Li-ion battery demand, accounting for in excess of 80% total global battery capacity by 2030,” according to critical materials research and consulting company Roskill. That demand is creating an incentive for new lithium supply, and LAC is developing projects in Argentina and Nevada. The Argentina project is on track for first production by the middle of next year, the company said in August. The Nevada project — which has been challenged in court — isn’t as far along, but the company says it expects construction to begin in early 2022. It is the largest-known lithium resource in the United States, according to Lithium Americas.
Ganfeng Lithium Co. Ltd. (GNENF)
Early stage mining companies face the risk that they won’t be able to get their projects into production for a variety of reasons, but they can richly reward shareholders if their projects pan out. It’s a different calculation for miners that are able to generate revenue from production. “Ganfeng is a top 3 lithium compound producer in the world and the leading producer in China,” Palandrani says. “The company is unique because it covers a wide swath of the lithium-ion battery supply chain.” That includes mining, refining and battery manufacturing. “The group has complete battery manufacturing and recycling technology, providing sustainable value-added solutions to battery manufacturers and electric vehicle manufacturers,” the company says. A risk for lithium mining companies is if alternatives to lithium batteries become widespread — but for now, Ganfeng can be considered one of the top EV stocks.
Panasonic Corp. (PCRFY)
With batteries representing about 29% of the total cost of an electric vehicle, reducing battery costs is critical for auto manufacturers seeking to gain market share from internal combustion engine vehicles, says Palandrani. He expects a new battery format that over-the-counter-traded Panasonic is working on for Tesla “to store more energy and have an easier manufacturing process, two keys to further reducing battery costs.” The Panasonic-Tesla partnership goes back years, but the Japanese company has also been expanding its customer base. Last year, Toyota and Panasonic announced a joint venture to build batteries not only for Toyota but for other customers, as well. “Batteries — as solutions for providing energy for automobiles and various other forms of mobility, and as solutions for various kinds of environmental issues — are expected to fulfill a central role in society going forward,” the companies said.
Top EV stocks and battery companies:
— Tesla Inc. (TSLA)
— Nio Inc. (NIO)
— ChargePoint Holdings Inc. (CHPT)
— Contemporary Amperex Technology Co. Ltd. (300750.SZ)
— Lithium Americas Corp. (LAC)
— Ganfeng Lithium Co. Ltd. (GNENF)
— Panasonic Corp. (PCRFY)
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Update 09/14/21: This story was published at an earlier date and has been updated with new information.