The battery sector has seen a remarkable expansion in recent years, drawing the attention of investors all around the globe. Battery demand is only expected to rise as electric cars (EVs), cloud computing, charging devices, and other applications grow more mainstream. As time goes on, the burgeoning EV industry will be the largest growth engine for battery stocks.
According to Industry Research Future, the electric vehicle battery market will be valued at $192.29 billion by 2030, with a 33.7 percent annual growth rate from 2022 to 2030. The global battery economy will reconfigure long-established supply networks, making battery equities one of the most profitable investment opportunities.
Hundreds of millions of dollars have been spent to improve battery longevity, power, mobility, charging times, and safety. Furthermore, electric vehicle batteries, in particular, exist in various sizes and chemistries, all of which have a significant influence on performance.
The switch to electric vehicles looks irreversible, yet lithium-ion batteries are costly, volatile, and difficult to charge. Solid-state battery manufacturers claim less expensive, faster-charging batteries that will not catch fire. But are these businesses too risky to be smart investments?
Why Should You Consider Solid-State Batteries?
In 2021, electric car sales in the United States increased to over 650,000 vehicles, accounting for 4.4 percent of the market. EVs now account for more than 20% of all new automobiles sold in China. However, advancements in battery technology are critical to the future of electric vehicles.
EV batteries now account for more than a third of the cost of electric cars. Even though the cost of lithium-ion batteries has reduced by 90% in the last decade, traditional batteries have limits. They take a long time to charge, light up and have a short-range.
A flammable liquid electrolyte is used in traditional lithium-ion batteries. Solid-state batteries, on the other hand, employ a solid electrolyte, which is why they're named "solid-state." Solid electrolytes are less prone to catching fire, resulting in improved safety, range, and longevity. A solid-state battery should charge in around 10 minutes, and higher energy density also means greater range.
Solid-state batteries, which needless green metals like cobalt, should be less expensive, making EVs more affordable than conventional vehicles.
Solid-state batteries that are safer and less expensive might revolutionize the electric vehicle business. Solid-state batteries are expected to account for 45 percent of the EV battery market by 2035, up from 0% currently, according to BloombergNEF, Bloomberg's research arm. Better batteries would be difficult for carmakers to pass on, resulting in a fundamental change in the battery sector.
However, it's unclear if publicly listed solid-power businesses will be the ones to effectively commercialize the technology. They compete with traditional battery producers as well as automakers such as Toyota.
What Are The Dangers Associated With Solid-State Battery Stocks?
The technology is still being tested.
Although some early testing has gone successfully, solid-state batteries for automobiles have yet to be marketed. Manufacturers of solid-state batteries must mass-produce goods that will function with various automobile types and in a variety of climates. QuantumScape, the world's biggest solid-state battery manufacturer, hasn't revealed much information, making its claims difficult to verify.
Commercial production is unlikely for some time.
Solid-state computing is a long-term investment. Because revenues are a long way off, investors must rely on partnerships, battery testing, and other technical milestones to assess the performance of their investments.
In a rising interest rate environment, future profits are substantially discounted.
Companies developing solid-state batteries do not plan to begin commercial production until 2025, with significant profits coming later. Higher interest rates are particularly damaging to companies with high valuations and uncertain revenues. Furthermore, pre-revenue firms are not presently favored by investors.
Only two of the several firms attempting to challenge traditional EV batteries are publicly listed. Traditional battery companies such as CATL in China, SK Innovation, and LG Energy in Korea have also invested in technology. Internally, Toyota is working on solid-state battery cells.
Nio (NIO)
A Chinese electric vehicle manufacturer, Nio has been rapidly expanding its battery charging and switch stations in its home market.
Its entry into the Norwegian market also intends to expand throughout Europe. Furthermore, it runs a unique "battery-as-a-service" program that has proved quite popular in China. As a result, its battery expenditures have complemented its quick increase in EV sales and will continue to enhance NIO stock.
So far, Nio has created over 500 swap stations, with 5.3 million swaps completed. Its battery-swap technology allows automobile owners to acquire a completely charged battery in three minutes or less. It will collaborate with Shell (NYSE: RDS-A, NYSE: RDS-B) on the construction of new stations in Europe next year and the installation of 100 new switching stations in China over the following four years. When you include its BaaS option, you're looking at a significant income stream from its battery business that will only increase over time.
QuantumScape (QS)
QuantumScape is one of the market's most promising EV battery stocks. Solid-state batteries are the Holy Grail of electric vehicle batteries, according to the business.
Even though other firms are competing, QuantumScape seems the most viable option. It had a fantastic 2021, meeting all of its goals ahead of schedule, making QS stock a fantastic option for the next year.
This year, QuantumScape has made incredible progress. The 10-layer cell, which boasts a stunning 80 percent energy retention at 25° Celsius after 800 cycles, was perhaps the most striking. So far, no other contender has come close to matching this achievement.
Furthermore, it has a strong liquidity position of $1.3 billion, which is impressive given its $250 million cash burn rate this year. As a result, it's on track to commercialize solid-state batteries and cement its status as an industry leader.
Albemarle (ALB)
Albemarle is the world's biggest lithium producer. Even though it has a diverse business, lithium accounts for 41% of total sales and has the strongest growth possibilities.
Naturally, as the demand for electric vehicles grows, so will the need for lithium goods. Furthermore, the corporation has made significant investments in expanding the production capacity of its mines in Chile and Australia.
Given its high plans for 2026, the firm seems to be on track for robust long-term growth. It forecasts sales of $6 billion to $7 billion, a significant increase above the $3.2 billion it is expected to generate in 2021.
Furthermore, it anticipates EBITDA to fall between $2 billion and $3 billion, a three-fold rise from this year. As a result, Albemarle and its enterprises have a lot to look forward to in the future years.
Muslim Farooque had no direct or indirect holdings in the securities referenced in this article as of publishing. The views stated in this article are those of the author and are subject to InvestorPlace.com's approval. Guidelines for Publication
Muslim Farooque is a savvy investor with a positive outlook. He is interested in assessing technology equities as a lifelong gamer and computer lover. Muslim graduated from Oxford Brookes University with a bachelor's degree in applied accounting.
BYD
BYD is a Chinese electric vehicle manufacturer. It makes and sells hybrid and electric vehicles, buses, trucks, and monorails. It also manufactures the batteries and semiconductors utilized in its electric vehicles.
Warren Buffett is a substantial stakeholder in BYD, making it unique in the EV business. Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) was the first to invest in the battery and electric vehicle firm in 2008. Buffett's business has an 8.2% stake in BYD, worth more than $8.5 billion in late 2021.
In China, BYD's electric vehicles are quite popular. The firm is the leading overall brand globally, selling five of the top 15 new energy cars. BYD sold more than 61,000 new energy cars in August 2021, more than four times its previous year's sales. Its battery business benefits from the strong sales pace as a fully integrated EV firm.
LG Chem
LG Chem is a significant chemical corporation based in South Korea. LG Energy Solution, a division of LG, manufactures batteries for automobiles, homes, and businesses. It's a Tesla supplier and one of its biggest EV battery manufacturers. It intends to develop a facility in the United States to make batteries for electric vehicles and energy storage devices. It also wants to make the bigger electric vehicle batteries that Tesla wants.
The EV battery business is becoming more important to LG Chem. In July 2021, the firm announced intentions to spend $8.7 billion in expansion projects through 2025, focusing on developing additional battery materials. The business intends to start building a cathode materials manufacturing plant in Gumi, South Korea, later in 2021.
Microvast
Microvast is a company that designs, develops, and manufactures lithium-ion battery systems. After combining with Tuscan Holdings, a special purpose acquisition company, the Texas-based enterprise became public in July 2021. (SPAC). Microvast received more than $700 million in cash as part of the acquisition to help support its future expansion.
In November 2021, Microvast released its first quarterly results as a public company. Increased sales of battery products to new and current clients drove a 20% rise in revenue.
The corporation is investing considerably in its expansion. Microvast anticipates capital expenditures of $120 million to $150 million in 2021. That's a significant sum of money for a company aiming for annual revenues of $145 million to $155 million. The investments will help the company increase its battery manufacturing capacity and product line, allowing it to tap into a huge and expanding market.
Panasonic
Panasonic, a Japanese company, is a major EV battery manufacturer. For many years, it has been a Tesla partner and supplier. In 2009, the two firms signed their first supply deal. Even though Panasonic is no longer Tesla's exclusive battery supplier, the business continues to produce a large volume of batteries for the electric vehicle manufacturer.
Panasonic is expanding its North American battery manufacturing plant in Nevada, where it shares space with Tesla's huge Gigafactory 1 by adding a new production line in 2021. It's also expanding capacity at its EV battery manufacturing in Japan. The firm produces a variety of electric vehicle batteries and is now constructing new manufacturing equipment to meet Tesla's need for bigger batteries.
Panasonic's connection with Tesla as a supplier may not extend indefinitely. On the other hand, the battery company is ideally positioned to offer EV batteries to all of the major automakers that have announced big intentions to build electric cars. Although not being a pure-play EV battery business, Panasonic is expected to remain a market leader.
QuantumScape
QuantumScape is developing solid-state battery technology to expand the range of electric vehicles while also making them simpler to recharge. The American firm is only getting started with large-scale testing of its battery technology, and it intends to produce more than 200,000 batteries each year.
QuantumScape is investing extensively in the commercialization of its technologies. It expects capital expenditures to be between $135 million and $165 million in 2021, and that would still leave them with more than $1.3 billion in cash to pursue its business objectives. In 2022, the business plans to send prototype battery samples to EV manufacturers, supply test vehicle batteries in 2023, and commence commercial battery manufacturing in 2024 or 2025.
QuantumScape thinks its bank sheet is solid enough to fund many more years of research and testing, but investing in the firm is hazardous. QuantumScape's equity might become worthless if its technology fails or becomes a commercial disaster. Nonetheless, this is a promising EV battery firm with room for development in a fast-growing field.
Romeo Power
Romeo Power is a commercial vehicle battery manufacturer situated in California. While income from heavy-duty battery packs is presently low — $5.8 million in the third quarter of 2021 — the business has a long-term supply arrangement with truck maker PACCAR (NASDAQ: PCAR) that runs through 2025.
PACCAR's Peterbilt 579 and 520 electric vehicles will be powered by Romeo batteries, with manufacturing beginning after 2021. The pace at which demand for electric trucks grows will determine Romeo's revenue growth, which is impossible to estimate. However, the sector looks to be on track to go electric shortly, placing Romeo Power in a strong position to capitalize.
FREYR Battery
FREYR Battery is a Norwegian electric vehicle manufacturer. The firm designed and manufactured high-density lithium-ion batteries for electric cars, buses, ships, and trucks. Additionally, the firm provides energy storage solutions.
In Mo I Rana, Norway, the business began building on its Customer Qualification Plant (CQP) and first battery cell manufacturing line in 2021. The factory is scheduled to open in the second half of 2022. Consequently, the business can put its 24M technology into practice and test its materials and battery cells.
It will also begin providing clients with samples. FREYR CEO Tom Jensen said that the factory would be Norway's first industrial-scale lithium-ion battery cell production facility, demonstrating the company's commitment to speed, scalability, and sustainability. Furthermore, the company's success in Norway gives this electric vehicle battery stock a once-in-a-lifetime chance.
Toyota Motor Corporation (TM)
Toyota Motors isn't a pure-play solid-state battery company, but it has the potential to become a big leader in the field. To meet their battery demands, car manufacturers of this caliber and size seek to work with startups.
On the other hand, Toyota has promised a $13.6 billion commitment to battery development over the next ten years. A significant portion of the funds will build quantum glass batteries.
A manufacturer with Toyota's resources has an obvious advantage over most startups. It has an excellent balance sheet and operational history. Consequently, the failure of its glass battery investments won't have a significant effect on TM stock.
It's understandable to anticipate delays given the huge difficulty of manufacturing solid-state batteries. Toyota said there might be delays in manufacturing glass batteries in September of last year. Nonetheless, with a firm like this backing the project, it's realistic to anticipate great outcomes down the road.
Growth Prospects That are Fully Charged
EV batteries are a critical component. Battery sales will increase as the number of electric cars on the road increases, which will benefit manufacturers. To benefit from this megatrend, forward-thinking investors may consider adding a battery manufacturer to their portfolio.
The world is moving toward renewable and cleaner energy sources. The movement to replace internal combustion engines with electric vehicles speeds up. Furthermore, this is a game-changer in the transportation business. It also creates a significant opportunity for investors who get in early on the EV shift.
However, before you invest, make sure you do your homework. Investing is never without risk, and profits are never guaranteed. There are also several investment alternatives to examine.
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