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Energy is vital to civilization and life in general. It is also tough to store. For a long time, the only available forms of stored energy were food (for humans or animals) and wood/charcoal.
With the industrial revolution, we started to tap into underground reserves of coal, oil, and gas.
But no energy form is more useful or versatile than electricity. It is one of the best forms of energy, as it can be equally used to power a computer chip, turn on a light bulb, or power massive industrial equipment.
The only problem is that electricity is tough to store. This is why the power grid is very complex, constantly balancing production and demand every second.
In theory, batteries are the answer for storing electricity. With the lithium-ion battery, it finally became possible to pack enough power in a small and light enough fashion to power devices like computers or smartphones.
Another reason to prefer electricity to fossil fuels is that it can be produced carbon-neutrally with renewables (or even nuclear power plants). With climate change a growing concern, reducing fossil fuel demand is ever more critical.
And no sector is as consuming for fossil fuel as transportation. It is also one in which it is difficult to move away from oil, as oil is one of the densest fuels possible. It means it contains a lot of energy per kilogram or per liter.
When Tesla and other companies like BYD launched their modern EVs (Electric Vehicles), they demonstrated that modernized batteries were now dense enough to compete against gasoline finally.
This creates an exploding demand for batteries, with EVs now its driving force. And most of the future growth is equally expected to be from EVs.
The EV battery demand is expected to grow by 19% CAGR, from $ 56.4B in 2022 to $134.6B in 2027.
Another sector that will see rising demand is stationary batteries, which power homes and the electric grid. This is because renewables are intermittent, either unpredictable like wind or not producing in the dark like solar. So, a fully decarbonized electric grid will need massive battery stations to bring power at peak demand in the evening.
Top 10 battery stocks
1. Tesla, Inc.
The uncontested leader of the EV market is Tesla, which has been at the forefront of the EV revolution.
Maybe the largest contribution of Tesla is not technology but EVs' image. The Roadster 1.0, with a performance comparable to a Porsche (and a quite similar price tag), completely changed the expectations about EVs. Yes, EVs can reduce carbon emissions and be “green.” But suddenly, they were also carrying a “cool” factor. This turned EVs from a “needed sacrifice to save the planet” into “the future of transportation.”
Tesla is also looking to become the first company to achieve full self-driving/robotaxi, relying on every Tesla on the road to provide an unmatched influx of data, outmatching all its competitors together.
Tesla's cars are powered by some of the best batteries in the world. First, it was supplied by Panasonic, later by CATL, and more recently by BYD, while also producing its own.
Lastly, Telsa is active in the energy sector, with a solar panel business and fixed batteries for homes (Powerwall) and at the utility-scale level (Megapack).
This is still a nascent business line, but it might, in the long run, turn out to be as big as the vehicle manufacturing part for Tesla.
It has already deployed 10 GWh of the Megapack in 1,500+ sites, with the pace of installation picking up very quickly.
Between quickly growing car sales and even more quickly growing utility-scale battery systems, Tesla is both a leading consumer and provider of batteries in the world.
Tesla is one of the most valuable companies in the world, with a stock price that exploded upward in the last few years. And a lot of its current market capitalization reflects strong optimism about its future. So, investors will want to check if the price they pay can be justified by future growth or if some of that growth is already priced in.
Toyota is a “classic” automaker and the world's second-largest car seller, just behind Volkswagen. It is a truly global company, with sales spread equally worldwide. It is also recognized as one of the most efficient manufacturers, with best-in-class automation and just-in-time supply chains and manufacturing systems.
For a while, Toyota was lagging in the EV sector, preferring a focus on fossil-fuel-powered cars, hybrid, and hydrogen.
This is changing, with plans for a 900-mile battery. Toyota's change of heart about EVs stems from its achievements in solid-state battery technology, a theoretically game-changer for the industry, allowing for a much more powerful battery with a better safety profile and quick charging. These models should be available in 2027-2028 and challenge the performance of the sector leaders.
Toyota's prudent turn toward electrification can be interesting for investors skeptical of claims of sudden and radical transformation of the transportation sector. With Toyota spending capital on EVs only now, once solid-state batteries are available, and still keeping some fuel cars in its lineup, it makes for a bet on electrification moving forward, but only once the technology is mature enough to replace legacy systems fully.
BYD is the leading EV company in China, with 1,860,000 vehicles sold in 2022, €20B in revenues in 2022, and one of the largest private companies in the country.
The company started as the first supplier of lithium-ion batteries to Motorola in 2000 and entered the automotive business as early as 2003. Today, it is also active in buses, trains, semiconductors, and battery energy storage.
Thanks to its sheer size, “BYD Surpassed LG to Become the World’s Second-Largest EV Battery Supplier”
Beyond the EV market, BYD, like Tesla, is looking to utilize its outsize battery supply for other markets. It notably launched the Battery-Box for residential usage, using cobalt-free Lithium Iron Phosphate chemistry. It also offers its New Energy package, combining solar and storage solutions.
Bringing together Battery-Box and New Energy, BYD Energy Storage System (ESS) has shipped more than 14 GWh of storage capacity.
BYD owns the complete supply chain layout from mineral battery cells to battery packs. This helped it set up its own proprietary recycling solution, using old car batteries as fixed storage or full battery recycling through a new subdivision in 2022.
BYD is now expanding overseas, especially in Europe, with €30,000 models and 265-mile ranges. This could pressure local manufacturers and Tesla, with a price tag now in the range of fuel-powered cars. Expansion in the US is more cautious as the US-China rivalry keeps escalating.
With strong growth prospects in Asia and Europe, as well as a dominant position in China, the leading market for EVs, BYD's stock is the less famous and less high-valuation alternative to Tesla.
Chinese CATL is by far the largest battery company in the world if judged by the volume of batteries. It produced in 2022 almost half of the world's batteries by GWh. It also has some of the most advanced lithium iron phosphate batteries, which might be a solution for creating cheaper and “dense enough” batteries for low-cost EVs.
CATL's expertise in battery chemistry extends to other options as well. Notably, the impressive 160 Wh/kg Sodium-ion battery was announced in 2021. Replacing lithium with abundant and cheap sodium offers an alternative to lithium, whose price has been very volatile and high in recent years. And for applications still requiring lithium, CATL is also investing $1.4B to develop lithium production in Bolivia.
But when it comes to battery performance, CATL is at the very edge of progress. First, it announced a 330 Wh/ kg ultra-durable “million miles” battery that charges to 80% in 5 minutes and is ready for commercialization. This battery should be used by Tesla in the future and will be the new standard for high-performance EVs.
It also recently announced a record-breaking 500 Wh/kg “condensed” battery, which would be dense enough to power long-range EVs and planes. It also claims to have found a way to make batteries handle cold weather better, but it is still a weakness of the technology and a problem for EVs in cold countries.
Leaders in EVs like Tesla and BYD, or ambitious new entries like Toyota, might look to develop their own battery technology as a unique advantage. But the rest of the auto industry, including German, American, and Japanese automakers, are looking for partners to keep up in the race for advanced batteries. This notably includes Ford, Nio, BAIC, Volvo & BMW, Honda, and Mercedes Benz.
CATL has the production volume to benefit the most from economies of scale in battery manufacturing. Its large sales also feedback directly into scientific expertise and a large R&D budget, allowing for more breakthroughs. By not being an automaker, it is also a better partner for most of the industry than their direct competitors like BYD and Tesla.
Altogether, this makes a compelling argument for CATL to remain the leader in battery production. However, the rising tensions between the US and China should not be completely forgotten, and its stock might get caught in the middle of the power struggle between the 2 largest economies in the world.
While CATL is the battery market leader, the number 2 is South Korean LG Energy Solution, ahead of BYD and Panasonic. Together, these 4 companies control 71.9% of the market for battery supply to third parties.
This branch of the giant conglomerate is listed separately in Korea and will make more sense than investing in the general LG stock for exposure to batteries, which covers a lot of other activities like electronics, home appliances, etc.
Nevertheless, the existence and links to the wider LG groups are important, as it allows LG Energy Solution to offer its products as part of a whole package, including car electronics, displays, and motors, and even rely on LG Chem for supplying it raw materials.
The company has been growing very quickly, doubling its revenues between 2020 and 2022 and turning a negative income into solid profits. When compared to 2014, LG Energy Solution revenues went up more than 7x, with an average 30% CAGR.
The company is also working on solid-state batteries and lithium-sulfur batteries. All-in-all, LG is likely to stay one of the world’s leaders in battery technology and production and benefit greatly from the growing demand for batteries for EVs.
Samsung SDI is part of the giant conglomerate from South Korea that deals with batteries, screens/displays, and semiconductors.
Regarding batteries, it includes small sizes for electronic devices, including the large volume of Samsung smartphones, of course, but also e-bikes, e-scooter power tools, garden tools, and vacuum cleaners. The company holds a 26.8% market share in this sector.
The company is also active in EV battery packs and stationary storage systems. Samsung has notably signed a deal with GM for a US $3B battery plant. It is also building a $1.3B battery plant in Malaysia. Samsung should also provide BMW $3B worth of batteries in the next 10 years.
Samsung is not the first name that comes to mind when discussing batteries in the small electronic market. It does not have the massive market share of its Chinese and Korean competitors for EV supplies.
Still, major industrial companies like GM and BMW have chosen to rely on Samsung for their energy transition plans. This should tell us something about the potential of the company's technology that it did manage in some cases to outbid its larger competitors.
The larger Samsung group's role should also not be dismissed, as battery technology will make its way into more and more applications as time passes. For example, the conglomerate is a major shipbuilder and active in renewable energies. Combined with its excellence in other high-tech sectors like smartphones and electronic chips, Samsung's relative lag in sales might not last long.
So Samsung SDI might surprise investors by catching up when everyone was looking at the battery war between automakers.
Panasonic has been part of the growth of battery technology from early on, being the first supplier to Tesla when the company was barely an ambitious startup. And it is still a major supplier to the EV supply chain.
It is also looking to stay at the top of innovation in the sector by establishing a joint venture with Toyota to develop new battery technologies, focusing on solid-state batteries. Theoretically, these batteries should be superior to lithium-ion batteries: safer, charging quicker, and with a much higher theoretical density.
Another sector where Panasonic's innovation is top-notch is in reducing the need for polluting or hard-to-supply metals. This includes the world’s first battery with less than 5% cobalt content. In the long term, the goal will be to produce cobalt-free batteries that also require less nickel. This should both reduce the environmental impact and the price of the batteries.
The company is building a $4B, 30 GWh factory in Kansas, due to start in early 2025. It also talks with Stellantis (Peugeot, Citroen, Jeep, etc…) and BMW for new battery plants.
For investors interested in battery stock, Panasonic is an interesting company with impressive technology. However, batteries are only a segment of the Panasonic Group activities, and investing only in this subsection is impossible.
Much of the current business is also electronic, software, electric components, and appliances.
So investors in Panasonic will need to also asses these other elements and not focus solely only on the battery activities. This can also provide plenty of synergies, upsells, and cross-sells between Panasonic departments, such as in-car entertainment systems for Ford or a mobile app for Harley-Davidson's first electric motorcycle.
QuantumScape is a pre-revenue startup developing solid-state batteries.
The logic behind this idea is that the lithium-ion battery design has some unsolvable flaws, notably the need for a liquid or gel electrolyte. This increases the risk of fire and increases the “dead weight” in the batteries.
Solid-state technology solves this by having only solid metals in the battery. The company has been backed by Bill Gates and has partnered with Volkswagen since 2012.
Quantum Scape aims for its battery to be way above its competitors' charging speed and density. Notably, it claims it has a path to a battery density of 500 Wh/kg and even up to 1,000 Wh/kg.
These are impressive numbers and have long been considered very ambitious, more than any lithium-ion manufacturer could hope to match.
Nevertheless, moving from prototype to mass manufacturing is a difficult step, and QuantumScape has somewhat lagged behind its initial optimistic forecast regarding the date to reach the markets.
This has caused repeated delays, and the company only started to ship prototypes for testing to automakers in Q1 2023. So, the company is unlikely to have a working product for sale and at scale before 2025.
This should not be a problem in itself, as the company has enough cash until that date. It will focus on selling to consumer electronic manufacturers in the meantime, as the smaller production batches are less of an issue in this industry than for EVs. What would power only one EV is enough to supply hundreds of computers and smartphones.
Another concern is CATL's recent announcement of a 500 Wh/kg “condensed” / semi-solid battery; Quantum Scape's solid-state battery might face tougher than-expected competition. You can follow the link for a more detailed and technical discussion on this topic.
Still, the idea that QuantumScape's technology is maybe only on par with the world's leader in battery production despite a much smaller budget says a lot about the quality of the company's team and research efforts. It is likely that both CATL and QuantumScape will reach the market around the same time with their 500 Wh/kg batteries, around 2025-2026.
This timeline explains Toyota's target for aggressive expansion in the EV market with solid-state batteries in 2026-2027. With its smaller market cap and no revenues yet, QuantumScape is a more speculative and risky bet that could pay off much more.
The last thing to consider is the distant but real possibility of Chinese companies being locked away from the US market by trade disputes. In that context, QuantumScape could become the late but much-supported American Alternative to the Chinese giants like CATL and BYD.
FREYR is a company looking to mass manufacture the technology from 24M, a spin-off from MIT.
They have developed a “semi-solid” battery, which should reduce production costs by 40% and improve its specs. This technology has already been licensed to Volkswagen and Fujifilm and has partnerships for building battery factories with FREYR (Norway), Lucas TVS (India), and Axxiva (China).
FREYR is looking to build a 43 GW battery factory in Norway, leveraging the country's low-carbon power grid to produce some of the lowest carbon emissions batteries on the planet. It is also building a 38 GWh factory in the USA for $8B, of which $2.5B comes directly from the benefits of the Inflation Reduction Act.
It is hard for non-technicians to evaluate properly brand new technology like these semi-solid batteries. In this case, a good method can be to rely on the actions of other companies, especially corporations hiring top scientists and technicians who will evaluate the technology themselves.
From that perspective, the company has achieved a lot, with a serious commitment from partners in the green industry to buy batteries from FREYR in the 2025-2030 period:
- 10-14 GWh from Impact Clean Power Technology.
- 38 GWh from Nidec Corporation.
- 19 GWh from Honeywell
- 5 GWh from Powin
- Undisclosed volume from Maersk, Siemens Energy, Scatec, ITOCHU, and Eguana.
An investment in FREYR is a bet on 24M’s new technology and FREYR’s ability to execute in building from scratch 2 giant battery factories. The relatively low market cap makes this idea potentially attractive, allowing FREYR much room to grow, especially considering the massive pre-sold volumes already agreed with several large industrial corporations.
Most battery companies focus on small electronics or EVs. But another sector that is undergoing electrification is the heavy-duty transportation sector. While companies like Tesla might be promising at some point a semi-truck, these promises have been lagging by many years by now, and overall, it seems that the focus of most automakers is on cheaper EVs, better performances, or even autonomous driving.
Houston-based Microvast has, from the beginning, focused on a different sector, targeting trucks, buses, delivery vans, industrial machinery, etc…
Microvast's technological advantage is unique battery chemistries with characteristics attractive to the niche markets in which it operates. For example, ultra-fast charges and very long-lasting batteries to the cost of lower range for buses or mining trucks.
It currently has 3 manufacturing plants in China and the US and installed 30,000+ battery systems. To the current 9 GWh of battery-making capacity, it is adding another 4 GW, to be in production by the end of 2023. These expansions are “self-funding” and cost no additional capex, thanks to US subsidies and customer prepayments.
The markets in which Microvast is operating are expected to display explosive growth, notably 39% CAGR by 2030 for electric commercial vehicles,
The company has also grown its order backlog by 300% since Q1 2022 and expects to grow revenues from 2023 to 2024 by 50-100%. In the long run, the company expects its revenues to grow by 50% CAGR until 2027.
The need for R&D for its unique battery chemistries and building the manufacturing capacity has kept Microvast unprofitable so far. The company's management expects to reach breakeven and profitability by 2024-2025.
So while not as “sexy” as electric sports and luxury cars, or as massive a corporation like CATL, LG, or Samsung, Microvast occupies a valuable niche posed for quick growth, and in which it acquired a solid reputation with all the main brands of buses, trucks, and mining equipment.
Investors in Microvast will want to see the company deliver the promised explosive growth, reach profitability, and pay close attention to the process of electrification of infrastructure like deliveries, buses, and industrial operations.
Bonus: Solid Power, Inc.
Solid Power is focused on making solid-state batteries a reality, using a unique solid sulfide-based electrolyte technology and a silicon anode. The company was funded by investors including Hyundai, Volta Energy Technologies, Umicore, Sanoh, A123 Systems, and Solvay. Since it also added Ford and BMW among its partners.
The company claims its process leverages already existing tools and methods used in lithium-ion production, allowing it to re-use 70% of the capex already invested in traditional battery tech. The company is targeting a 350 Wh/kg density.
Many questions are left open about Solid Power technology, and the targeted density is impressive but in line with the target of other firms working on solid-state batteries (QuantumScape) or even on improving lithium-ion (CATL).
Still, the company has engaged in a truly unique path with silicon/sulfide chemistry. This could prove to be a serious advantage when everyone else is betting on less creative variations of lithium batteries.
It could also make it a target for takeover by some of the industry giants, as the current market capitalization of just above $500M is fairly small compared to Tesla, BYD, or CATL, tens or hundreds of billions.