Investments in the electrification of cars keep coming … as does progress toward creating a cost-effective solid-state battery
Yesterday brought news that luxury carmaker, Daimler, has invested $100 million in a private California-based battery company, launched by a former Tesla engineer.
The move comes as Daimler continues its push into the electric car market, which regular Digest readers recognize as one of the biggest investment opportunities of the next 25 years.
While this $100M investment is evidence of the race for next-generation battery technology, its size is nothing compared to what we’ve seen from Daimler in recent months.
For example, in December, the carmaker announced it would be buying over $20 billion in battery cells to support its electric vehicle plans. It’s part of what Daimler’s Chairman, Dieter Zetsche, calls the company’s “electric offensive“.
Our electric offensive continues to gain momentum. After investing billions of euros in the development of the electric fleet and the expansion of our global battery network, we are now taking the next step:
With the purchase of battery cells for more than 20 billion euros, we are systematically pushing forward with the transformation into the electric future of our company. We plan a total of 130 electrified variants at Mercedes-Benz Cars by 2022. In addition, we will have electric vans, buses and trucks.
***Daimler is hardly alone in its efforts to electrify its auto fleet
Reuters reports that global automakers are planning to spend an unprecedented amount on the electric vehicle market over the next five to 10 years.
That figure? $300 billion. For context, $300 billion is greater than the entire economy of Egypt or Chile.
And of that $300 billion, a massive chunk is going directly into next-generation battery research. Here are just a few examples:
Volkswagen/Audi/Porsche — out of $91B going to electric vehicles, batteries alone will see $57B of that. For Daimler, batteries will get $30B out of a total spend of $42B. And all of Toyota’s $13.5B is earmarked for batteries. Click here to see the entire list.
***Why are batteries receiving so much of the investment allocation?
Because longer-lasting, more efficient batteries are the key to tomorrow’s electric car adoption.
You see, so far, automakers haven’t been able to mass-produce electric cars profitably. At the moment, there are lots of government subsidies. The lack of profitability is mostly because of the prohibitive cost of the battery packs, which make up between 30% and 50% of the cost of an electric vehicle.
For context, a 500 km-range battery costs around $20,000. Plus, you have to add another $2,000 for the electric motor and inverter. Compare that with a gasoline engine that costs around $5,000.
Given this battery cost issue, automakers are scrambling to be the first to solve this problem — which is why we’re seeing companies like Daimler allocating billions toward battery technology.
***And the battery which holds the most promise is the solid-state battery
Solid-state is considered the holy grail. It’s a superior, safer technology. And its investment potential is massive.
For more on that, I’m going to turn to Matt McCall. In his newsletter, Investment Opportunities, Matt tracks the trends that are reshaping our world — and creating massive investment wealth in the process.
After all the research and analysis, any potential investment opportunity must still have the numbers to back up big future growth. I would like to share predictions from a few research firms about the future of solid-state batteries:
According to MarketsAndMarkets, the solid-state battery market is expected to reach $1.1 billion by 2020. That would result in a compound annual growth rate (CAGR) of 72% between 2015 and 2020.
Inkwood Research expects the global solid-state battery market to grow with a CAGR of 67% between 2018 and 2026.
Research firm Arthur D. Little sees the entire battery market growing to $90 billion by 2025 from $60 billion in 2015. This is an important number because it shows how the overall demand for batteries is set to explode.
If solid-state is the standard for future batteries, it will capture a large portion of that $90 billion market. Even a mere 10% is $9 billion. This would represent enormous growth in the next seven years. And even more importantly, it represents massive profit potential if you are invested in the right stocks.
***In recent months, we’ve seen advances toward solid-state breakthroughs
In our March 4th Digest, we reported on a small, private company that was making significant headway with battery technology. Yesterday’s Daimler investment is another step in this direction.
The recipient of Daimler’s $100 million is Sila Nanotechnologies, one of California’s first “tech unicorns” focused on improving battery chemistry. (A “unicorn” is a private company with a valuation of $1 billion or greater.)
Sila’s technology replaces the graphite in a battery’s anode with its own silicon-based material. The company claims this improves density (moving us closer to solid-state) by 20%.
When we’ll completely crack the solid-state problem isn’t clear, but according to Matt, it’s a matter of “when” not “if.”
Over the past year, I’ve spent an enormous amount of time studying the battery industry. I can tell you this mega innovation isn’t a matter of “if,” it’s a matter of “when.” I believe the next big battery breakthrough will go down as one of the greatest inventions of the 21st century.
There are huge investment implications here. Those on the right side of this innovation stand to build incredible wealth … just like those who were on the right side of the internet and the smartphone in the beginning.
If you want more access to Matt and his investment research on batteries, he’s created a free video presentation to help investors better understand how to position themselves. Click here to watch.
We’ll continue to keep you updated.
Have a good evening,