Electric vehicles (EVs) had another moment in the spotlight this past week thanks to the $2 billion deal between General Motors Co. (NYSE:GM) and Nikola Corp. (NASDAQ:NKLA) … not to mention the ongoing saga of the bubbling Tesla Inc. (NASDAQ:TSLA) share price.
In the GM-Nikola partnership, the old-line automaker is taking an 11% stake in the upstart to work on the Badger, a fully electric and hydrogen fuel cell electric pickup truck.
As we’ve discussed here recently, most of the batteries that power EVs, including those used by Tesla, use lithium-ion cells, which are mostly made up of “battery metals” like copper, nickel, and cobalt.
And as I’ve said, I believe the biggest opportunity in this segment of the market isn’t in automakers or battery developers. It’s in battery metal suppliers and miners — classic picks-and-shovels plays.
That’s because global investment to boost production of battery metals has been limited over the last few years. Meanwhile, the proliferation of EVs, energy storage, and other pieces of the Second Electric Revolution has only grown.
Nikola is supposedly the exception.
The company announced its more energy-dense batteries back in 2019, but it still hasn’t revealed the metals that form its cells. All Nikola has claimed is that they aren’t lithium-ion batteries, and they supposedly don’t use any of the metals used to make lithium-ion batteries.
However, I still believe the GM-Nikola deal is bullish for the battery metal miners we’ve been talking about here.
Here’s why …
Billions Pouring Into EVs
The GM-Nikola deal to make Badgers isn’t the first move by established automakers into the EV market. Far from it …
Ford Motor Co. (NYSE:F) just announced a roadshow in the United Kingdom to promote its commitment to electrification. And Toyota Motor Corp. (NYSE:TM), after pushing up the release schedule of its new EVs last year, owns 51% of the recently founded Prime Planet Energy and Solutions, which develops and manufactures batteries for sale to other automakers.
Meanwhile, some of the biggest transportation companies around are pledging to go fully electric.
Lyft Corp (NASDAQ:LYFT) made its commitment back in June, saying 100% of its trips will be in electric vehicles by the end of 2030. Given that the state of California is considering a regulatory crackdown on the greenhouse gasses emitted by Lyft’s vehicles, the switch to electric isn’t just a PR stunt … it’s a survival tactic.
The ride-sharing competition isn’t far behind. Uber Technologies Inc. (NYSE:UBER) just pledged to end all emissions from its U.S., Canadian, and European by 2030 … and all rides globally to be in EVs by 2040. It also pledged to make the electricity powering those rides carbon-free by 2040.
And there’s money to back that commitment up. Uber will spend $800 million to help its drivers switch to EVs by 2025.
In other words … while Nikola EVs may not use traditional battery metals (and that’s up for debate, as I’ll show you in a second), plenty of other EV makers do … and will continue to do so.
Moreover, the GM-Nikola partnership shows us just how important EVs are to the future … and the immediate impact of the deal shows us just how much enthusiasm there is for companies investing in that future.
On the day General Motors announced the deal with Nikola, its stock price jumped by nearly 8%. Nikola soared more than 50%. That was on Tuesday, when the S&P 500 dropped by 2.8%. Here’s how The Wall Street Journal story about the deal puts it:
Wall Street has shown increasing enthusiasm about electric vehicles and the auto industry is moving quickly to add more plug-in models to meet tougher environmental regulations globally on tailpipe emissions.
It doesn’t matter if Nikola doesn’t use base metals in its batteries … because Nikola is just one company. Its proprietary technology doesn’t change the fact that most EVs use lithium-ion batteries, and those lithium-ion batteries increasingly rely on the metals we talk about here.
Then there’s the “elephant in the room” that we need to address regarding Nikola’s battery tech.
It might not exist …
Bet on Facts and Figures, Not Hype
After the General Motors deal was announced, Hindenburg Research released a short-seller report which alleges that the CEO of Nikola has made extensive false statements. Hindenburg says the company has continued to “hype” its battery technology even though it is “vaporware” — i.e., fake.
According to the short seller, Nikola was supposed to acquire its hydrogen battery technology from another, smaller company, but the deal never went through precisely because Nikola realized the technology was theoretical.
Moreover, Hindenburg alleges that Tesla’s soaring share price over the past few years is what “pressured” General Motors to form its partnership with Nikola.
While it’s rarely smart to fully believe a short-seller report without further evidence, Hindenburg’s allegations point to yet another reason why it’s better to invest in the metals behind battery technology instead of the companies making use of those technologies.
We have facts and figures showing us just how important nickel and other base metals are.
Remember in 2016 when coal was dying, and the election of Hilary Clinton was supposed to be the final “nail in the coffin” for the whole industry? All of Wall Street took bets against coal, even though 18 U.S. states still depended on coal for power.
That’s the year I placed a bet on a major North American producer of coal and ended up with a position that produced 900% gains before the year was over. The “crowd” was wrong … and they might be again.
Well, betting against nickel just because Nikola may have found an alternative to lithium-ion batteries makes even less sense than betting against coal because Hilary Clinton might become president. Instead, we should interpret the Nikola-GM deal as a good sign for the entire EV segment.
I’ve made my career spotting the times the most hated stocks in the world — the ones that Wall Street is telling you to run away from – are most likely to soar. Along the way, I’ve racked up 1,000%+ winners 41 times.
Just a few days ago, I placed my latest contrarian “bet” on what I think could be my next 1,000% winner during a live video event. They haven’t taken that video down yet.
On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south.