Biden goes all-in on EVs… the tsunami of capital headed toward the EV build-out… three ways to invest today
They’re a vision of the future that is now beginning to happen – a future of the automobile industry that is electric.
Battery electric, plug-in, hybrid electric, fuel cell electric – it’s electric, and there’s no turning back.
So said President Biden in a speech last Thursday.
Biden went on to push a voluntary auto industry commitment wherein electric vehicles will make up half of all U.S. auto sales by 2030.
This is in keeping with Biden’s vision for a national transition from fossil fuels to green energy. And one thing is for sure – hitting this goal will require an enormous amount of money.
From Barron’s:
President Biden wants half of all new car sales in America to be electric by the end of the decade. It’s a bold goal – and it won’t be easy.
It will require a lot of lithium, batteries, EV charging, and EV manufacturing capacity. Most important, it will require billions and billions of dollars.
Barron’s goes on to crunch the numbers on EV development. After tallying up the actual EV assembly process and EV infrastructure build-out (think charging stations), they estimate that the U.S. auto industry will spend almost $100 billion over the next nine years.
Today, let’s look at a few ways investors can profit as this wave of capital floods the EV sector.
***Zeroing in on EV infrastructure
To get from “now” to Biden’s vision, it’s going to require a massive push. What does that mean in terms of numbers?
Back to Barron’s:
There are 150,000 gas stations in America and only a few thousand fast-charging stations. Of course, people plug EVs in at home, but they still need to be able to charge up while on the road.
The fastest chargers cost about $100,000 each, according to Arcady Sosinov, CEO of FreeWire, which builds charging equipment with battery backup that doesn’t require complicated utility hookups.
That price doesn’t include installation. To get to, say, 50,000 fast-charging stations might require another $10 billion.
It doesn’t require any earthshattering analysis to see how this is an enormous tailwind behind EV infrastructure companies.
Let’s look at one as an example.
Blink (BLNK) is one of America’s largest owners, operators, and providers of EV charging stations and services.
Our hypergrowth specialist, Luke Lango, highlighted Blink to his Daily 10X Stock Report subscribers last September.
Here’s how he described the opportunity:
As of late 2019, the $200 million company had 5,600 commercial EV charging stations across 40 states, nearly 9,000 more residential charging stations, and was the second largest EV charging company in the U.S.
Consider those numbers in context. Blink is America’s second largest charging company, with just 15,000 charging stations. That’s because there’s only about 75,000 charging stations in America.
By comparison, there are 1.2 MILLION gas station pumps in America – sixteen-fold the number of charging stations.
Clearly, if EVs really are the future of automobile transportation (spoiler alert: they are), then the number of charging stations in the U.S. is going to explode higher over the next decade.
At the center of all that growth will be Blink.
I’ll add that subscribers who bought Blink when Luke recommended it in the Daily 10X are sitting on 355% gains as I write… and far bigger gains are likely to come.
***Another investment opportunity related to Biden’s green push can be found in batteries themselves
Let’s establish some context to get a sense for the growth potential here.
Back to Barron’s:
GM… has already announced plans to invest $35 billion in EV development between 2020 and 2025, which includes about $8 billion for battery capacity. That is supposed to result in 1 million EV sales a year, giving investors a useful rule of thumb.
If one million EVs need $8 billion of battery capacity, then 8 million EVs – about 50% of U.S. annual light vehicle sales – will require $64 billion.
Perhaps no other sector has more to gain from battery technology advancements than the auto industry. While EVs are the future of automobiles, automakers have not yet been able to mass-produce electric cars profitably. (At the moment, massive government subsidies incentivize continued EV efforts.)
Why?
The prohibitive cost of the battery packs. They make up between 30% and 50% of the cost of an electric vehicle.
For context, it wasn’t long ago that a 500 kilometer-range battery cost around $20,000. Plus, you’d have to add another $2,000 for the electric motor and inverter. Compare that with a gasoline engine that costs around $5,000.
But in recent years, technology has been chipping away at these battery costs. And by 2025, the battery pack is projected to be just 20% of the cost of the vehicle.
This means any company on the forefront of battery technology stands to reap a windfall as low-cost, high-performance batteries become a reality.
To play these battery breakthroughs, you could take a look at Toyota (TM).
Though you probably consider Toyota a car manufacturer, it’s also one of the preeminent battery research companies on the planet.
From TechWireAsia:
The world’s biggest car producer in 2020, Toyota Motor, has been considered a front-runner to produce a commercially viable solid-state battery.
In fact, the carmaker plans to announce a prototype of a car powered by a solid-state battery by the end of this year and seeking to launch a vehicle in the early 2020s…
Toyota has been pursuing a next-generation battery for over a decade, making the largest number of patent applications for solid-state batteries from 2014 to 2018, according to a report by the European Patent Office and the International Energy Agency. Toyota vowed at an earnings conference on May 12 to sell 8 million electrified vehicles in 2030, with fuel-cell vehicles and EVs accounting for a quarter of that estimate.
Then, in April 2020 Toyota established Prime Planet Energy & Solutions, a joint venture with Panasonic to develop vehicle batteries, with a focus on solid-state batteries.
Luke holds Toyota in the Solid State Battery sub-portfolio in his Investment Opportunities newsletter. Subscribers who followed his original recommendation already are sitting on 67% gains.
Here’s Luke on the overall opportunity:
All in all, solid state batteries remain the biggest battery breakthrough of the century, with the potential to fundamentally change how humans power everything from phones to cars.
By the way, if you’re an Investment Opportunities subscriber, don’t miss Luke’s August issue.
It’s a deep dive into what’s coming with self-driving technology. Plus, it profiles the No. 1 self-driving stock to buy today, detailing why it’s miles ahead of the competition.
***Finally, what exactly powers batteries?
So, we have huge demand for EV infrastructure… which means huge demand for batteries… but what’s inside batteries?
Battery metals.
Might it be a good investment to align your wealth with the miners that will be supplying the huge volume of metals required to power our electric initiatives?
That’s the belief of our macro specialist, Eric Fry, editor of Fry’s Investment Report.
Here’s Eric to put some numbers on this opportunity:
The average plug-in EV requires about 200 pounds of copper, which is nearly four times what a midsized internal combustion vehicle requires.
Depending on the exact battery chemistry, these vehicles also contain about 50 pounds of nickel, along with meaningful quantities of manganese, aluminum, and/or lithium.
You could say, in effect, that the road to carbon neutrality is paved with batteries.
Below is a chart from Eric that shows how much the demand for various battery metals will increase in the next 10 years.
If you have trouble seeing it, nickel and aluminum demand are set to explode around 14X… phosphorus and iron roughly 13X… and copper and graphite about 10X.
So, how might an investor play this metals boom?
For one-click convenience, there’s the iShares MSCI Global Select Metals & Mining Producers ETF (PICK). It contains a basket of the major mining companies operating around the world, including BHP, Rio Tinto, Vale, Freeport-McMoRan, Glencore, and Nucor. Collectively, these miners give investors exposure to a wide array of diversified metals that are used in batteries.
Eric holds PICK in his Investment Report portfolio – it’s currently sitting on a 70% gain. But here too, if Biden’s vision plays out, there will be far bigger gains to come.
Wrapping up, if President Biden gets his way, we’re going to see billions of dollars flow toward an EV/green energy industry build-out. And this will be a massive tailwind for leading green infrastructure companies, battery makers, and battery metals miners.
Putting some investment capital in the path of this massive economic transition should reward you many times over in the years to come.
Have a good evening,
Jeff Remsburg
