The EV sector appears poised for a monster year … the tailwinds behind growth … one issue that could slow things down … how to turn it into a positive
The electric vehicle (EV) revolution is about to kick into high gear.
That’s the prediction of our hypergrowth specialist, Luke Lango.
Let’s jump to yesterday’s issue of Luke’s Hypergrowth Investing for his broad takeaway:
The EV Revolution is going to go mainstream in 2022.
Electric vehicle adoption is going to soar like never before this year – and EV stocks are going to skyrocket hundreds of percent.
On Monday, news from Tesla supported this forecast.
The electric vehicle manufacturer delivered 936,172 electric vehicles in 2021, with its fourth-quarter deliveries setting a new record.
For context, this full-year delivery figure is an astonishing 87% increase compared to Tesla’s 2020 number.
Tesla investors enjoyed a 14% pop on Monday in the wake of the good news.
As we’re going to cover in today’s Digest with Luke’s help, the EV revolution looks ready to explode in 2022. But before you open up your wallet, there’s a complicating issue you need to know about. It could slam the breaks on anticipated EV growth. However, even this complication could turn into a wildly profitable trade.
Lots to cover, let’s jump in.
***What will drive the big EV breakout in 2022
For newer Digest readers, Luke is our hypergrowth expert, and the analyst behind Hypergrowth Investing. His specialty is finding market-leading tech innovators that are pioneering explosive trends, capable of generating outsized investor wealth. That puts EV stocks directly in Luke’s crosshairs.
So, what is going to drive the EV boom in 2022? Why now?
Here’s Luke with his first reason:
For starters, EVs are finally cheaper than gas-powered cars.
An April 2021 report from the U.S. Department of Energy found that the all-in lifetime cost for a gas-fueled car is about $95,000, while the all-in lifetime cost for a similar EV is about $90,000.
Luke goes on to note how the $95,000 figure for gas-fueled cars will likely rise in 2022 due to soaring fuel prices. Meanwhile, the cost for EVs should drop further thanks to economies of scale and falling battery costs.
So, gas-powered cars are no longer cost-advantageous. But historically, they’ve offered drivers a greater driving range than electric cars. Well, that advantage is now gone too.
Back to Luke:
Historically speaking, EVs have been limited by driving ranges… That’s no longer true.
Case-in-point: Lucid Motors unveiled its signature Lucid Air vehicle in late 2021, which features 500 miles of range (more than a gas-powered car) and has more horsepower than any Lamborghini ever made.
That’s just one example. But it’s a microcosm of the improving technology phenomenon sweeping across the industry.
In 2022, the average driving range of an EV is projected to hit 275 miles – which is on-par with the average driving range of a gas-powered car.
Then there’s the abundance of choice for EV buyers.
Gone are the days when owning an EV meant driving something that looked like a clunky box. Consumers are about to enjoy a wave of EV differentiation ranging from aesthetics to manufacturer to cost.
Here’s Luke:
Prospective car buyers are going to have more EV options to choose from than ever before in 2022.
Not only are legacy automakers across the price spectrum – like Ford, GM, Mercedes, and BMW – launching dozens of new EV models in 2022, but multiple EV startups like Lucid, Rivian, Canoo, Arrival, and more will start actively delivering their EVs to consumers in 2022, too.
Finally, though President Biden’s $2 trillion Build Back Better plan appears stalled at present, if it finds new life, it would include $550 billion in clean energy spending – the bulk of which will go to incentivizing electric vehicle uptake via expanding tax subsidies and boosting charging infrastructure.
Bottom-line, there are many bullish tailwinds. Here’s Luke’s take:
Falling costs. Improving technology. More supply. And potentially $550 billion worth of legal tailwinds. What more could you want?
But now, let’s throw a wrench into things. Actually, is it a wrench? Or might it be a big bag of money?
***The EV headwind that could mean big returns for your portfolio
Byron Wien is the vice chairman of private-equity giant Blackstone. For 37 years now, he’s been making a list of ten surprises for the coming year.
Though no one has a crystal ball, Wien included, his predictions have carried a respectful degree of accuracy over the years.
Earlier this week, MarketWatch published his predictions for 2022. One in particular caught my eye:
In a setback to its green energy program, the United States finds it cannot buy enough lithium batteries to power the electric vehicles planned for production.
China controls the lithium market, as well as the markets for the cobalt and nickel used in making the transmission rods, and it opts to reserve most of the supply of these commodities for domestic use.
EVs require battery metals. It’s that simple.
You can’t have an electric car without an electric battery. And our latest, cutting-edge batteries require lithium.
Ergo, a revolution in EVs is predicated by massive lithium demand.
As you can see below, Australia, Chile, and China basically control the global market for lithium.
If China decides to hold back its lithium for political reasons, it will have a profound impact on global supply…which would have a significant impact on the supply of EVs.
***Even if we avoid this, we’re on a collision course with too much demand for current lithium supply
From MorningBrew:
If you’re not already familiar with lithium, 2022 will probably be the year that changes.
This metal is third on the periodic table, the lightest solid element on earth, and an essential material in the lithium-ion batteries used for electric vehicles and energy-storage systems as the world transitions away from fossil fuels.
While there is plenty of lithium on the planet, it isn’t being extracted and refined quickly enough to keep up with the rapidly growing demand for batteries.
By 2030, there’s projected to be a lithium deficit between 455,000 and 1.7 million metric tons each year.
Simon Moores, CEO of Benchmark Mineral Intelligence, was interviewed about this shortage. He was quick to highlight the supply/demand imbalance:
So the “structural shortage” is what the commodity industry calls it. That’s when there’s literally not enough capacity in the industry to meet that demand.
This year (2021) was the year where supply got tight and then it has just fallen into shortage in the last few months. It’s a very clear shortage, a structural shortage.
It’s kind of no going back.
Now, first things first, does this jeopardize the EV revolution we just covered?
Back to Moores:
I think people only now are starting to realize how important the humble lithium-ion battery is, really.
You’ve got to ride out the volatility. Long term, it will be fine. The price will be fine. There’s no geological shortage.
Lithium-ion battery powered EVs will dominate the world.
With that assurance, let’s focus on the “volatility” that Moores references. How might we turn that into a source of profit?
***A one-click way to play lithium
An easy, one-click way to add lithium exposure to your portfolio is with the Lithium & Battery Tech ETF (LIT) from Global X.
This isn’t a perfect way to play lithium. For one, the ETF’s top 10 holdings aren’t all pure-play lithium producers. Here’s that list:
LIT also has an expense ratio of 0.75%. This is on the high side, eroding returns over time.
That said, you are getting exposure to many top lithium producers.
And as to LIT’s returns?
Huge.
As you can see below, over the past two years, LIT is up 209% compared to the S&P’s 47% gain.
As one more possibility, there’s the Amplify Lithium & Battery Technology ETF (BATT).
Its expense ratio is a bit lower at 0.59%. Here are its top 10 holdings:
***As for Luke, he’s zeroing in on a tiny stock tied to this battery revolution
Back to his issue:
If you’re like me, you aren’t looking to make 100%, or even 300% gains in the EV Revolution.
This is a once-in-a-lifetime, multi-trillion dollar paradigm shift, which, if you invest in it correctly, could forever change your financial future.
And that’s why I found one, tiny $3 stock at the epicenter of the EV Revolution…
A completely unheard-of tech startup that is pioneering a “Forever Battery” breakthrough which has the potential to change everything about the EV Revolution…
With a stock that could soar 1,000% or more in the coming years.
Luke recently gave a presentation on this small tech stock. You can click here for more details.
In any case, look for EVs to be a massive growth story in 2022. But for that to happen, lithium demand is going to explode.
We’ll keep you updated here in the Digest.
Have a good evening,
Jeff Remsburg
