The electric vehicle trend has been gaining momentum for years. With low-cost charging stations popping up in every corner of America, it’s never been easier to go green by switching from gasoline-powered vehicles. The future looks bright for all those who want cleaner air and a better fuel economy without having to worry about traditional fossil fuels like oil or natural gas ever again. This is just one lifestyle choice among many others where being environmentally conscious comes first. However, at the heart of these electric vehicles lies the battery, without which this colossal shift cannot occur. Hence, if you own any battery stocks, you should be watching them closely.
In the past few months, Tesla’s (NASDAQ:TSLA) stock price has been doing well, but not all-electric vehicle stocks are doing well. Some investors believe that Tesla is the only company in the industry worth investing in, while others think it’s too risky to invest in any company when there is no clear winner yet.
Investors often use a pick-and-shovel strategy to increase their exposure to a particular sector. It is an investment strategy that involves buying stock in companies that produce the commodity or service itself. In other words, it’s a way of getting exposure to a sector by investing in its producers rather than its consumers. The strategy works particularly well when investing in a high-growth industry, such as electric vehicles.
Hence, it is better to invest in battery stocks to gain exposure to the EV sector. They are vital to the overall health of the industry.
- Nio (NYSE:NIO)
- General Motors (NYSE:GM)
- Freeport-McMoRan (NYSE:FCX)
- Teck Resources (NYSE:TECK)
- Lucid Group (NASDAQ:LCID)
- Panasonic (OTCMKTS:PCRFY)
- QuantumScape (NYSE:QS)
Battery Stocks: Nio (NIO)
Investing in the stock market has always been a difficult proposition, but things are even more challenging these days. The recent volatility and correction in Chinese stocks make it particularly difficult for those looking to invest in the lucrative overseas market. The Chinese & U.S governments are stepping up regulation on technology companies and China is threatening to delist companies that do not comply with government regulations. It’s all part of the long-standing trade war between these two major countries.
However, many analysts and investors see the Chinese EV market as too alluring to ignore. Nio’s branding is on fire in China, and their regular updates to the line have helped them gain market share. In many ways, Nio is China’s answer to Tesla. Quarter after quarter, it manages to beat earnings and delivery estimates handsomely.
It also has an excellent relationship with a local Chinese government. Nio inked a bailout agreement with the city of Hefei, the capital of Anhui province, at the height of the pandemic. Under the terms of the arrangement, Nio and the city of Hefei have created a joint venture. It is accomplishing several major tasks through a local subsidiary. Having a relationship with a local Chinese government will put several investors at ease.
NIO is positive that they will deliver the 150kWh battery pack from the fourth quarter of 2022. It also allows for an upgrade and swapping across all NIO models. Unlike a typical battery, this solid-state design has no liquid electrolyte and is safer and cheaper to manufacture. It also promises a longer range.
Investors are looking forward to and will undoubtedly pop the stock price in the latter half of the year.
General Motors (GM)
General Motors has lots of facilities worldwide and sells cars to people in 150 countries. It also leads the largest & fastest-growing automotive markets. GM owns and operates Chevrolet, Buick, GMC, Cadillac & Hummer.
Although it is an iconic brand, many people do not think of GM when discussing electric vehicles or battery stocks. However, the company is moving with the times. If you’re looking for a way to invest in electric cars, look no further than General Motors. The company has recently announced its plans to invest $6.6 billion in Michigan over the next decade. They say that they will be investing heavily into an electric battery plant and increasing pickup truck production.
General Motors needs to invest in more facilities to maintain the production schedule of 1 million electric vehicles by 2025. Their investment strategy will involve the company in $35 billion worth of electric vehicle production by 2025. On a separate note, General Motors has announced that they will be opening a new battery cell development research facility in Warren, Michigan, covering 300,000 sq ft. The goal of this facility is to help GM’s electric cars last longer and charge more quickly, thereby helping build a better environment for everyone.
GM shares trade at just 7.4 times forward earnings, which is much lower than other EV startups and makes them more attractive investments for investors who want a good return on their money without having to take risks with new technologies that may not live up to expectations right off the bat.
Battery Stocks: Freeport-McMoRan (FCX)
Freeport-McMoRan operates globally and is based in Phoenix, Arizona.
The company operates in mining copper, gold, molybdenum, and silver. They are the world’s largest publicly traded copper producer and one of the largest publicly traded gold producers.
Freeport-linked EV battery materials seem to be pretty popular. With electric cars becoming more of a priority, Freeport is an appealing commodity play. The growing global demand for industrial supplies, the optimism around the economy, disruptions in supply chains due to the pandemic, and increased demand from Chinese consumers have all led to increased prices for materials. Freeport is looking pretty good as its sales should continue to grow thanks to higher copper prices. The cost of copper was sky-high in 2021 after a rebound in demand during the pandemic and supply constraints.
American infrastructure is crumbling and a push to rebuild it is underway. It’s a bipartisan issue that will cost trillions and contribute to building an even better country. Opportunities to make money from this rebuilding are on the horizon. Therefore, whichever way you slice it, FCX stock will continue to do well in the forthcoming quarters. Hence, you will find Freeport on lists of battery stocks.
Teck Resources (TECK)
The fight for dominance in the EV space is just getting started, with many investors betting on both sides. Many say they see no need to forecast winners or losers yet because many startups are developing new technology that will soon become major players. Teck Resources is a Canadian mining company that produces various minerals and metals. It is one of the largest diversified resources companies globally and is headquartered in Vancouver.
EVs are so popular among commodity investors, and for a good reason. They contain four times as much copper as cars with an internal combustion engine. This is great news for Teck because so much of their product is copper. Teck’s logistics chain was temporarily disrupted by severe weather. However, production has not suffered much. And due to the increase in commodity prices, the company is doing very well.
The prices for Teck Resources’ products have been increasing dramatically, leading to an improvement in revenue from the third quarter of last year. Adjusted EBITDA for Q3 is $2.1 billion, more than triple what it was in the year-ago period. The company made $816 million or $1.53 per share, and adjusted profit was $1 billion or $1.91 per share, a staggering increase from the same period last year.
It is also worth addressing an important development concerning Teck Resources. It is primarily a coal company, but its business hasn’t been doing too well over the past decade. There’s been an increase in the number of countries converting to renewables for energy, meaning there will eventually be less demand for coal. There are reports that Teck is looking to sell off or spin off its coal business to offset this. Although coal prices were very strong recently, this is a potential long-term, strategic move.
Battery Stocks: Lucid Group (LCID)
The Lucid Group is an automotive company that focuses on electric vehicles. They are at the forefront of developing and manufacturing electric cars. It was founded in 2007 by Bernard Tse and Sam Weng. The company has been involved in developing and manufacturing electric vehicles, and they are at the forefront of this industry.
Lucid Group debuted on the public markets through a reverse merger with Churchill Capital IV Corp, a blank check company. The company has raised a lot of money and started shipping their first electric vehicle to customers last October. The Environmental Protection Agency (EPA) has officially rated the Lucid Dream Edition Model range as 520 miles. They now offer cars with the longest range on the market and at least 100+ more miles than rival Tesla.
Passenger demand for the company’s vehicles is up, and the company has ambitious production targets. The company plans to produce 20,000 cars by the end of 2022. That’s a huge difference from the 577 vehicles last year. But it will take lots of work and money. Nevertheless, Lucid Group has enough cash to finance its operations through the year.
Meanwhile, Lucid Motors have designed their battery packs for two purposes. They are already operating in energy storage systems for residential and commercial customers, so it’s clear that they are not just sticking to electric vehicles. It is a beneficial feature that the battery cells used to power our cars are also good for storing energy. These modules can also provide an efficient solution for prolonged use. It will diversify its revenue base and further power the stock price moving forward.
Panasonic’s first breakthrough came in 1955 with the first Japanese-made transistor radio, and it has been growing ever since. It has been a leading company in the electronics industry for many years. It was known as a company that only focused on manufacturing and selling electronic devices in the past. However, Panasonic has diversified its business model to include other sectors such as housing and healthcare.
This diversification strategy has helped Panasonic to be more competitive in the market. It can now offer services in different sectors of the economy, which gives them an edge over its competitors. Panasonic will manufacture Tesla’s next-generation batteries to store five times more energy than current models. Although Tesla is the primary client for this battery, Panasonic says it might be supplying them to other companies in the future. The new batteries promise to provide an improved range for electric cars and make them cheaper to produce and sell.
Tesla’s 2020 event focused on their batteries, production, and the disruption that could happen if they were to rely on outside manufacturers like Panasonic. However, there is no chance of that happening anytime soon. Elon Musk has indicated that Tesla won’t produce a significant volume of battery cells until 2022.
Overall, Panasonic has its hands in many sectors, ranging from electronics to healthcare. This gives it an edge against other companies that rely on only one industry.
Panasonic’s diversified business model helps it stay afloat during economic downturns and provides investors with a sense of security when investing in the company.
Battery Stocks: QuantumScape (QS)
The QuantumScape team has been developing a solid-state battery for over ten years, with their work funded by the Saudi Public Investment Fund and Bill Gates, among others. They have developed a new type of battery that will last longer and be cheaper to produce than current lithium-ion batteries. This new battery will also charge faster, which is important because electric vehicles can drive farther before recharge. Due to the innovative technology at the heart of this enterprise, it is perhaps the most exciting of all the battery stocks out there.
Volkswagen (OTCMKTS:VWAGY) is the company’s biggest shareholder. Volkswagen executives claim that half of their annual sales will be electric vehicles by 2030. The company aims to slash its CO2 emissions by 2050 to zero. QuantumScape will be instrumental in powering these plans.
The company’s technologies included quantum battery solutions created to help with the most pressing problems in the EV industry: battery life and charging times. QuantumScape can help revolutionize the life span of a common electric vehicle battery. Leading industry analysts have put QuantumScape ahead of the competition. The potential for a breakthrough could create huge gains for both investors and the company as a whole. That makes it one of the best battery stocks out there.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.