The automotive industry is going electric. Indeed, that transition has already created a lot of wealth, with battery stocks a particular area of interest to investors. That growth and interest is only going to grow, as mass adoption of EVs materializes over time. All of the major automotive manufacturers are on board with electrification, as they’ve seen the premiums EVs command, and where the future consumer is headed.
The business case for battery technology is clear. Strong demand is creating opportunities throughout the EV supply chain and across the industry. Battery makers, suppliers, and designers are thriving, and investors have reasons to be optimistic over the long-term. By 2030, 40% of new car sales are expected to be EVs.
With that said, here are seven of the top battery stocks to buy to take advantage of this trend.
Albemarle (NYSE:ALB) is going to continue to be a great option for investors looking to make money from the mass adoption of EVs. The company is a major producer of lithium, which is a primary component used in producing EV batteries.
That means Albermarle is subject to the ebb-and-flow cyclicality of the commodities pricing market. The company sees its revenues soar when market dynamics send lithium prices higher. Of course, the inverse is also true.
Investors who owned ALB shares throughout 2022 are already well aware of this. Those favorable dynamics can change quickly. The bottom fell out of lithium prices earlier this year, with concerns around oversupply hampering demand from investors. Various major factors will likely continue to drive a volatile market, but Albermarle remains among the best picks in this sector.
I view this volatility as something that creates an ongoing opportunity to buy, hold, and sell Albemarle as it ebbs and flows. Notably, the company is diversifying into downstream processing with a $1.3 billion factory in South Carolina. As this factory yields profits, investors stand to reap the benefits in the years and decades to come.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) is a battery stock in the purest sense. The company designs solid-state battery technology, going public via a SPAC merger in mid-2021. It hasn’t been a winner in the sense that its share price has fallen since the initial offering. However, it is developing potentially disruptive technology that has great upside.
Solid-state battery technology promises to make current lithium-ion batteries obsolete. They’re safer, and have higher energy density. So, once these batteries are commercialized, they’ll provide greater range more safely.
Solid Power remains on track in terms of its roadmap, planning to achieve automotive qualification later this year. The company continues to improve its electrolyte production scaling and cell performance.
Investors are betting on the company’s ability to achieve commercialization. Right now, Solid Power spends roughly 6-times what it makes on an annual basis. Commercialization milestones will eventually provide profitability, but that’s a risky bet. Those looking for battery stocks with big upside have one here, but tread lightly.
QuantumScape (NYSE:QS) is another solid-state battery technology developer that comes alongside an inexpensive stock price. It’s also an equity that isn’t favored by many analysts currently, trading above the consensus average analyst target price.
While sentiment has arguably soured on QuantumScape, this company continues to iterate its technology upward. It delivered 24-layer prototypes to automotive manufacturers in 2022. These batteries are being independently tested in a series of stages at those respective companies.
My intuition is that QuantumScape is maligned by many skeptics who simply want it to fail for one reason or another. It has been marred by controversy that earnestly began when a short seller targeted it in 2021.
Short interest remains high to this day. But QuantumScape continues to plod along toward legitimate commercialization potential. Ignore the negativity and pay attention to the company’ progress. Right now that means being patient, and contingent to hold shares of QS through what could be a painful period.
Once QuantumScape’s early prototypes are well-understood by the market, there’s a lot to like with this stock’s upside. There’s nothing to suggest QuantumScape is even close to failing. That makes it one to buy and hold as a speculative bet on the long-term shift toward solid-state EV battery adoption.
Tesla (NASDAQ:TSLA) is, and will continue to be, the most headline-grabbing EV company. Elon Musk is a brilliant businessman who has developed a divisive media personality that simply works. He’s also built a pioneering EV firm that has paved the way for the EV transition.
Simply put, there’s always something interesting to report about Tesla, its leadership, the stock, and the brand overall. Tesla’s EV batteries tend to get lost in that mix.
But that battery production is an integral part of Tesla’s business. The company shifted battery production from Germany to the U.S. early in 2023 to take advantage of subsidies.
Further, Tesla continues to work on its own in-house battery development, while continuing to utilize Panasonic and LG in production efforts stateside and in China.
Notably, TSLA stock has done incredibly well in 2023, having surged by roughly 150% at the time of writing. If there is a single buy-and-hold EV stock, Tesla is it.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is likely to grow into an important link in the EV battery supply chain. The company owns the rights to mine Thacker Pass, a key U.S.-based lithium mine, and one of the largest globally. This makes the stock a promising long-term investment.
Thacker Pass houses the second-largest proven lithium deposit in the world. It has recently been commissioned, and is expected to have a life cycle of 46 years. Estimates suggest that it will produce 30,000 tons of battery-grade lithium per year in its initial stage, which has already begun. Phase 2, slated for 2026, will see that production rate double.
Investors should also consider that Lithium Americas maintains a valuable strategic position for the American EV industry. It is geopolitically important, given its U.S. location. U.S. EV manufacturers do not want to find themselves in a situation in which they become dependent on Chinese lithium producers. Thus, Lithium Americas is likely to play an important geopolitical role that should not be undervalued right now.
BYD Co. (BYDDF)
BYD Co. (OTCMKTS:BYDDF) is a Chinese EV manufacturer with a diversified business that spans nearly the entire supply chain. Its stock doesn’t get much attention, but it should.
The company manufactures EV cars, trucks, and buses. But it also makes the semiconductor chips and batteries used in those vehicles.
Beyond that, investors should also note that BYD is China’s largest vehicle seller, period. Not just EVs, but China’s largest vehicle manufacturer overall. BYD doesn’t get a lot of attention in the U.S., largely because its stock trades over the counter and isn’t listed on a major exchange. U.S. investors remain more interested in upstart EV companies, especially in relation to the Chinese market.
But BYD is Tesla’s primary competitor, a fact I think is generally lost on most U.S. investors. Nio (NYSE:NIO) and XPeng (NYSE:XPEV) receive more U.S. investor capital attention, but BYD is the far more important company in terms of playing the Chinese EV market.
EnerSys (NYSE:ENS) probably isn’t a company many readers will have heard of in relation to EV batteries, if at all. The company specializes in stored energy solutions for industrial applications, including system solutions. It also manufactures specialty batteries and has recently moved into lithium-ion battery development.
Notably, the company is also exploring the development of a gigafactory in Texas. EnerSys recently signed a memorandum of understanding with French firm Verkor to explore the development of a lithium-ion battery gigafactory in Texas. They’re basically determining optimal site location and funding sources currently.
Verkor is a major supplier to Renault. Renault was the third leading EV seller in 2022 and sold 228,000 EVs. That means EnerSys could quickly grow into a major EV battery manufacturer with a foothold in the U.S. and European markets. Further, should the company’s gigafactory development go as planned, EnerSys could logically pivot into a more EV battery-oriented business model.
On the date of publication, Alex Sirois 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.