The U.S. electric vehicle (EV) market is slowing, but demand remains upbeat elsewhere around the world. That means EV batteries have a strong tailwind at their back.
China ended EV subsidies last year, which analysts thought would kill the market. Instead, China reported record EV sales in October. Local governments continued supporting the industry, which market research firm Rho Motion said allowed the world’s largest EV market to record 29% year-to-date growth through September. Globally, sales surged 34%.
Manufacturers are pushing to develop new technologies. QuantumScape (NYSE:QS) is developing solid-state batteries. NAWA Technologies is using 3D carbon-based nano-materials to boost battery power 10-fold over existing technologies. IBM (NYSE:IBM) is working on science that will allow for heavy metal-free batteries.
Yet these are all unproven at the moment. Investors looking for battery stocks to buy now may want to focus on technologies that exist. The following three companies offer that option and are ready to scoop up right now.
ExxonMobil (XOM)
What the heck? Oil and gas giant ExxonMobil (NYSE:XOM) is a battery stock? Well, not right this second, but it soon will be. While its acquisition of Pioneer Natural Resources (NYSE:PXD) shows the energy leader is still committed to fossil fuels. In fact, the company just announced it will begin drilling in Arkansas to produce lithium.
Exxon long resisted buying into the renewables space, but this lithium field it intends to exploit is right in its core competency. The oil stock’s head of low-carbon solutions, the company’s President Dan Ammann, told The Financial Times, “We’re drilling wells 10,000 feet underground into these saltwater reservoirs. That’s obviously directly in our wheelhouse and capability skillset.”
It acquired 120,000 acres of the Smackover formation earlier this year. The southern Arkansas region possesses one of the most prolific lithium resources of its type in North America.
Exxon is getting into the game late, but it possesses financial resources unavailable to most players. It just reported third-quarter operating earnings of $9.1 billion, up 15% from the second quarter. To put that in perspective, leading lithium miner Albemarle‘s (NYSE:ALB) revenue for all of last year was $7.3 billion. Exxon can pour a lot of money right away into this initiative.
The oil giant won’t begin production until 2027, but it expects that by 2030 it will be producing enough lithium to supply over one million EVs a year. With lithium demand expected to double by then, ExxonMobil will quickly leapfrog into an industry-leading position.
Vale (VALE)
Although lithium grabs most of the headlines regarding EV batteries, nickel is another essential component in their manufacturing. Vale (NYSE:VALE) is primarily known for its iron ore and copper operations, but it is also one of the world’s largest nickel miners in the world.
In the recently completed third quarter, Vale produced 42,000 tonnes of nickel, though it has seen prices decline. It’s an impact many miners are experiencing, whether it’s nickel, lithium or other metals. Yet Vale expects to sell much of that in the fourth quarter. It explained that’s what occurred last year. It’s why the miner is looking for higher sales and production this time around as well. Management maintains, though, that nickel production is patchy quarter to quarter, even month to month.
Vale is in the middle of a transition from an open-pit mine at Ovoid to underground mines at the Voisey’s Bay project in Canada. Those won’t really begin to hit their strides until the third quarter of next year. That is fine by Vale, as it isn’t worried about any slowdown in EV demand. Vale’s executive vice president of base metals Deshnee Naidoo told analysts, “But all I can say from the data that we are looking at is that the EV demand still continues to be strong despite some of the softening that we are seeing today.”
At 6 times expected earnings and 15x FCF, Vale is a mining stock that’s cheap and gives investors EV exposure as well as other critical minerals and metals.
Toyota Motors (TM)
The third battery maker you’ll regret not buying in November is another atypical stock. Toyota Motors (NYSE:TM) will begin battery production as soon as next year. The automaker initially committed $5.6 billion to developing EV batteries in Japan and the U.S. but has expanded that investment to over $9 billion. Toyota says it will invest a total of $6 billion in a new North Carolina battery plant. The factory will be operational in 2025. The plant will have six battery production lines, four for hybrid vehicles like its Prius, and two for battery EVs. It wants to have at least 40 GWh of combined capacity.
Toyota is also signing agreements with other battery makers like LG to supply its battery EVs with the juice needed to drive them. The automaker additionally partnered with Japanese oil company Idemitsu to mass-produce solid-state batteries. Toyota says it has the production capabilities while Idemitsu owns the technologies in materials to make the batteries. It hopes production begins in 2027 or 2028.
Like Exxon, the carmaker was behind rivals like Tesla (NASDAQ:TSLA) and BYD (OTCMKTS:BYDDY) and is making up for lost time by investing billions in deals and technology. Despite Toyota’s stock rocketing 38% higher in 2023, it trades at just 9 times earnings, a fraction of its sales and book value, and just 3x its expected earnings growth rate.
On the date of publication, Rich Duprey held a long position in XOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
