The battery revolution is upon us, and investors are looking for battery stocks to get in on. The global market for lithium-ion batteries was valued at $108.4 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 14.1% over the next seven years. In the U.S., the battery market was valued at $10.49 billion in 2019. The revolution is primarily being driven by the move to electric vehicles that run on lithium-ion batteries.
However, electric vehicles are not the only products causing the increased demand for batteries. High demand for portable electronics, including LCD displays, smartphones, tablets and wearable devices such as fitness bands are also boosting market growth.
In this article, I offer four tips for capitalizing on the battery innovation that is changing how the world operates. Investors should use these tips to find the right battery stocks for them.
1. Look Beyond Electric Vehicles for Battery Stocks
Electric vehicles are leading the charge when it comes to lithium-ion batteries. The market is set to take off in the next decade. According to the International Energy Agency (IEA), electric vehicles are to rise from four million vehicles in 2018 to 120 million by 2030, accounting for 7% of the vehicles operated around the world within 10 years.
However, as mentioned, electric vehicles do not account for all the demand and growth in lithium-ion batteries and battery stocks. The ubiquitous nature of smartphones, tablets and wearable technology is also driving demand for batteries. The global wearable-technology market was valued at $32.63 billion in 2019 and is projected to expand at a CAGR of 15.9% by 2027. Furthermore, the rise of the Internet of Things (IoT) and connected devices is expected to dramatically enhance demand in coming years.
Additionally, the aging of Baby Boomers and a coming wave of chronic diseases have led to the adoption of more battery-powered wearable health products such as body monitors and activity trackers. These devices offer real-time information about a person’s health, including blood pressure, oxygen levels, calorie intake, cholesterol levels, heartbeat monitoring and other information.
2. Focus on Market Leaders
There are a number of companies that are market leaders when it comes to lithium-ion batteries. They are responsible for advancing the technology to a point where batteries are a viable and cost-effective alternative to other energy sources, such as oil and gasoline. Many of these companies also happen to have high-flying stocks. Investors should consider companies such as Tesla (NASDAQ:TSLA), General Motors (NYSE:GM), Panasonic (OTCMKTS:PCRFY), LG Chem and Toshiba (OTCMKTS:TOSYY).
These companies do not just have a big market share. They are also pushing forward the technology that is needed to make batteries last longer, be more sustainable and cost less. Producing batteries that are more powerful, longer lasting and less expensive is critical to creating a world that runs on more efficient and environmentally friendly batteries.
Investors should also keep an eye out for smaller emerging players in the battery space that could play a big role in coming years.
3. Think Infrastructure
The battery market is about more than the vehicles, smartphones and wearable tech that runs on lithium-ion batteries. There is also the infrastructure that’s needed to run a global network of electric vehicles. Think charging stations and repair shops. And, there are also the companies that mine and produce the lithium that powers the batteries themselves. Investors should take a step back and look at the entire market for lithium-ion batteries.
Some of the companies that are enabling the battery market of today and tomorrow include ChargePoint, a company that builds electric vehicle charging stations and is holding an IPO in November. Lithium mining companies include Lithium Americas Corp. (NYSE:LAC), Galaxy Resources, Piedmont Lithium (NASDAQ:PLL) and Albemarle (NYSE:ALB). These are companies that are positioned to grow and expand further as the adoption of batteries becomes more widespread.
4. Consider Foreign Markets
The U.S. is not the only country racing forward with lithium-ion batteries. Japan, for example, has strived to hold on to their advantage in the global market. Currently, the Japanese government offers subsidies that cover 66% of the cost for homes and businesses that install lithium-ion batteries. Other countries that are also aggressively pursing dominance in battery technology include China, South Korea, India and Germany.
Also importantly, developing markets throughout Africa, South America and Asia are expected to boost battery demand in products such as electric bicycles, as well as renewable sources of energy such as wind and solar power.
Governments around the world are increasingly adopting and encouraging policies that promote greater use of lithium-ion batteries. These supportive policies will likely help buoy the market for batteries and provide growth in revenues for battery manufacturers, spurring on the revolution that’s now underway.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.