The 8 Biggest Lithium Battery Stocks of 2028
We’ve talked before about how the Jack and Jill retail investor types gravitate towards easy-to-understand stories. Jack watching Saturday morning cartoons in his underwear sees a Tesla commercial, followed by an iRobot commercial, and tells Jill they ought to invest some of their self-directed 401K into battery stocks. Jack logs into his brokerage account, plugs in the bog-standard Google search “biggest battery stocks to invest in,” and he’s cooking with gas.
There are a few problems Jack will encounter in his quest for wealth. Firstly, not all batteries are created equal. The type of battery that’s being adopted in today’s electric vehicles and fancy consumer gadgetry is the lithium-ion battery, and the cost to produce such batteries is plummeting.
Just because you own a company that manufactures lithium batteries doesn’t mean you have a Sanlorenzo sitting in the harbor. As we saw in the solar industry, the plummeting cost of solar panels pushed a lot of manufacturers out of business. Investing in raw materials such as lithium hydroxide isn’t the way forward either, something we covered in our recent piece on how Investing in Lithium Hasn’t Panned Out. Yet. Perhaps we can figure out which publicly-traded companies are the biggest manufacturers of lithium batteries and sort Jack out with some suitable stocks for his battery thesis.
Finding 8 Big Lithium Stocks
The simplest approach to take here would be to find out which company manufactures the most lithium batteries and invest in it. Or even better, we can take planned capacity into account and skate to where the puck will be. The MBAs over at Statista put together this nifty chart which shows the capacity expected from the top ten lithium battery producers in 2028:
Aside from the typo (Parasis = Farasis), it’s an interesting look at who plans to have the most capacity in seven years based on investments being made today. The top three names on the list – CATL, LG Chem, and Tesla – will have more production capacity than the next seven companies combined.
Here’s a look at some key metrics for the ten companies with the most expected lithium battery production capacity by 2028.
|Company||Ticker||Market Cap |
|Samsung SDI Co.||006400.KS||48||Korea|
Eight of the ten are publicly traded companies. Let’s take a look to see if any make for compelling investments.
gorilla panda in the room is China’s Contemporary Amperex Technology Co. Limited (CATL) which was founded just 10 years ago and is now the largest manufacturer of lithium batteries in China and third in the world. That’s just one of the things we learned while perusing their Wikipedia page which is about the only place we could find basic information about the company. CATL is working with a number of major auto companies – Honda, BMW, Toyota, Volvo, Volkswagen, Daimler – along with quite a few Chinese names. We were also surprised to see that CATL supplies batteries to Tesla. From a BBC article last June:
In October of this year, a Bloomberg piece talked about how Tesla is cutting the price of their Chinese-made Tesla Model 3 because they’re using CATL batteries. As Tesla ramps up their gigafactories, they continue to buy batteries from Panasonic and this next company.
LG Chem is one of the top-ten largest chemical companies in the world, citing their main business areas as “petrochemicals, advanced materials, and life sciences.” For example, they command the largest market share in the global ABS plastics market. Great way to get exposure to Korean chemical companies, not so great way to invest in lithium batteries. Late last year, LG Chem announced that they will be doubling battery capacity because of one key client – Tesla.
Godwin’s law says that when people debate in Internet forums, the probability that someone starts using Nazi analogies approaches one as time goes on. The same is true for any discussion of vehicle electrification. It just can’t happen without mentioning you know who.
Reasons for investing in Tesla span multiple themes, from vehicle electrification to vehicle autonomy, the latter being the foundation of the biggest bull thesis for Tesla. Right now, Tesla cars are collecting data and their self-driving capabilities are getting better and better. Vehicle autonomy is a trillion-dollar industry. Ergo, Tesla is a trillion-dollar company. And with a market cap of $783 billion, they’re not that far away. At Tesla’s long-awaited battery day, they announced a new battery that will extend their vehicle range by 16%. They’ll not only ramp up production of these batteries in-house, they’ll also look to buy a whole lot more from other battery manufacturers as well.
There’s Godwin’s law, and then there’s Tesla’s law, which says you cannot discuss Tesla without bringing up their stock price – $816.12. With that sorted, let’s talk about a battery maker dubbed “China’s Tesla.”
Ever since we sold our shares in Ali Baba, we’ve become concerned about the vague VIE structures surrounding Chinese companies. We are not comfortable taking on this added layer of risk, and even less comfortable with the accounting irregularities that pop up in large Chinese companies at a frequency that’s rather alarming. (Luckin Coffee anyone?) That said, we’ve long admired BYD from afar as we wrote about in a 2017 article titled “Is BYD Auto the Tesla of China? Or Something More?” Here’s how those two companies stacked up back then:
And here’s how those same numbers look today (numbers in USD billions):
|Return since our May 2017 article||+1,155%||+492%|
We’re definitely going to come back and visit BYD in a coming article to try and figure out if the company’s one-year return of +496% can be at all justified. Such sudden rises are often due more to hype than substance, something that’s been pervasive across all electric vehicle stocks lately.
As the largest South Korean chaebol, Samsung is a diversified conglomerate that dabbles in everything from ships to refrigerators, though they’re perhaps best known for consumer electronics which account for the majority of revenues. They’re the world’s largest TV manufacturer since 2006, and the world’s second-largest chipmaker. The company’s impact on Korea’s GDP is in the double-digits, so it’s fortunate that their battery operations are part of a smaller $48 billion company – Samung SDI – which operates through three segments: Chemicals, Electronic Materials, and Energy, with the latter commanding the majority of revenues. While the company’s latest earnings report talks up the impact of electric vehicles on the company, it’s impossible to tell just how much lithium-ion batteries account for the energy segment’s revenues which have been on a steady growth trajectory. According to Nikkei Asia, batteries account for about half of all revenues:
The company now manufactures batteries, which account for roughly 50% of its sales, polarizing plates for liquid crystal display panels and materials for semiconductors and display panel.Nikkei Asia
China’s largest producer of sport utility vehicles and pick-em-up trucks, Great Wall Motors, spun out a company called SVOLT Energy Technology that soon will supply a new, cobalt-free battery. That move towards “cobalt free” is a function of concerns about mining safety and cost. Batteries are now available to order, and the company is investing several billion dollars in establishing two factories in Germany, a country that many Chinese EV-related companies are eyeballing right now for opportunity. It’s one of two companies on today’s list that are not publicly traded.
One thing we like about conglomerates is that they come to the table with their own industry diversification. (This is what makes 3M a must-hold for dividend growth investors.) Japanese conglomerate Panasonic is no exception, dabbling in everything from smart homes to avionics, to healthcare equipment. They’ve recently been pivoting away from consumer electronics and into automotive, something that’s impacted profitability. They’re now in bed with Toyota, and continue to supply Tesla with batteries, the number of which is actually increasing despite Tesla’s move to manufacture batteries in-house.
Hong Kong people never hesitate to queue around the block for merely the chance of buying something at a discount. Then there’s the mainland Chinese who don’t believe in queues, but love a bargain nonetheless. That’s why China’s Wanxiang Group was over shopping for discount assets in ‘Murica, and came back with a few purchases – A123 Systems and Fisker Automotive – both of which now belong to the conglomerate. We’re not sure if those were placed under Wangxiang Qiaochao, a subsidiary of Wanxiang Group, which also happens to be the largest automotive parts company in China and publicly traded (000559.SZ). This giant Chinese conglomerate doesn’t feel like it has much pure-play exposure to lithium-ion battery production.
Continuing on with our cultural generalizations, most Chinese love nothing more than a good punt. It’s why Macau pulls in 12X the revenues Vegas does. It’s also why China’s Nasdaq-style Star Market mints one billionaire a month with the average stock debut rising an average of +200%. Shares of battery producer Farasis lagged when they debuted on Shanghai’s Star Market in July of 2020 only closing up +76%, an event which also saw participation from German auto giant Daimler to the tune of about $128 million. Says an informative article by TechNode:
Farasis is the country’s fifth-largest battery maker with 2.27 gigawatt hours in sales volume in China last year, less than 10% of what industry giant CATL produced. The company has been a long-term partner with Chinese automakers including BAIC and Great Wall Motors since 2016, and forged an alliance with Daimler as its certified battery supplier in late 2018.
In recent news out of Asia, Korea’s SK Innovation was banned “from supplying EV batteries in the United States unless the company can source all the needed materials there – a step analysts say is not feasible.” It all started with the aforementioned LG Chem accusing SK Innovation of stealing its battery-making secrets. SK Innovation is a leading oil and chemical company in South Korea, and a core business of the SK group, the country’s third-largest chaebol. Again, we have a case where a conglomerate prevents us from getting any pure-play exposure to our lithium battery thesis – not that we’d necessarily want one given the ongoing spat.
To Buy or Not to Buy
Samsung SDI looks appealing based on revenue growth, but we dislike not having insights into the contributions from lithium ion batteries. Right now we’re sitting on the sidelines when it comes to Chinese VIE structures, so that puts CATL off limits. Alongside Samsung SDI, they’re probably the most attractive of the lot, followed by another Chinese stock in the list – BYD. None of the other stocks provide the sort of pure-play exposure to lithium batteries that retail investors like Jack and Jill are looking for.
Not all is lost though. We did manage to come across three stocks you might find interesting. The market caps of these mystery companies range from $2.4 billion to $7.3 billion and they’re spread out across the globe – from Sweden to Taiwan. In a coming article, we’ll dig into these three battery stocks and see if any merit a spot in The Nanalyze Disruptive Tech Portfolio.
As part of looking for emerging tech trends, we look at which search terms are growing in popularity, and among those is “lithium battery stocks.” While some index providers might take this list of stocks and chuck it into a lithium ETF, we believe that fails to give investors what they’re actually looking for – pure-play exposure to the lithium thesis driven by the growth of vehicle electrification. The best approach may be to cherry-pick some promising names.
We looked at dozens of battery stocks and only found one we thought was a compelling investment. Become a Nanalyze Premium annual subscriber to find out which battery stock we’re holding today.