In recent years, lithium ion batteries have seen rapid adaptation into a variety of applications, such as consumer electronics, military, aerospace, and grid tied energy storage, which has pushed demand ever higher. It is commonly accepted in the industry that the true tipping point for the lithium supply chain will be the wide spread adoption of pure electric, hybrid, and plug-in hybrid vehicles. The industry does not need mass adoption of these alternative vehicles; it simply needs wider spread adaptation. This is now happening and the lithium industry may be teetering the edge of a significant tipping point.
Focusing specifically on developments in North America, nearly all major automotive manufacturers, including GM (NYSE:GM), Ford (NYSE:F), Toyota (NYSE:TM), and Nissan (OTCPK:NSANY), are offering at least one alternative vehicle that stores and redistributes energy from lithium ion batteries. Recent automotive start-up, Tesla Motors (NASDAQ:TSLA), has made headlines regarding its success with the Model S vehicle. Industry reports show that the Electric Vehicle rang in 2013 sales at roughly 96,000 units higher than 2012 totals of 53,000. Furthermore, the Chevy VOLT and Nissan LEAF are leaders in the North American market based on recent sales data. In 2012, the Toyota Prius Plug-In was rolled out in the USA, which was the first Toyota model to switch from nickel-based batteries to lithium ion. This shift was part of a larger investment by Toyota in the lithium supply chain; 2013 sales figures for the Toyota Prius Plug-In hybrid came in for a total of 12,088 units.
GM has made headlines announcing that they are seeking to reduce the price of the Chevy Volt by $7,000 to $10,000. The next generation of the Volt will be launched in 2015 as a 2016 model, confirming GM's commitment to the industry. Chevy has also launched the SPARK EV in California, priced significantly lower than the Volt, and Honda has slashed the lease price on the Fit EV. SMART which is produced by Daimler AG (DDAIF) has launched a ForTwo Electric Drive option and was rolled out nationwide in 2013; the vehicle has been priced in the US$25,000 range and they have created a battery rental program that will draw out the cost of the battery from the vehicle but place a monthly rental program against the vehicle. These are all examples of how major automotive manufacturers are looking at ways to grow their market share of the EV, Hybrid, and PHEV sectors and, ultimately, grow the consumer adoption rate for this sector. Financing models, battery rental programs, and long-term reduction plans are all signs that these manufacturers intend to continue to invest in the market over the long run.
With Tier 1 automotive manufacturers now committed to the industry and the supply chain taking shape, a number of potential investment opportunities have arisen. An indirect approach to electric vehicles is through the acquisition of common shares in Tier 1 diversified auto manufacturers such as GM, Ford, Toyota, and Nissan. For investors seeking direct exposure to EV sales, Tesla Motors offers this; Telsa is now building 550 vehicles per week or 27,500 vehicles per year and 2013 sales figures are expected to finish with 21,500 shipments.
Outside of the automakers themselves, a logical investment choice is the supply chain, specifically lithium ion battery manufacturers. Panasonic Corp. (OTCPK:PCRFY) is a worldwide leader in the development and engineering of electronic technologies and solutions for a variety of applications. Through their Energy Systems division, they supply lithium ion batteries to the automotive sector; their largest customer is Tesla. In October 2013, Tesla and Panasonic signed an auto grade lithium ion battery cell agreement that will see Panasonic supply 2 billion cells over the course of four years. In fact, Panasonic was an early investor in Tesla with its US$30million investment in 2010, and it is speculated that Panasonic will invest US$100million in Tesla's recently announced "GigaFactory".
Another player is Korea-based Samsung Electronics Co. (OTCPK:SSNLF), who is currently selling electric vehicle batteries for BMW's i3 electric car through their Samsung SDI division. In late 2013, it was confirmed by both Tesla and Samsung SDI that the two companies were in talks about Samsung SDI supplying battery technology to Tesla.
LG Chem. Ltd. (LGCEY) supplies EV batteries to more than 10 automotive OEM companies including GM's Chevy Volt and Ford's Focus Electric. LG operates a battery manufacturing facility in Holland, MI, which has a plant designed for an annual capacity of 60,000 Volt-sized battery packs.
Toyota Motor Co. is likely the most progressive automaker in the electric vehicle market as they not only offer a number of PHEV, EV, and HEV vehicles, but they are also expanding their battery manufacturing capabilities, securing their lithium supply, and have made a US$50million investment in Tesla Motors (Seeking Alpha: Toyota's Lithium Based Future).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
