Batteries, yep good old batteries, are the technology of tomorrow. Here’s how to invest
It’s 1967. In “The Graduate” the experienced Mr. McGuire leans over to whisper advice to the very inexperienced Benjamin. (Played by a very young Dustin Hoffman.)
“I want to say one word to you. Just one word.”
“Yes, sir,” replies the ever polite Benjamin.
“Are you listening?” continues McGuire.
“Yes, I am,” Benjamin assures him.
“Plastics.”
“Just how do you mean that, sir?” asks the completely dumbfounded Benjamin.
Write that same scene today and McGuire would whisper, “Batteries.”
Especially if he was a savvy investor who followed the trends in the global auto industry.
You’ve undoubtedly read the stories about General Motors’ (GM) electric car, the Chevy Volt, scheduled to go on sale in 2010. That car, with its $40,000 price tag and its 230-miles-per-gallon mileage rating from the Environmental Protection Agency is either a gimmick designed to convince the U.S. consumer and the Obama administration that the company has turned over a new leaf or a real portent of how much things have changed in Detroit.
Whichever it is, the Volt is only one drop in a wave of hybrid electric and plug-in electric cars that is going to wash over the global auto market in the next two decades. In June 2008 Deutsche Bank counted 75 new hybrid electric models set for sale by 2011. And the number has only gone up since then. The National Highway Traffic Safety Administration projects that hybrid cars could take as much as 20% of the U.S. auto market by 2015, up from just 2% in 2007. In Europe, according to J.D. Power, hybrids and electric cars could account for 50% of the market by 2015, up from 2% in 2007.
And every one of those hybrid and electric cars will need a rechargeable battery. Most of those new batteries will be lithium ion batteries. The automotive market for lithium ion batteries is close to zilch today. Hybrids like Toyota’s Prius run on older nickel metal hydride battery technology. (Conventional car batteries use a lead- based technology.) But lithium-ion technology with its lighter weight and greater ability to stand up to recharging after being completely discharged is the likely technology of the future.
From just about zero now, Deutsche Bank estimates that the automotive market for lithium ion batteries will hit $10 billion to $15 billion in sales by 2010. (The entire market for lithium batteries in things like rechargeable phones and laptop computers was $7 billion in 2007.) By 2020, when the bank projects that lithium ion technology would have just about completely replaced nickel metal hydride technology in cars, the automotive market for lithium ion batteries could reach $30 billion to $40 billion annually.
But just how do you invest in this coming wave of automotive lithium-ion batteries?
All up and down the battery food chain from the companies that mine lithium to the companies that make the key pieces that form the guts of the batteries to the battery makers themselves.
