Top 6 Battery Stocks in 2023

Battery manufacturer powering the electric vehicle revolution.

A multinational conglomerate with a rich tradition, Panasonic Holdings Corporation started as Matsushita Electric – focusing on lighting before expanding into other ventures. Panasonic operates through 5 segments: Appliances, Life Solutions, Connected Solutions, Automotive, and Industrial Solutions.

Due to strategic importance, the company spun a subsidiary from the Industrial Solutions segment, forming The Panasonic Energy Co. in April 2022 with approx. 20,000 employees.

This subsidiary exclusively deals with developing, manufacturing, and selling primary batteries – including lithium-ion batteries for in-vehicle use, lithium secondary batteries, storage battery modules, etc.

The company is looking to capitalize on the electric vehicle (EV) market growth by leveraging 7,500 patents and focusing on products with a high market share. Panasonic’s automotive batteries are already powering some of the largest names in the electric vehicle space, with the likes of Tesla and Lucid procuring batteries from the company. Business is doing well enough to justify the decision to build out a new 30GWh EV battery production facility in Kansas, which should come online in March of 2025. Their target is sales growth of 10% or more per year and EBITDA of 20% by FY 2027.

In their most recent quarterly results, Panasonic noted their Energy segment sales increased by 24% to ¥469.8B (US$3.60B) from a year ago. The company attributes this growth to the increased sales of automotive batteries coinciding with growing demand for EVs. The growth in sales was also helped in part by revisions made to product pricing over the last year. However, despite the increased sales, operating profit for the segment actually decreased by 23% to ¥28.7B ($US$220M) from the same quarter last year. This is due mainly to rising raw material and logistics costs as well as increased fixed costs related to increased production.

Panasonic’s goal for FY 2031 is to reduce their carbon footprint by half. The major expansion is set for North America, where the production capacity of automotive batteries could grow by approximately 3 to 4 times by FY 2029. Several expansion projects are currently arriving in FY 2024, including Monterrey, Tokushima, Wuxi, and Osaka factories.

Global leader in lithium sales providing the raw materials for global battery production.

Launching in 1994 as a chemical business spin-off from Ethyl Corporation – Albermarle Corporation is an established specialty chemicals manufacturer. It operates through 3 segments: Lithium, Bromine, and Catalysts.

The lithium segment is the majority of its business, accounting for around 60% of sales, which isn’t surprising given the company’s leading supplier status for electric vehicle batteries. So far, the company is looking at a compounded annual growth of +20%, expected to reach 200,000 tonnes per annum (tpa) by 2025. Meanwhile, pressure from the Auto industry could see lithium demand reach 3.2 million tpa by 2030.

With the demand significantly outstripping the supply, we can expect higher lithium prices. Meanwhile, the company is looking to take advantage by stepping away from the fixed pricing model (currently 20% of sales) and leveraging its experience in the field since most of the "low-hanging fruits", the most accessible lithium resources, have already been tapped. The company is well-positioned for global coverage with lithium presence in all key markets, particularly China.

Thus, it isn’t surprising to see substantial CAPEX investments, growing from US$954M in 2021 to approx. US$1.3-1.4B in 2022. The latest investment includes a minimum of US$180M to establish Albemarle Technology Park – a novel materials R&D facility for next-generation lithium products in North Carolina.

Albemarle has undergone a year of explosive growth. The most recent quarterly report mentions net sales for the lithium segment of the business increased 318% year-on-year. The company attributes 298% of that 318% increase to higher realized lithium prices while the remaining 20% of the increase is attributed to actual increases in sales volume.

The volume increases reflect expansions at Silver Peak, LaNegra, Kemerton, and Qinzhou with further upside from these expansions is expected to be realized in the coming fiscal years.

Should EV sales in Europe and China continue to drive demand for batteries, Albemarle will expect to see the flow on benefits as roughly 85% of their lithium sales were for energy storage purposes.

Chinese EV giant taking battery research into their own hands.

BYD Company Limited is a Chinese manufacturing conglomerate that began as a rechargeable-battery company but diversified into other ventures such as electric vehicles, solar panels, and renewable power storage. The company operates in 3 segments that focus on batteries, mobile phone components, and automotive products. While the production focus is in China, the company has manufacturing operations in the US, Canada, Brazil, India, France, and Hungary.

Famously, Warren Buffett invested $232m for 10% of BYD in 2008. Although he keeps taking profits on that investment, it remains worth billions. In fact, the most recent sales from Berkshire Hathaway were reported earlier this year.

BYD is the top-selling EV company in China, with estimations to sell approximately 2 million vehicles – exceeding the 2021 numbers by 300%. With strong Chinese EV market growth, BYD is well-positioned to take advantage of its battery expertise since the battery remains the costliest EV component. Battery R&D is also a factor since the company has been experimenting with a new sodium-ion battery that could be cheaper and less flammable, albeit heavier. This type of innovation aligns with the brand and could present further cost-cutting opportunities and improve price competitiveness.

In June of 2022, BYD announced it sold 641,000 vehicles in the first half of the year, helping the company overtake Tesla as the largest EV manufacturer globally.

Across both the Automotive and Handset business, gross profit for the 6 months to June 30 2022 increased by 75% to RMB20.342B (US$3.00B) and statutory earnings came in at RMB3.595B (US$520M). Taking a look at the company’s margins, we saw a slight improvement year-on-year with an increase from 12.76% for the first half of 2021 to approximately 13.51% the same period in 2022, an increase that has been directly linked to greater sales volumes in the automotive business.

Yet, despite the opportunity that growing with the domestic and seizing the foreign market presents, there are 2 risks to consider. First, there is an ever-present political risk of being a Chinese company in a world with the worst geopolitical relations since the Cold War. Second, the company might be over-reliant on its CEO Wang Chauanfu who has led the company since its inception.

An energy storage newcomer with an emissions-conscious approach.

FREYR Battery is a Norwegian-Luxembourgish battery company that focuses on producing and selling battery cells for Energy Storage Systems (ESS) and Electric Vehicles (EVs).

The thesis behind FREYR is simple – to create large-scale battery manufacturing while reducing the carbon emissions of that process by 81%. The company plans to achieve this through partnerships with companies such as 24M Technologies, Elkem, Glencore, Siemens Energy, and Maersk. So far, agreements involve a pre-sell of over 130 GWh of future capacity. Two key projects include Giga Arctic and Giga America.

The Giga Arctic project consists of 2 factories in Mo i Rana, Norway, with an annual manufacturing capacity of 29 GWh and should become operational in 2024.

Meanwhile, the Giga America project is located in Coweta County, Georgia, with a 34 GWh annual capacity and should become operational by 2026. A long-term goal is to provide over 200 GWh per annum globally by 2030.

The company currently enjoys favorable policies and a strong partner network, but execution risk remains since this is a young company that went public through a SPAC.

The company is currently pre-revenue but the expectation is that things are getting underway with the start and ramp up of sample cell production in 1Q 2023. Achieving this first sample cell production in early 2023 is a key condition required to complete project financing, which would provide US$1.5B of credit facilities with indications from 13 lenders that this could be expanded to US$2.5B. Following their first sales, their revenue is set to grow at 57.1% annually according to the estimates from analysts covering FREYR.

Exploring new battery frontiers with developments in Solid State Batteries (SSBs).

QuantumScape Corporation is a development stage company focusing on solid-state metal lithium batteries (SSB) for electric cars. It was founded in 2010 at Stanford University, and since 2012 it has had a strategic partnership with Volkswagen. QuantumScape went public in 2020 through a SPAC merger.

The company is considered a leader in the SSB segment, developing a 24-layer lithium-metal prototype known as Sample A0 – currently under testing by EV OEMs. Other prototypes include 16 layers and 10 layers. So far, single-layer batteries have completed 400 consecutive 15-minute fast-charge cycles from 10% to 80% capacity while retaining over 80% of the initial energy. For perspective, 400 charge cycles on 300 miles of range would equal 120k miles driven.

SSB batteries use solid ceramic metals instead of typical liquid electrolytes. This concept makes them cheaper, lighter, and faster to charge. According to a study by Minviro – this can also reduce carbon footprint by at least 24%. Commercial production is expected by 2025.

QuantumScape has already received more than US$2B in capital investment with over US$500M spent on development over the last 12 years of R&D. The company is already mapping out the long-term partnership channels with 6 commercial agreements already secured with automotive OEMs.

The case for Lithium-metal SSBs is that it should be a catalyst for a shift in EV price-performance and help progress beyond the current frontier to deliver a solution that is both lower-cost and higher energy density compared to traditional Lithium-ion batteries.