Competition in the EV-Battery Space Is Heating Up
Editor's note: The future is bright for electric vehicles ("EVs")...
The transportation industry is embracing the transition from traditional gas-powered vehicles to EVs. This shift to a new generation of automobiles is causing automakers to ramp up EV-battery production. And The McCall Report editor Matt McCall believes this bodes well for us as investors...
In short, Matt says this "hypergrowth megatrend" has massive growth potential and will create a slew of unprecedented buying opportunities as more companies adapt to this shift...
In today's Masters Series, originally from the July 15 issue of Matt McCall's Daily Insight e-letter, Matt details how EV-battery production has become fiercely competitive... explains why this trend isn't going away anytime soon... and reveals how we can position ourselves to profit from it...
Competition in the EV-Battery Space Is Heating Up
We've got good news for not one but two of our hypergrowth megatrends.
My subscribers know that I believe next-generation battery technology and electric vehicles will change the future. We've been following and talking about these trends for some time, and every day it becomes clearer that we're on the right track – and ahead of Wall Street.
The U.S. is working hard to catch up to China on its EV-battery production...
And as part of that, tech company Panasonic (PCRFY) is set to build a new battery plant in Kansas that will provide 4,000 jobs. The company hasn't disclosed any other information about its plans, but it's noteworthy because Panasonic supplies some of the biggest automakers in the world – namely Tesla (TSLA).
The expansion is part of Panasonic's goal to quadruple EV-battery production through 2028 as it looks to meet high demand from customers.
Next-generation battery technology is one of my favorite investments for the Roaring 2020s. It's a huge part of the EV revolution in particular because as EV adoption gains steam, batteries will be a key piece of that growth.
Right now, almost all of that growth is concentrated in one country...
China is far and away the leader in EV-battery production, making up nearly 80% of the globe's lithium-ion battery manufacturing. Contemporary Amperex Technology (better known as "CATL") and BYD (BYDDY) are the country's two biggest players – with about 68% of the market in 2021.
I'm not at all surprised by that market dominance. China's EV industry is massive, and more consumers are receptive to EVs there than almost anywhere else in the world. In 2021, China accounted for around half of all EVs sold across the world. So with sky-high demand, production levels need to match.
The U.S. is the second-largest battery maker in the world, with about 6% of the market. But nearly all of the country's EV-battery capacity comes from one location – Tesla's Fremont plant. Clearly, U.S. companies need to increase battery manufacturing in order to close the gap.
That's a huge reason why President Joe Biden invoked the Defense Production Act to boost battery production in March. And businesses are taking full advantage...
Besides Panasonic, other companies like Volkswagen (VWAGY), General Motors (GM), and Stellantis (STLA) are all investing heavily in U.S. battery plants.
But battery companies are just part of the deal – companies like LG, SK Innovation, and Samsung have partnered in these plant investments. These three firms alone are set to invest (or have already begun investing) about $9 billion in U.S. battery production – with more likely on the way.
This hypergrowth megatrend is still in its early stages. Companies will continue to invest heavily as EV adoption gains steam in the U.S. and other parts of the world.
And battery companies will receive a massive tailwind as this adoption occurs...
In another sign of increased adoption, retail behemoth Walmart (WMT) made waves last month when it placed an order for 4,500 delivery vans from troubled EV startup Canoo (GOEV). The vans range in price from $35,000 to $50,000.
On the low end, this deal is worth about $160 million. But it could be worth much more. Walmart also has the option to buy up to 5,500 more vans, which would boost Canoo's sales even further.
The vehicles won't be in service until 2023. But Canoo plans to send some pre-production models to Walmart to finalize the design process. Then, production should begin at the end of this year.
The twinkie-shaped vans may look a bit goofy, but you can expect to see them on the roads soon enough...
Walmart's order was welcome news for Canoo. The company warned investors that it may run out of cash during its last quarterly earnings announcement. So this deal could save the firm.
However, it comes at a price...
For one, Canoo cannot sell its vans to industry rival Amazon (AMZN), as the e-commerce giant already has its own deal for EV vans with Rivian Automotive (RIVN).
Plus, Canoo had to issue warrants – long-term option contracts – to Walmart for 61.2 million Canoo shares. The warrants have an exercise price of $2.15 per share. So if Walmart exercises those options, it could own more than 20% of Canoo.
Still, the deal led to a huge spike in Canoo's shares. It rallied from $1.85 to $4.61 before pulling back since the deal was announced...
Ultimately, this is great news for the entire EV sector.
Both Amazon and Walmart have made big commitments for EV-delivery vans. In fact, earlier this year, Walmart reserved 5,000 EV-delivery vans from General Motors' BrightDrop subsidiary. The firm is making a big push into EVs and autonomous driving to propel its growing e-commerce business.
And I think this is just the beginning.
Industry giants don't make rash decisions. They test the waters on new technologies... and then they go big. If Rivian and Canoo can live up to their commitments, these deals could be the first of many to come.
Here's to the future,
Matt McCall
Editor's note: EVs aren't the only trend picking up steam. Matt recently pinpointed a different sector that could take off in the coming years. And hundreds of billions of dollars are being pushed into this sector right now...
That's why Matt followed the trail of government funding to find the six stocks in this sector that are best positioned to soar – regardless of market volatility. He says this group of stocks could jump 10X, 20X, 30X, or even higher... Get the full details here.