7 Battery Stocks Sitting in the Sweet Spot

Electric vehicles are fast becoming the dominant type of automobile around the world. As automakers rush to rollout electric versions of their most popular vehicle models and phaseout gas-powered cars, trucks and SUVS, the global auto industry as we know it is changing forever. And this transition presents a huge opportunity for companies that produce the batteries that power electric vehicles. According to Fortune Business Insights, the global electric vehicle battery market is forecast to grow from $49.22 billion last year to $98.97 billion  in 2029, for a compound annual growth rate (CAGR) of 10.5%. Investing in companies that are leading the way when it comes to EV battery development and production could be a smart move. The key it to identify the successful companies from the ones that are not likely to survive long-term. Here are seven battery stocks sitting in the sweet spot and poised to grow.

QuantumScape (QS)

QuantumScape (NYSE:QS) is a battery company that has a lot of potential, though much of that potential remains unrealized. The company is involved in the development of solid-state lithium-ion batteries that many people see as a gamechanger for electric vehicles, promising to dramatically reduce battery charging times while also increasing the life of a battery. It’s this promise that has attracted a number of prominent investors to QuantumScape, including Microsoft (NASDAQ:MSFT) co-founder Bill Gates and the German automotive giant Volkswagen (OTCMKTS:VWAGY).

Volkswagen has invested more than $300 million in QuantumScape and is the company’s largest shareholder. This has given Quantumscape a lot of credibility in the industry, along with the fact that the company is run by three former Stanford University professors. The company continues to work on a solid-state battery that it says could give electric vehicles a driving range of 650 km on a single battery charge, while simultaneously lowering the time to fully recharge the battery to 15 minutes. QS stock also remains a work in progress. After a brutal selloff in 2022, the share price has risen an impressive 42% so far this year. However, Quantumscape’s stock remains down 62% from a year ago.

Ford (F)

Michigan just awarded the Ford Motor Company (NYSE:F) a $120 million grant to help finance a new electric vehicle battery plant the automaker is building in the state. Ford is constructing the battery plant at a total cost of $3.5 billion, and it is expected to eventually employ 2,500 people. The Detroit auto giant is building its own battery manufacturing site as CEO Jim Farley says that a reliable supply of batteries is proving to be a “constraint” on its electric vehicle ambitions.

Farley has called on the U.S. to stop importing batteries, and the minerals and metals used in them from foreign nations such as China. The Ford CEO wants to see other U.S. automakers develop and manufacture their own EV batteries, and for the U.S. to secure a domestic supply of minerals such as nickel, lithium and cobalt that are key ingredients in batteries. Ford’s approach should turn it into a major battery maker in the coming years, in addition to being a leading electric vehicle manufacturer. F stock is down 33% over the last 12 months.

Panasonic (PCRFY)

People might be familiar with Japanese battery company Panasonic (OTCMKTS:PCRFY), but less familiar with the company’s position in the market for electric vehicle batteries. Currently, Panasonic holds a 10% share of the global market for electric vehicle batteries, and it is continuing to grow. The company is the main battery supplier to Tesla (NASDAQ:TSLA). And, Panasonic is building a $4 billion electric vehicle battery factory in Kansas as it looks beyond Tesla and to the broader market.

Panasonic’s EV battery plant in Kansas is expected to create 4,000 jobs and will be the company’s second in the U.S. after its factory near Reno, Nevada. Panasonic has already produced more than six billion electric vehicle battery cells, almost all of them for Tesla. However, Panasonic recently inked a deal to also supply batteries to Tesla rival Lucid Group (NASDAQ:LCID), which makes a luxury electric sedan that sells for more than $100,000.

Panasonic’s stock has declined 12% in the last year, though it has rebounded 5% so far in 2023.

Nio (NIO)

Chinese electric vehicle company Nio (NYSE:NIO) is a leading electric vehicle manufacturer that also makes its own batteries. In fact, the company has developed a unique “battery as a service” (BaaS) model that has become quite popular within China. Rather than install expensive charging stations in their homes, owners of Nio electric vehicles drive to designated service stations to have their depleted batteries swapped out for newly charged ones. The process is similar to the way consumers swap empty barbecue propane tanks for filled ones at Costco (NASDAQ:COST).

While Nio customers save on the expense of installing battery charging systems at their homes, they pay Nio a monthly subscription fee for the battery swapping service. This approach pays Nio a steady and predictable income stream, which it plows into the research and development of its electric vehicles and batteries. Analysts praise Nio for its innovative approach to batteries, which consumers seem to love. The company is now taking its BaaS model to Europe, where it is expanding. While NIO stock has been hit hard in the past year, declining 55% and now hovering near a 52-week low, investors may want to view the share price decline as a buying opportunity.

Albemarle Corp. (ALB)

It’s difficult to talk about battery companies and not mention Albemarle (NYSE:ALB). While the company is technically a chemical manufacturer, it is the largest provider of lithium for electric-vehicle batteries in the world. This makes Albemarle indispensable to both automakers and battery companies. ALB stock has benefitted from a huge upswing in the price of lithium. Over the past two years, lithium prices have increased 500%.

Much of the increase in lithium has been caused by strong demand in China, which is transitioning its population of 1.4 billion people to electric vehicles through companies such as the aforementioned Nio. Demand for lithium is expected to remain robust for many years to come, which is positive for Albemarle and its shareholders. This explains why ALB stock has gained nearly 150% over the past five years. In the last 12 months, the stock is flat or unchanged. However, it has outperformed the S&P 500 index, which is down 13% in the past year.

Volkswagen (VWAGY)

German auto giant Volkswagen just announced plans to build its first overseas electric vehicle battery plant in rural Canada. Volkswagen said that the Canadian plant will play a key role in its North American EV expansion strategy, and that it will be wholly owned by its battery subsidiary called PowerCo. The new battery plant on this side of the pond is part of a $20 billion investment Volkswagen is making to build its own electric vehicle batteries.

Power Co has been created to manage Volkswagen’s battery supply chain — from research and development to the mining of raw materials, through to end-of-life recycling. In addition to the Canadian site, the company has announced plans to build six battery plants in Europe by 2030 as it works to secure a steady supply of the batteries needed to power its many electric vehicle models. Volkswagen is the second biggest automaker in the world after Toyota (NYSE:TM) and its entry into the battery market is expected to be felt far and wide.

Volkswagen’s stock has slumped 23% over the past year.

Tesla (TSLA)

Tesla remains the world’s foremost electric vehicle maker. However, the company led by Elon Musk is also a massive manufacturer of batteries used to power its electric sedans, SUVs, and upcoming Cybertruck. The company produced enough batteries in 2022 to power more than one million electric vehicles. Additionally, Tesla is constantly working to improve its battery technology so that its vehicles have longer driving ranges and shorter charging times.

Tesla engineers produce the company’s batteries in-house, and by most accounts they are tireless perfectionists. One of the company’s newest lithium-ion batteries has five times more energy than previous ones. Tesla also has a cost incentive to improve its batteries. More efficient batteries will help to bring down the costs of its electric vehicles, making them more affordable and attractive to consumers. Musk himself talks about how cost-efficient batteries will give the company an edge over its legion of competitors.

TSLA stock has been one of the best performers in 2023, up 78% year to date. However, the share price remains 48% lower than where it was trading at a year ago and well below its 52-week high, presenting a nice entry point for investors.

On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

The post 7 Battery Stocks Sitting in the Sweet Spot appeared first on InvestorPlace.

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