As electric cars take over highways, we're shifting gears to lithium.

Electric vehicles

October 25, 2017 • AUTOMOBILE

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The notion of the electrification of vehicles has been present for a number of years, though through most of recent history has been thought of as an ‘alternative’ option for environmentally-conscious consumers seeking a greener mode of transportation, or for others, a cost effective solution to rising gas prices. Today, we are seeing the transition towards electric vehicles shift into overdrive. This is no longer a story of ‘alternative’ driving, but rather one of the discontinuation of combustible engines.

Nearly 80% of the global auto market is moving towards a phase-out of petroleum cars and adopting electric vehicles [1]. Both the U.K. and France have set a deadline of 2040 for an end to sales of fossil fueled powered vehicles. Scotland has also proposed a plan to phase out petrol and diesel cars and vans by 2032, eight years ahead of its European counterparts. Just recently, China has joined the fray with the vice-minister of industry and information technology saying the country is actively working with regulators on a timetable to phase out combustible engines. While no deadline has yet been selected, the impact would be significant considering China’s market of nearly 200 million vehicles [2].

By 2040, 54% of all cars sold will be electric and it is expected there will be one billion electric vehicles by 2050 [3]. Vehicle companies are taking action, with Honda announcing plans to bring their electric cars to China next year and Nissan upgrading the Leaf in China in 2018/2019.

While consumer and media attention is mainly rooted in the evolving auto industry, there are massive ramifications for suppliers and enablers of electric vehicles as well. As these vehicles become commonplace, availability of copper, nickel and other materials will become strained. BHP Billitcon, the world’s largest mining company, is repositioning its nickel business around electric cars and more specifically, increased demand for lithium-ion batteries. The company has unveiled plans to build a $43 million nickel processing plant in Australia to begin production of nickel sulfate, a key input in these batteries. The company expects demand for nickel to account for more than 90% of the plant’s output within the next five to six years.

This is only one example of new investment opportunities created by way of electric vehicle growth. As this transition takes place, the global mining industry will require a capital increase of between US$350-750 billion [4].

The ease of charging at home, where over 90% of charging takes place [5], has mitigated the obstacle electric vehicles face with time consuming roadside charges. Owners of home chargers in the U.K. are also able to put these to profitable use through “Chargie”, an app bringing electric vehicle owners together to rent these private chargepoints to the public. Those in need of a charge can use the app to find nearby stations, with the home owner determining availability, similar to Airbnb. So as electricity will power more cars, it will also empower the people that drive them.

Coinciding with the emergence of electric vehicles, battery production has undergone a dramatic transformation as well. Battery technology is seeing constant innovation and improvement in chemistry and innovation, resulting in energy density gains and cost declines. Looking beyond 2020, solid-state lithium batteries appear to be the next technological breakthrough. These offer twice the range of today’s electric vehicles, while only charging in minutes. Unlike risks with current batteries, solid-state also reduces the risk of fire, a key safety feature for vehicle use. Perhaps most crucial, solid-state batteries can be molded into many shapes, which significantly helps auto engineers in developing cars of the future.

Electric vehicles are not a passing trend, but rather a major player in a green-conscious world that is growing at a rapid pace. Looking beyond electric vehicles themselves, related investment opportunities in batteries have plenty of ‘road’ ahead.


[1] Bloomberg Intelligence, August 2017

[2] Statista, 2017

[3] Morgan Stanley, “Why EV’s are really coming this time”

[4] Bernstein, March 2017

[5] The Economist, September 2017

Commentaries contained herein are provided as a general source of information based on information available as of October 1, 2017 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AGF Investments. The specific securities identified and described herein do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.

Published date: October 30, 2017

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