Battery Bonanza

The first lithium ion batteries were brought to the market over a quarter century ago in a camcorder made by Sony.  Since then the technology has gained widespread adoption for all sorts of electronic devices and most importantly for electric vehicles. In 2016, lithium ion batteries were sold with a total of 70 gigawatt-hours storage capacity, just over a third of which ended up in electric cars.  There are plans afoot to eclipse that production level.  The top lithium ion battery makers are reportedly posed to expand manufacturing capacity that together could triple production of lithium ion batteries within the next couple of years.

Popularity should not be confused for full satisfaction.   Battery manufacturers are under pressure to improve performance.  Higher capacity, shorter charge time, slower discharge, and longer life and just a few of the characteristics that electronics producers would like to get in the battery.

Electric car manufacturers are particularly sensitive to the need for smaller size and lighter weight.  The typical electric car battery pack weighs between 200 and 250 kilograms (400 to 550 pounds), but the much discussed  Model S sports car made by Tesla (TSLA:  Nasdaq) battery weighs 540 kilograms (1,200 pounds).  A lighter battery could lead to higher efficiency and longer drive times between charges.

One of the most recent battery recalls was made by Hewlett Packard (HP:  NYSE) when in January 2018, batteries shipped with certain laptops and mobile workstations were found to have a ‘potential to overheat’ and could be a fire hazard.  Add better safety to the wish list.

Battery makers themselves would like to perfect better designs that would require less expensive components and materials. The industry is worried about the adequacy of the current supply chain for the materials used in most lithium ion batteries.  In particular cobalt appears to be in short supply given planned expansion in lithium ion battery capacity.  Most cobalt is sourced from the Democratic Republic of Congo (DRC), where politics is often tumultuous if not dangerous.  In April 2018, the DRC state-owned mining operation called Gecamines went to court to dissolve its copper-cobalt operation with Katanga Mining (KAT:  TSC) that is controlled by Glencore (GLEN:  LSE). 

The battery industry has some answers.  For example, higher-voltage cathodes and anodes could boost lithium ion battery performance.  Improved electrolytes could lead to a better safety profile.  Performance improvements could also reduce dependency on expensive, sort supply Alternatively, battery manufacturers could scrap lithium ions altogether and hitch their wagons to some other ‘ion’ workhorse.

Plans to create efficiency or improve alternatives almost always spell opportunity for small, innovative companies.  This post begins a new series on battery technology.  The posts will return to battery developers that have been profiled before as well as look at new players in the field.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.