The Real Wealth in Electric Vehicles

Sep 24, 2021

Editor's note: Electric Vehicles are the hottest story in the market today. There is huge wealth to be made in this space. But to play it right you must find the best EV stocks to buy. Tanushree Banerjee, our co-head of research, wrote a great editorial on this. I'm sharing it with you today.


It was 1914.

Henry Ford bought his wife, Clara, a Detroit Electric car rather than one of his own Model Ts.

That year, Henry Ford confirmed rumours that he was developing a low-cost electric car. It was to be developed in partnership with none other than Thomas Edison.

The problem that Ford was trying to solve was building a light weight storage battery. This would operate for long distances without recharging. The need for constant recharging was the electric car's primary weakness back then.

For want of a reliable battery, the electric car was repeatedly delayed. Edison tried and failed to develop an alternative to the heavy, bulky lead-acid batteries. Eventually, the entire project was quietly abandoned.

Electric cars might have been expected to benefit from the concerns over the sustainability of gas-guzzlers.

But the battery technology made little progress. Sales of electric cars peaked in the early 1920s. As internal combustion engines became more reliable, they left electric vehicles in the dust. So, the last time electric vehicles created a storm, they lost out for want of sustainable fuel.

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With today's fast-changing technology and concern about the environment, the popularity of electric vehicles (EVs) has been on the rise.

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A hundred years later, thanks to companies like Tesla, electric vehicles are back in vogue.

Turns out that the spotlight, again, is not on the vehicle itself but its fuel. This time, lithium is being called the 21st century oil!

Lithium-ion batteries are critical in the making of battery packs for electric vehicles. The most important use of lithium is in rechargeable batteries for mobile phones, laptops, digital cameras, and electric vehicles (EV).

Lithium-ion batteries account for 35-40% of the cost of an electric vehicle and lithium cells constitute around 70% per cent of the battery cost.

Rechargeable batteries are the most valuable part of an electric vehicle. In fact, it often differentiates the frontrunners from the rest. So, most EV companies are rightly focussed on building giga-factories to anchor the battery to the EV value chain.

But once again questions arise on the sustainability and geopolitical consequences of relying on single kind of fuel.

EV batteries need consistent and abundant supply of lithium and cobalt. Mining these "rare earth" elements raise environmental and geopolitical questions.

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Though lithium is quite abundant, cobalt is not. The main source of cobalt is the Democratic Republic of the Congo, where mining conditions are primitive. To add to that they violate human rights.

If that was not enough, once mined, cobalt is mostly refined in China, which also has the lion's share of global lithium-ion battery production capacity.

China, in fact, dominates production of rare-earth elements, too. Not surprisingly, almost 40% of the EVs produced in the world today come out of Chinese factories.

Geopolitical tensions have already led to disputes between China and western countries on supply of computer chips and related manufacturing tools.

In the meanwhile, EV producers in India, betting big on lithium batteries need to make way for alternative fuels too. Those companies successful in doing so may be able to ride a rather long megatrend.

So, the real wealth in electric vehicles is far from the passenger car manufacturers, for now. Rather, companies that successfully develop batteries with reliable fuel have a lot of profits coming their way.

The ongoing EV revolution is a critical element of the big India Revival megatrend. Join my India Revival group on Telegram to get the latest updates.

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There is no denying the opportunity is huge.

But it is important to figure out which of the players have the most credible track record of creating wealth.

India's Revival is a massive megatrend that is here to stay for decades.

But you need to invest in the best stocks to take full advantage of this megatrend.

Investing in the best stocks could result in wealth compounding on a massive scale. But remember, not every opportunity is equal.

As investors, you need to differentiate between the good, great, and gruesome businesses.

How do I do that for my subscribers?

Well, I'll be glad to tell you all about it!

Join me today at the India Revival Summit at 5pm sharp and find out.

Warm regards,

Tanushree Banerjee
Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)

PS: This evening at 5pm, at the India Revival Summit, I'll show you how to potentially make 1000%+ gains from a once-in-a-generation opportunity. Book your free seat here.

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3 Responses to "The Real Wealth in Electric Vehicles"

Sujeet Jodha

Oct 7, 2021

I am interested in real wealth in electric vehicle.

Like 

Siva

Sep 27, 2021

Hi I am much interested

Like (2)

Mitesh Shah

Sep 24, 2021

Pls mention Indian stock names in reference to the subject "The Real Wealth in Electric Vehicles".

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Equitymaster requests your view! Post a comment on "The Real Wealth in Electric Vehicles". Click here!