Increased focus on the transition to net zero carbon emissions has driven up the demand for electric vehicles, which has in turn made the batteries that power them more valuable.
For investors, investing in the components that will power the energy transition, rather than trying to figure out which electric vehicle manufacturer will win out in the long term is a safer way to get exposure to this long term trend.
According to a report from Mordor Intelligence, the global electric vehicle battery market is expected to reach $166bn in 2026, from $34bn last year. During this time, the lithium-ion battery segment will dominate the market while government policies will continue to drive significant growth in the near future.
Some of the largest companies are investing in the space. For example, Toyota, the world’s largest automaker, earlier this month said it will invest around $13.6bn in battery tech over the next decade.
Lithium stocks
Lithium is a key component of rechargeable batteries which, aside from being used in electric vehicles, is also in portable devices like smartphones and tablets. One of the ways to invest is through companies that mine lithium such as Albemarle (ALB) in the US, Galaxy resources (GXY) in Australia and Sociedad Quimica y Minera de Chile (SQM) based in Chile.
But it’s important to keep in mind that the price of lithium has an impact on these stocks. While the demand for the metal is expected to increase, there is a concern that as supply also rises the price of lithium could plunge in the next few years, putting pressure on stocks like Albermarle and Sociedad Quimica y Minera de Chile.In addition to mining stocks investors can also put capital in battery manufacturers or those focused on other materials.
Some of the most well-known players in these areas include Umicore (UMI.BR), Alfen Beheer (ALFEN:AS), Simplo Technology (6121:TWA) and Guangzhou Tinci Materials (002709.SZ). In the US QuantumScap and Microvast are also potentially interesting investments as manufacturers of batteries.
Exchange traded funds can also provide exposure to the lithium market. Examples include the WisdomTree Battery Solutions ETF, the Global X Lithium & Battery Tech ETF and the Amplify Lithium & Battery Technology ETF.
Energy storage
The need for energy storage is also gaining momentum as countries move towards renewables and push to modernise their grids. Improving costs and performance is also viewed as a driver of this segment of the market.
According to consultancy BloombergNEF the average cost of a lithium-ion battery pack is around $140 perkilowatt hour. At $100 per kilowatt hour electric vehicles are expected to become cost-competitive with combustible ones.
A recent report from Deloitte noted: “Energy storage isn’t just about integrating intermittent wind and solar output: Battery solutions, which can be deployed rapidly and with pinpoint precision, can be used to make the overall grid more efficient and resilient, regardless of the generation sources. This makes the storage story all the more compelling.”
The Gresham House Energy Storage fund and the Gore Street Energy Storage fund are two listed investment trusts in the UK also focused on this trend.
Here’s a selection of related ETF ideas
| Product Name | ISIN | Exchange Ticker | Listing Currency |
| WisdomTree Battery Solutions Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | Charles Stanley Direct | EQi |
IE00BKLF1R75 | CHRG | GBP |
| WisdomTree Cloud Computing Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | Charles Stanley Direct | EQi |
IE00BJGWQN72 | KLWD | GBP |
| WisdomTree Artificial Intelligence Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | Charles Stanley Direct | EQi |
IE00BKLF1R75 | INTL | GBP |
