Electric vehicle (EV) demand is slowing as cash-strapped consumers think twice about splurging on high-end vehicles — especially those not eligible for tax credits. Here is a collection of stocks to watch amid a near-term reversal in EV momentum.
- Panasonic has slashed its full-year guidance citing falling demand for EV models that aren’t eligible for tax credits.
- LG Energy Solution’s battery plant in Turkey has been scrapped after an investment partner pulled out due to the current pace of EV adoption.
- CATL’s Q3 2023 net income grew at the slowest rate since Q1 2022.
Albemarle
The Falling Lithium Price Stock
Albemarle [ALB] has cut its annual forecast amid declining lithium prices, according to its third-quarter (Q3) 2023 earnings report on 1 November. Adjusted EBITDA is now expected to be in a range of $2.9–3bn, “below our previous outlook due to lower expected pricing and lower sales volumes”. The company, which supplies Tesla [TSLA] and sells almost all of its lithium on long-term contracts, is expecting its sales to increase 30–35% year-over-year, but only sees lithium prices increasing 15–20%.
Panasonic
The Reduced Luxury Demand Stock
Panasonic [PCRFY] makes batteries for Tesla’s premium Model S and Model X, but the Japanese conglomerate warned of a global slowdown on its Q2 2024 earnings call on 30 October. Chief Financial Officer Hirokazu Umeda explained that Tesla’s high-end cars exceed the price that would make them eligible for US tax credits and, as a result, demand has fallen. The energy division’s full-year sales and profit guidance has been revised downwards.
LG Energy Solution
The Scrapped Battery Plant Stock
LG Energy Solution’s [373220:KS] plan to build a battery plant in Turkey with Ford [F] has been scrapped. The news comes after Turkish investment company Koc Holding [KHOLY] pulled out. “Considering the current pace of EV adoption, the timing is not appropriate for a battery cell investment,” said Koc in a statement to the Public Disclosure Platform, reported Reuters. The three companies had established a joint venture in February, with production earmarked for 2026. At least 25GWh of battery cells would have been produced annually, potentially rising to 45GWh.
CATL
The Slowing Profit Stock
Contemporary Amperex Technology (CATL) [300750:SZ], the world’s biggest battery maker, reported Q3 2023 net income rising 10.7% year-over-year to RMB10.4bn, making it the weakest quarter of growth since Q1 2022. CATL has had to contend with a price war, intensifying competition and cooling demand. According to Bloomberg, CATL is catching up to LG Energy with regard to EV battery market share outside of China — both had a 28.1% share of sales in September.
FREYR Battery
The Investment Cut Stock
FREYR Battery [FREY] saw its share price slide 27.5% on 10 November after the company announced on its Q3 2023 earning call that it will be cutting investment at its Giga Arctic factory as part of wider cost-saving measures, in a bid to slash its cash burn rate by as much as 50%. FREYR CEO Birger Steen said on the earnings call that “we must operate within reality. And today the project is no longer competitive in economic terms”, adding that higher interest rates and the introduction of the IRA have impacted the business case.
Another Way to Invest in EV Batteries
The Amplify Lithium and Battery Technology ETF
The Amplify Lithium and Battery Technology ETF [BATT] holds all five stocks, though it includes Panasonic’s Japanese shares [6752:T]. EV stocks account for 25% of the portfolio and battery technology for 23%, while nickel, lithium and cobalt have weightings of 14%, 12% and 8%, respectively, and battery components have a 7% allocation as of 30 September. The fund is down 15.5% year-to-date.
The Global X Lithium & Battery Tech ETF [LIT] holds all the stocks barring FREYR. As of 31 October, metals and minerals account for 10.5% of the portfolio, while motor vehicles and electronic components both have weightings of 8.5%, and precious metals have an allocation of 4.6%. The fund is down 18.7% year-to-date.
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