It’s no secret that a once-in-a-century shift is hitting the transportation sector.

By 2030, annual sales of electric vehicles (EVs) could hit 24 million, according to Bloomberg New Energy Finance.

That’s a thirtyfold increase over today’s volumes…

pick and shovel electric vehicles 0 1

Longtime readers know I’m big on pick-and-shovel plays. These are stocks or funds that allow investors to profit by investing in the raw materials every manufacturer requires.

In the case of EVs, these are materials within the battery pack. And that pack is a big one. Look at Tesla’s battery pack for its Model S sedan…

pick and shovel electric vehicles 1

There are a number of new battery technologies in development, but for now, lithium-ion technology is the standard for EV batteries. This will be the case for at least the next five years.

It’s easy to see how the demand for lithium and other EV battery materials is going to explode. Supply gaps will happen as EV manufacturers ramp up battery production.

I believe the long-term investment opportunity for battery materials is very compelling. It seems like more manufacturers announce big EV model programs every week.

Since 2010, the cost of lithium-ion batteries has fallen 73%. By next year, EVs will be very cost-competitive with internal combustion engine (ICE) vehicles.

That will spur even more rapid EV adoption.


The EV Tipping Point Is Coming in 2018

There are many countries far ahead of the U.S. as far as taking steps to address climate change.

Many have set dates beyond which the sale of ICE vehicles will be banned.

Norway is banning the sale of EVs after 2025. France announced the end of gas and diesel vehicle sales by 2040.

India wants all vehicles on battery power by 2030. That’s an aggressive timeline for the second most populous country in the world. However, even if India doesn’t hit that date, its aggressive measures are sure to make a major impact.

Even China announced it is considering a ban on the sale of ICE vehicles. It has yet to specify a date. But rest assured, it will eventually announce a date (probably 2030 or 2035) beyond which it will ban the sale of ICE vehicles.

It’s not just countries (and there are many others)… Car manufacturers are moving away from ICE vehicles too.

This past July, Volvo announced it would be phasing out ICE vehicles in favor of EVs.

Mazda and Toyota just announced a partnership with Denso Corporation to form a company to develop EV technologies.

Daimler (Mercedes-Benz) said it’s fast-tracking its EV program. It now expects to have 10 new EV models in its showrooms by 2022.

And finally, Volkswagen announced its plans to produce 30 or more EV models by 2025. It expects them to account for 25% of all of the company’s sales.

It’s pretty clear the effect all this EV demand is going to have on EV battery materials such as lithium, cobalt and nickel.

There are many different battery cathode designs. And as you can see, each has a different chemical makeup…

pick and shovel electric vehicles 2