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Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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5 Top Picks To Play The Electric Car Boom

lithium brine

The electric vehicle revolution is coming much faster than even some of the most bullish analysts expected. In late July, even the CEO of Royal Dutch Shell, one of the largest oil and gas companies in the world, said that he would buy an electric vehicle, acknowledging that the transition from the internal-combustion engine to the electric battery was inevitable. He also said that oil prices could remain “lower forever,” and that the oil market would see peak oil demand within the next decade and a half.

According to Bloomberg New Energy Finance (BNEF), one of the leading clean energy analyst out there, “the EV revolution is going to hit the car market even harder and faster” than they thought as recently as last year. EVs will be cheaper than conventional gasoline or diesel vehicles by 2025-2029, and not just over the course of the vehicles lifetime (with lower fuel and maintenance costs), but on an upfront basis.

In other words, the price tag at the dealership for an EV will be lower than that of a traditional vehicle in the very near future. As a result, EVs will make up more than half of the auto market by 2040.

Needless to say, this will be massively disruptive. The big losers? Oil companies, lumbering automakers that don’t make the switch, and metals that are only used in today’s market. The winners? EV makers, battery makers, lithium miners, and producers of other metals that will be part of the new clean energy economy.

Here are five companies to watch that will benefit from the unfolding EV revolution.

#1 Alcoa (NYSE: AA)

Alcoa brags about how it invented the aluminum industry, and indeed, its name is synonymous with aluminum. Alcoa has the largest bauxite mining portfolio in the world, the key element used to produce aluminum. It also has a large refining and smelting system.

Why should we care about aluminum? Aluminum is lightweight, and is increasingly replacing steel to improve the fuel efficiency of vehicles. That will be particularly important as EV manufacturers try to extend the range of their vehicles, hoping to squeeze out evermore miles on a single charge. Displacing steel in vehicles had led to additional demand by 1.6 million metric tons of aluminum between 2013 and 2016, or 2.7 percent of global production, according to Michael Widmer, head of metals market research at Bank of America Merrill Lynch.

With the EV revolution coming quickly, the demand for aluminum will rise significantly.

#2 Southern Lithium Corp. (TSX: SNL.V)

While the other companies on this list are largely household names, Southern Lithium is a bit of a gem that few know about…for now. Southern Lithium has assets on part of the biggest “lithium volcano” in the world. In northern Argentina, this lithium volcano is home to abundant sources of lithium in salt flats, inside the so-called “Lithium Triangle” at the crossroads of Argentina, Bolivia and Chile, where two-thirds of the global lithium supply comes from.

The thing is, investors have made a fortune betting on lithium production coming out of the north side of the volcano, where ADY Resources (part of the Enirgi Group), is sitting on probable reserves with an estimated value of $5 billion. But the south side has thus far been undeveloped, and Southern Lithium, only 11 kilometers south of ADY, is starting to drill. The geology looks similar, and Southern Lithium is hoping to prove up the reserves, at which point, the company’s value could skyrocket. Keep an eye on their news releases over the coming weeks – and the following report has some very good information on the play. Southern Lithium Report

#3 GM (NYSE: GM)

The obvious answer to who will win from the EV revolution would be Tesla (NYSE: TSLA), and while that is a very viable possibility, GM offers investors more security while also giving investors exposure to electric vehicles. GM recently rolled out its Bolt, a fully-electric mass market vehicle that is competing with Tesla’s Model 3 at the roughly $35,000 price point. GM has initially struggled with the Bolt amid rising inventories and tepid sales, but the automaker says that the Bolt will finally be going nationwide this month.

The legacy carmaker will still have a tough time competing with the flashier Tesla, and its share price is down a bit recently, as Tesla has made news with the first deliveries of its Model 3. Still, one should not dismiss GM, which has more electric and electric-hybrid models in the works and is in it for the long haul.

#4 FMC (NYSE: FMC)

Another lithium producer is FMC, which has seen strong revenue growth for its lithium business. FMC owns lithium-producing assets in Argentina, like Southern Lithium, but it also owns some lithium processing facilities, giving it the advantage of vertical integration.

FMC’s lithium unit saw revenue growth of 17 percent in the second quarter, benefitting from higher prices. The company expects to take in $340 to $360 million in lithium revenues this year, up 30 percent from 2016.

The flip side is that FMC is a giant, with its hand in other non-lithium related industries such as agriculture. It offers safety, but a little less exposure to the upside of the lithium boom.

#5 U.S. Cobalt (TSX:USCO.V; OTC:SCTFF)

In addition to lithium, cobalt is also used in batteries, so it too is seeing soaring demand as the EV revolution starts to take off. Cobalt prices are skyrocketing, with prices up 70 percent on the year, which comes on top of the 37 percent increase in 2016, according to Bloomberg.

Cobalt allows lithium-ion batteries to extend their range, and by 2020, roughly three-quarters of all lithium-ion batteries will contain cobalt. The cobalt market is already in a supply/demand mismatch, exacerbated by a bout of hoarding in expectation of higher prices.

About 60 percent of the global cobalt supply comes from the Democratic Republic of Congo (DRC), a supply chain rife with reports of human rights violations. That makes it vulnerable to international pressure and regulation.

Fortunately, U.S. Cobalt is developing cobalt reserves in the Idaho Cobalt Belt, in the northwest U.S. The company sees signs that the area could have up to 10 million tons of cobalt, worth somewhere around $1 billion. To top it off, the cobalt is pure, rather than coming as a byproduct of copper and nickel production, as is often the case.

U.S. cobalt will be perfectly positioned to supply some of the raw materials for the EV revolution.

Honorable Mentions:

Vivint Solar (NYSE:VSLR): Ok, so solar.. Why in this list, you ask? Because Vivint is riding high after announced a collaboration deal with Daimler to bring the Mercedes-Benz customizable home energy storage system to the U.S. solar market.

Delphi Automotive (NYSE:DLPH): Delphi is a world class supplier of technologies for the automotive and commercial vehicle market. Currently, Delphi is investing in driverless car technology and has successfully tested driverless vehicles. We like Delphi as a mid-term to long-term play as it is at the core of this breakthrough technology.

Magna International, Inc. (NYSE: MGA): A division of this Ontario based company, Magna E Systems, produces innovative complete-vehicle solutions and integrates components and systems for electric and hybrid cars. As the electric car boom continues, it will be a company to watch.

Teck Resources (NYSE:TECK): Zinc hasn’t been Teck’s best friend of late, but that looks set to change in the medium term, as supply continue to dwindle and as we hear news that the world’s top producer of the metal—Glencore—isn’t planning to bring shuttered mines back online. Supply will remain tight. Keep in mind this, though: Teck’s Q1 earnings and revenue fell short of expectations because of weaknesses at its zinc unit, sending it shares down about 6% in late April. In particular, there’s been a 23% drop in production at its Red Dog mine due to lower grades of zinc.

Albemarle Corp.(NYSE:ALB): Another Lithium giant. Owns brine deposits in the U.S. and Chile, as well as a 49 percent stake in the huge Greenbushes mine Australia. Hopes to double production by 2019 to hit 1.34 million tonnes. Albemarle is currently the only lithium producer in the United States.

By Charles Kennedy

Legal Disclaimer/Disclosure: This piece is an advertorial and has been paid for. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this Report should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. We make no guarantee, representation or warranty and accept no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report




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