Four Companies Leading the Rise of Lithium & Battery ...

The ongoing paradigm shift in the mobility segment toward electric vehicles (EVs) created a need to build out the entire value chain. Consequently, demand for materials like lithium and lithium-ion batteries has increased meaningfully in recent years. Compared to consumer electronics, EV batteries can contain thousands of times more lithium by weight and anywhere from tens to thousands of times more lithium-ion cells. While many investors are familiar with dedicated electric automakers such as Tesla and Rivian, there’s an entire ecosystem of companies further up the value chain making the EV revolution possible.

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In this analysis, we delve into four prominent players in the lithium and battery sector, serving as a continuation of our previous discussions on the subject.

• BYD: A vertically integrated powerhouse in battery and EV manufacturing boasting significant market share in both areas.
• Arcadium Lithium: A new powerhouse in lithium following the merger between Allkem and Livent.
• Albemarle: A leading global lithium supplier with aggressive expansion plans in place.
• LG Energy Solutions: A pivotal battery provider for automakers outside China.

BYD: The Integrated Battery Innovator

BYD stands out as a Chinese manufacturer that transitioned from batteries to becoming a frontrunner in electric vehicles (EVs), having sold more battery-electric vehicles than any competitor in Q4. With an extraordinary level of vertical integration, BYD has emerged as the second-largest battery manufacturer and EV producer by market share. Furthermore, its success in the plug-in hybrid arena has positioned it as the leading seller of EVs overall.

Thanks to its in-house production capabilities, BYD has successfully kept costs low, enabling it to launch competitively priced models, such as the BYD Seagull priced at USD 11,400 and the Dolphin at USD 31,000, among the most affordable EVs globally. A reinforcing aspect of this integration allows BYD to enhance its profit margins, even amidst fierce competition in the Chinese automotive market.

With ambitions to grow its global footprint, BYD’s exports accounted for 8% of its unit sales last year, a figure we anticipate will increase. A crucial step in this expansion is its confirmation of a new factory set to be built in Szeged, Hungary, aimed at penetrating the European market and further globalizing its operations.

Arcadium Lithium: A New Leader in the Lithium Market

The merger of Livent and Allkem, finalized in early January, marks a significant milestone as it creates Arcadium Lithium, now a leading presence in the lithium production landscape. This merger aligns it with established players such as Albemarle and Ganfeng, providing a comprehensive suite of lithium products including spodumene, carbonate, and hydroxide.

Prior to the merger, Allkem specialized in traditional lithium production through brine and hard rock mining, while Livent focused on refining lithium and chemical production. Together, they are positioned to streamline operations and enhance their logistics capabilities across their respective assets.

Arcadium's extensive supply chain could serve to capitalize on incentives from the Inflation Reduction Act, which promotes domestic manufacturing for EVs and battery technologies. Their production aligns seamlessly with these sourcing requirements, promising benefits for both the company and its downstream clientele looking to avail themselves of these incentives.

Albemarle: A Resilient Force

Albemarle consistently vies with SQM and Ganfeng for the title of the world’s largest lithium producer. As of September, it achieved the highest lithium salt capacity and stood out as the most valuable producer based on market capitalization. The company employs extraction and conversion facilities globally, including access to premium lithium resources such as those in Australia and Chile.

The company’s aggressive project pipeline looks to increase lithium output by up to threefold over the next few years, in line with its forecasts of the burgeoning demand expected primarily from EV applications.

Notably, Albemarle holds the title of operating the only lithium mine in the United States, the Silver Peak mine, and has actively participated in governmental projects aimed at boosting domestic critical material production.

LG Energy Solution: A Vital Contributor to the EV Market

After its spin-off from LG Chem, LG Energy Solution now ranks just behind BYD as the third-largest EV battery manufacturer. This strategic positioning allows it to maintain a broad operational presence globally, with facilities in South Korea, China, Poland, and the US while forming alliances with major automakers including GM and Honda.

With high-profile clients like Tesla and Volkswagen, LG Energy is uniquely positioned to benefit from the rising demand in relatively untapped markets, especially as EV growth in North America and Europe is forecasted to outpace that of China.

The company reported a significant operating profit growth of 78% year-over-year in its recent earnings call, with a notable portion attributed to the incentives from the IRA, bolstering its operations in the United States.

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Conclusion: Beyond Just Electric Vehicles

The expansive EV value chain encompasses diverse stakeholders, with the four companies discussed here playing pivotal roles in advancing this sector. As the lithium and battery industries evolve, they hold vast potential for growth, facilitating a transition from conventional transportation methods. Investors can significantly benefit from grasping the complexities of the EV ecosystem, thereby navigating and capitalizing on this transformative phase.

Related ETFs:

LIT - Global X Lithium & Battery Tech ETF

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