The world of automotives is undergoing a massive change, with several factors rolling in to form a new need of the hour — the electric vehicle. After all, the shift toward clean energy and high-powered vehicles is a matter of evolution for the expanding automotive market, which has created a new space for investors to look into.
The vital component that powers these cars is undoubtedly at the forefront for gains from the rising trend of electric vehicles in the United States and abroad. Therefore, investors who seek to consider a new arena for investments in the future can look into the global automotive battery market.
The Automotive Battery Market Shows Promising Growth
As per the report published by Fior Markets, the global automotive battery market is expected to reach $49.05 billion in 2017 to $85.41 billion by 2025, at a CAGR of 7.02%.
As more automotive companies are flexing their muscles in the area of electric vehicles, features such as lighting, numerous gadgets and car infotainment systems require more power to function. So, the demand for automotive battery has increased significantly over the past few years.
In addition, strict regulation standards regarding emission as set by several government agencies is also pushing the demand for electric vehicles and relevant batteries.
Factors Pushing EV Market and That of Automotive Batteries
While one may note that the sale of electric vehicles may not outrun that of conventional combustion engines until at least 2025 or 2030, the shift that has already begun is unlikely to slow down.
Three major factors are driving this trend.
First and foremost, is the demand for clean emission. With rising awareness of greenhouse gases and their effect on global climate, more consumers are turning to vehicles that do not require fossil fuel and instead may run on electricity. This amounts to zero waste and therefore clean emission.
Second, as more cars are now equipped with high-performance infotainment systems, the need for energy is higher, which can be compensated much better in the case of a vehicle driven by electricity. Lithium-ion batteries are a good choice for electric vehicles, the demand for which is anticipated to rise in the years ahead. Batteries offer longevity and higher performance for the EVs, which are in vouge.
Finally, the growing cost-effectiveness of lithium-ion batteries is a major factor in the rise in demand for electric vehicles. A major reason behind this is the use of these batteries in PHEVs HEVs, BEVs, uninterruptible power supply systems and other non-automotive electronic appliances, which has considerably reduced its cost. This decline in cost of lithium-ion batteries is set to make it the ideal source of energy for long-range EVs ahead.
Stocks in Focus
We have chosen stocks of companies that have ongoing operations in the automotive battery industry. All of these stocks carry a Zacks Rank #2 (Buy) or 3 (Hold).
Tesla, Inc. (TSLA) is planning to expand its small scale battery manufacturing capabilities in Fremont, per a Reuters report. The automaker is looking for approval in order to speed up its battery manufacturing capacity. According to Tesla, it could take about three months to build the facility and install the equipment.
Tesla has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 12% north in the past 60 days. The company carries a Zacks Rank #2.
Energizer Holdings, Inc. (ENR) is a leading manufacturer of batteries and automotive care products globally. The company is a major manufacturer of lithium-ion batteries. The batteries produced by Energizer are of utmost importance for the electric vehicles market as well as the car chargers market.
Energizer has expected earnings growth of 18.7% for the next year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 1.1% north in the past 60 days. The company carries a Zacks Rank #3.
Panasonic Corporation (PCRFY) specializes in batteries. Last year, the company partnered with Toyota to manufacture batteries for electric vehicles. The companies plan to raise the battery capacity by 50 times as compared to the ones used in current Toyota hybrid vehicles. Mazda, Subaru and Daihatsu will be utilizing batteries from the aforementioned joint venture. In fact, Honda already uses Panasonic’s batteries and will also gain from the said partnership.
Panasonic has expected earnings growth of 89.5% for the next year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 11.8% north in the past 30 days. The company carries a Zacks Rank #3.
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