The electric vehicle narrative is about using new technology to strike at the heart of one of the most profound drivers of global climate change: gas-powered automobiles.
If that story doesn’t hold up – ie, if it turns out that massive investment and adoption of electric vehicles does not really help the environment all that much – then the whole narrative for stocks in the EV space falls apart. QED.
In this mix, the ESG investment theme is just an ancillary story and a problem multiplier because the same narrative twist would just mean that EV investments no longer work as ESG investments, dropping EV plays off the radar of the capital conglomerations that will dominate the next ten years.
This would have the potential to undermine some of the most impressive gainers in the market, including Tesla Inc. (Nasdaq:TSLA), Lucid Group Inc. (Nasdaq:LCID), Rivian Automotive Inc (NASDAQ:RIVN), NIO Inc. ADR (NYSE:NIO), and Fisker Inc. (NYSE:FSR).
“Fair enough,” you might respond. “But the primary EV narrative will hold up. Any notion that producing the electricity to charge the batteries or the like is going to present just as much environmental damage as powering the auto industry on fossil fuels will be something we can solve over time – those issues don’t derail the main story. They just imply the need for optimization over time. And there’s no reason to believe we won’t be able to achieve that optimization at a global industrial scale.”
Well said. A robust retort, my friend. However, that isn’t the problem one should be worried about.
The big boogeyman that could spoil the story is about the supply chain for EV batteries. At its present rate, the costs of scaling the EV battery market are rocketing past “prohibitive” and verging on “downright disaster” when we look out over the next few years.
That dynamic alone could completely derail the EV story unless a new solution emerges. But, as luck would have it, that new solution is starting to scale up in the form of EV battery recycling. And we think it could be “the next big thing”. We would also point out one stock that looks set to be a key player in this story: KULR Technology Group Inc (NYSEAMERICAN:KULR).
Why the Supply Chain Story Could Shift from Semiconductors to EV Batteries
It should be no shock to learn that supply chains are defining the outcome distribution for many industries right now in the aftermath of the pandemic. It turns out that restarting a complex global logistics system is not easy.
Computer chips are probably the most front-page story in this narrative. Bloomberg recently reported that the lag time for chip deliveries is now at 21.9 weeks (as of October 31), which is the longest lead time gap on record. But the second-derivative growth in that lead time is finally starting to contract, which could mean we are past the worst of it.
However, the bottleneck potential for the EV battery market could be warming up to make the semiconductor shortage look pedestrian.
According to another piece in Bloomberg, Mark Newman, a former battery analyst at Sanford Bernstein, thinks battery manufacturers are overcommitting to automakers in a bid to secure business: “In the next decade, you’re going to see bottlenecks [in EV batteries] that are going to make this semiconductor supply chain bottleneck seem like a non-issue,” Newman said in the piece. “Battery supply cannot keep up.”
Even with massive new investments in battery production, the industry is bracing for a lasting supply shortage that holds the potential to derail the EV scalability story without some new factor.
As noted above, that new factor is likely to be all about EV battery recycling. And major investors are starting bet huge sums of capital on the thesis.
According to a piece on wastedive.com, over the course of just one week in September, four battery recyclers with U.S. operations announced collectively raising more than $255 million in new funding to expand their operations – American Battery Technology Company raised $39.1 million to support a new Nevada facility; Redwood Materials announced a $50 million investment from Ford to integrate battery recycling into the automaker’s supply chain; Li-Cycle received a $100 million investment from Koch Strategic Platforms to build out new recycling centers in North America and elsewhere; and Battery Resourcers raised $70 million in funding to expand operations to Europe.
However, there aren’t many ways to participate in this trade for publicly traded stock investors. That could help to fuel further gains for KULR Technology Group Inc (NYSEAMERICAN:KULR), which has recently positioned itself as possibly the best vehicle for this theme among listed stocks.
KULR Moves into EV Battery Recycling Pole Position
For a little background, KULR Technology Group Inc. (NYSEAmerican:KULR) develops, manufactures and licenses next-generation carbon fiber thermal management technologies for batteries and electronic systems. The company offers lithium-ion battery thermal runaway shields; fiber thermal interface materials; phase change material heatsinks; HYDRA TRS battery storage bags; internal short circuit device; and CRUX cathodes.
KULR’s technologies are used in electric vehicles and autonomous driving systems, artificial intelligence and cloud computing, and energy storage and 5G communication technologies.
To add further strong legitimacy, the co-founder of a Warren Buffet backed company in the EV space, BYD Company ADR (OTCMKTS:BYDDY), currently serves on KULR’s official Board of Advisors.
The company is rooted in a 30-year history tied to carbon fiber thermal energy management technology for aerospace and defense applications. Its technology is trusted by NASA, with KULR parts on the Mars Rover 2020 Perseverance and the International Space Station.
KULR also recently announced, alongside its partner Heritage Battery Recycling, that it has expanded its safe battery transportation market share as a result of HBR’s merger with Retriev Technologies. HBR’s combination with Retriev will create the largest lithium-ion battery recycler in North America.
According to its release, the combined entity will operate under the Retriev Technologies name as it leverages its extensive reach into the original equipment manufacturer recycling market Retriev serves. In addition to the existing partnership’s customer programs in the e-bike and scooter markets, KULR will also provide safe transportation logistics to Retriev’s battery collection operations across North America. Retriev will serve the entire battery lifecycle – from pickup and transportation to critical material recovery and reuse.
This news sits alongside its even more recent announcement that it has joined Clarios (the largest auto battery producer in the world) in the U.S. Department of Energy’s lithium-ion battery lifecycle initiative to develop the manufacturing and reuse of lithium-ion batteries and their chemical elements in the United States for the purpose of domestic national interest.
These developments are both very recent and appear to be fueling a breakout that seems to be picking up steam in shares of KULR, as the stock pushes new 52-week highs. In fact, the stock is now poised near new all-time highs and is printing its highest levels in over two and a half years this week as a growing cadre of market participants take notice.
But we are still talking about a very early-stage growth story still trading under $4 per share. As always, do your own due diligence. But we think KULR could be worth a closer look given its positioning around the potentially explosive EV battery recycling theme.