Not many investors noticed in September 2008 when Warren Buffet took a 10% stake in Hong Kong-based battery maker BYD Co. Ltd. for $230 million.
They should be noticing now.
Shares in BYD, which also makes cell phones and automobiles, have quintupled in a little more than 12 months, meaning that Buffet’s investment is now worth more than $1.5 billion.
But Buffet’s interest in this little-known Chinese stock isn’t the main story here. In fact, the investing icon is simply focusing a bright spotlight on an industry that could serve as a major profit play for years to come.
The real story here is battery power, a technology market that’s heating up in a big way. Just the market for rechargeable batteries is expected to zoom from $36 billion in 2008 to $51 billion in 2013.
And yet the battery market gets less attention than solar or wind power, its higher-profile (but less-technologically developed) cousins.
Modern battery technology is the keystone of the global push to find an energy alternative for oil. In fact, a specific new category of rechargeable batteries is actually a “breakthrough” technology that has the potential to replace as much as 148 billion barrels of oil over the next 50 years, a potential savings of $10.4 trillion – even at current prices.
And oil prices will certainly blast well above the current $78.50 a barrel as supplies diminish.
What these numbers don’t tell you is that there’s a powerful catalyst at work, one that’s behind the big push to develop new, rechargeable battery technologies: the electric – or “hybrid” – car.
Billions Bet on “Third Element” Technology
While last year’s record oil price of $147 a barrel served as a wake-up call for the car-driving consumer, it was also the catalyst that shifted the plug-in-auto industry into high gear.
In response to the oil price surge in 2008, U.S. President Barack Obama promised to invest at least $150 billion on alternative energy during his term.
But a big chunk of his $787 billion stimulus bill will finance development of a new, rechargeable battery technology for Plug-in Hybrid Electric Vehicles (PHEV).
The technology in question: Lithium-ion.
Sometimes referred to as the “Third Element” – because of its No. 3 position on the Periodic Table of the Elements, lithium is believed to have been one of the few elements synthesized in the “Big Bang” that created the universe.
Now it’s a key ingredient of the new class of rechargeable batteries needed to jump-start the plug-in car market. The other ingredient is capital.
President Obama’s American Reinvestment and Recovery Act allocates $2 billion for the development of battery systems, components and software for advanced lithium-ion batteries and for hybrid electric systems. Another $300 million will support an Alternative Fueled Vehicles Pilot Program.
While those allocations will nurture the continued development of lithium-ion technologies, another program is aimed at hybrid-vehicle buyers: Starting this year, buyers of commercial plug-in electric vehicles can receive a tax credit of up to $7,500.
And that was just a down payment: The $25 billion Advanced Technology Vehicles Manufacturing Loan Program will make sure the industry itself continues to develop.
Automakers have latched onto lithium-ion battery technology as the road to the future. Right now, nearly every automaker on the planet is gearing up to flood the market with some form of electric-powered car:
- Daimler AG (NYSE: DAI) plans to roll out a hybrid version of its S-Class sedan later this year. The entire Mercedes lineup eventually will be available as hybrids in the next five years.
- Tesla Motors Inc., of San Carlos, Ca., has already delivered the Tesla Roadster, a stunning electric two-seater that sells for more than $100,000.
- Nissan Motor Co. Ltd. (ADR OTC: NSANY) retooled a factory in Smyrna, Tenn. to produce a pure electric vehicle. Nissan expects to sell as many as 50,000 units of the hybrid Altima in its first year.
- Ford Motor Co. (NYSE: F) is bringing out the pure electric Transit Connect commercial fleet van in 2010 and plans to invest $550 million to retool a Michigan truck plant to manufacture a pure electric Focus in 2011.
- Chinese carmakers Hafei and Coda are planning to bring a mass-produced electric car to market in California in fall 2010.
- And General Motors Corp. (OTC: MTLQQ, NYSE: GRM), is counting heavily on new-technology lithium-ion batteries to power the Chevy Volt, its revolutionary and much-hyped PHEV, which is due to debut next year.
A Global Power (and Profit) Play
For further confirmation that the PHEVs are more than just a passing fad, look at the money being invested by governments across the globe.
Aabar Investments PJSC, an investment company wholly owned by the Abu Dhabi government, recently bought a 4% stake in Tesla Motors from Daimler. And Aabar Chairman Khadem Abdulla al Qubaisi says the fund is planning several more electric-vehicle ventures with Daimler.
“When we acquired our stake in Daimler in March, we identified a number of potential areas for co-operation between our two businesses. One of these was a desire to focus on the development of electric vehicles,” al Qubaisi said.
But here’s the real kicker: Aabar Investments is using Abu Dhabi oil revenue to finance its foray into these oil-supplanting battery technologies.
Worldwide demand for batteries of all types – both non-rechargeable (primary) and rechargeable (secondary) is projected to advance at roughly a 7% annual clip through 2010, reaching $73.6 billion, according to a study published by The Freedonia Group, a Cleveland-based market-research firm.
Not surprisingly, the “World Batteries” study predicts that China will post the largest gains, while sales increases are also expected to be strong in India, Indonesia, South Korea, Poland, South Africa, Brazil and Russia.
But it’s the China market that promises to put a real charge into the worldwide battery business.
On the home front, Beijing is pushing its assault on battery power through its “20% by 2020” campaign, meaning that 20% of China’s power needs will be served by renewable-energy technologies.
From a global standpoint, China is using its big advantage in labor costs to establish a leadership position in the worldwide battery market, and already has more than 50 factories cranking out product.
It’s an aggressive plan, to be sure, but it’s also cohesive and complete. And Beijing has the cash to make it happen.
[Editor's Note: Although it's a new technology, there's a clear leader in the lithium-battery-technology market.
The company's profit potential is stunning.
And Money Morning Contributing Editor Horacio Marquez has found it.
The firm in question is a global player with a solid market cap and is well known within the hybrid-vehicle sector. But surprisingly few investors know about the company, or have ever even heard its name.
It's no surprise that Marquez uncovered this gem, since he's forged a reputation for spotting profit plays long before the institutional money piles in. This profit-creating talent was one that Marquez displayed time and again during his years on Wall Street and is one that he now makes available to the subscribers of his Money Map VIP Trader investing service.
To learn more about this company - to get in ahead of the masses - and to find out more about Marquez's Money Map VIP Trader, please click here.]
News and Related Story Links:
- Power Electronics:
China to Overtake United States in Battery Market - China Daily:
China eyes 20% renewable energy by 2020 - Department of Energy:
ATVM loan program. - Fox Business News:
Reportlinker Adds Advanced Rechargeable Battery Market: Emerging Technologies and Trends Worldwide Report. - The National:
Aabar takes stake in Tesla. - The Freedonia Group:
Official Web Site. - Popular Mechanics Magazine:
Plug-in Hybrid Electric Vehicles. - WhiteHouse.gov:
President Barack Obama. - WebElements.com:
Lithium. - Automotive News:
Mercedes plans more hybrids, AMG models.
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It would be worthy for Brazilian readres to compare the potential of this industry with the actual perspectives of biofuels such
as sugar-cane ethanol and other energy sources based on extensive agriculture and low investment in technology.
The increase of electric use in this manner will improve food supplies because we will need less fields for biofuels, which in my opinion is also a short lived energy source because battery tech just gets so much more funding.
Great Article, mentions lithium, but seems to miss the importance of cobalt. On a 1:1 ration chemically with Lithium in the battery, and at 3 times the weight, and approximately 7 times the price per pound, cobalt prices going forward will be really driven of the price of lithium ion batteries (or Li-Co batteries).
And with 50% of the world’s supply of cobalt coming from the DRC, it is apparent that North American Supply is critial. Producers such as Xstrata, Vale and Sherrit all have domestic (North American) production and/or refining capacity/capability, but these are typically byproduct sourced cobalt primarily dependant on the nickel price.
True primary source cobalt in North America will likely come Puget Ventures project in Ontario, Canada, and Formation Capital’s Idaho project in the US.
It seems the hype around lithium prices has moved many stocks to 52 week record highs, and cobalt stock prices have lagged. It will be interesting to see where the cobalt price ends up in the coming months, and to see what annual production in 2007 versus 2008 and 2009 really looks like so forecasting for 2010 can be more accurate. With cobalt (and moly) starting to trade on the LME in the new year, cobalt will see some new eyes looking at it as an investment vehicle.
The other ingredient in a lithium ion battery, other than capital, is cobalt.
See the comments by Dr Irving Mintzer principal of MEG LLC, an energy consulting firm as he described a “nightmare scenario” at the Critical & Strategic Metals Summit in Washington DC this week. He is quoted saying that more supply of cobalt and neodymium are required.
The missing piece of the equation – safe, secure supply of cobalt.
WHAT ABOUT SAFETY OF HANDLING COBALT , ENVIRONMENT POLLUTION THROUGH DISPOSAL OF COBALT . IS IT SAFE ? WHERE WILL COBALT COME FROM TO SUSTAIN LARGE VOLUME OF LITHIUM BATTERIES ? WE MAY END UP IN POLLUTING SOMETHING ELSE AS WE DID POLLUTE AIR DUE TO CARBON EMISSION BY USE OF MASSIVE FUELS .
I continue to be amazed at the lack of rational thinking here co2 is what plants use during photosynthesis at the time of the energy exchange the carbon atom is split off and the byproduct that is released is o2, oxygen, which is what we require to breath, the conclusion here is that plants are a natural scrubber for the emmisions that everyone was so up in arms about the question is what are you medlesome arrogant self important job killing global proverty expansionists going to come up with to clean all the real environmental problems and poisons your movement has created. you are not nearly as smart and compassionate as you fancy yourself as, in the coming months there will be enough additional evidence come to light over the climate change fiasco that even al gore will have to go into hiding hopefully he will excuse himself from the country. its too bad the russians had to be the ones to expose it but far be it from me to deny credit where its due, i have cussed them much but for this one they deserve thanks oil has done more to promote freedom than anything else on earth it replaced the slaves and the rest is history.
IN A RACE TO MAKE MONEY HUMANS ARE AGAIN RUSHING FOR COBALT WHICH WHO KNOWS MIGHT RESULT IN FURTHER DAMAGE TO ENVIRONMENT . IT IS GREED FOR MONEY THAT IS DRIVING POLLUTION EVERYWHERE . ULTIMATELY RENEWABLE ENERGY SOURCE WILL HAVE TO BE NUMBER 1 PRIORITY . HUMAN BEINGS WILL HAVE TO LEARN TO LIVE WITH LESS .
OIL SUPPLY IS DWINDLING IS BEING HEARD SINCE 1978 SINCE THE FIRST OIL SQUEEZ . NONE IS PREDICTING HOW LONG IT WILL LAST . THIS UNCERTAINITY IS DRIVING NEWER TECHNOLOGY , BEGIINING WITH BIO-FUELS AND NOW BATTERIES . WHERE WILL IT LEAD TO ? WHAT IS THE TRUTH ABOUT OIL`S LAST BIRTHDAY ?
Please supply me with information on investing in LITHIUM battries & Companies who is dealing in LITHIUM battries. thank You . I am already receiving your newsletter.
Please send info on the companies involved in subject electric battery tech. Thanks, Paul Sage
As retired but active Brazilian chemical engineer, am interested on impact pof Lithium on Biodiesel.
Will contact authors of article pubished by you.
Any more relevant informations ?
Thanhk you in advance.
Holger Heller
I am taking advantage of your lithium based recommendations, but would be interested in any publication of a way to invest in the cobalt opportunity suggested above. I am a satisfied life-time member.
Thanks for the info!
I have a few shares of Zenn Motor company (ZNN) because they are investing in the technology of EESTor, which is capacitor-based. It may turn out to be a failed production attempt if the finer points of the technology can’t be put into process, but I think it’s worth a shot because the initial idea grates with the scientific ‘experts’ who have also been telling us hot fusion is “10 years away” for 40 years. Not a good argument, I know, but the potential is even better than any battery so far, if only for the ability to fast charge and better storage of regenerative braking.
If interested, here’s most of the info in a nutshell: http://bariumtitanate.blogspot.com/2002/07/if-fascination-of-eestors.html
I want to invest in the future for my progeny.
I would appreciate any information you can give me regarding :
Blackhawk Expl. Inc Com BHWX
Our “electric grid” is not capable of handling electric cars right now if a majority of people buy them.
What we need are vehicles operating on natural gas.
The article refers to batteries as re-newable energy sources, this is not true, they are energy storage devices, the energy itself must still be generated elsewhere, usually by burning fossil fuels at a power station. Now if every battery powered car came with a solar panel and/or windmill for the top of the garage…..!
Terry is quite right. Your article may induce confusion, as it did the propaganda about hydrogen, the first element, which again is NOT a new fuel but a storage of energy generated by power plants. So I cannot understand how cloud lithium save alla the barrels of oil as maintained by the author.
Un fuerte abrazo desde Washington Horacio. Me ha gustado mucho tu articulo.
I for myself believe very much in electrical energy for cars. I am a shareholder of a small company named Li-ion Motors (LMCO) trading right now at around between 75 and 85 cts. per share. I believe this company has lots going for it. They just delivered cars to the Netherlands and Abu Dabi. Those cars are solely running on Lithium power.
For the cities a car like that is perfect. I do believe that the company has huge potential. And it is american made.
I believe in the furture of companies like this one in general but that it takes on Oil on a short term iI seriously doubt. In the future, for sure but people have to change their minds and adjust their way of thinking first before anthing significant can take place.
In Europe we already have the Government to help with developing cars with electrical power
and it is beginning to become more and more interesting. In Italy they have already around 5000 Fiat 500 running on just electrical power.
Be it as it may. There is still a long way to go.
P.S. pardon my typos, since my first language is german. Sorry again and have a pleasant day everybody
TK
like every succesful bussiness model diversify . we need all types of energy used , more nuclear , coal, battery, solar , geo thermal is amazing i think a major breakthrough is coming in this energy source, where water is pumped down into earth and turned to steam and then when comes up back though pipe it turns a turbine unlumited supply of heat, anyway our country just lets other countries just eclipse us because they are ambitious and we are full of political wrangling and our country will go down unless action is taken . just like china is doing we need to do the same if this country was run more like a bussiness we would be fine , it should be a prerequisite to own a succesful business in order to hold any kind of office much less the presidency , there are more requirements to buy a house than to be president!!!
and the world laughs as our democracy allows for corruption and stifles our needs like energy all they have to do to influence our country is lobby us and that is legal bribery our democracy allows for this , in the real world this is called conflict of interest and we would be fired from any corparation for this but not the people who are running the biggest bussiness in the world our country!!!!!!!! and i am sad to see and watch it slowly go down the drain!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
The author left out the most important point of all. To charge a battery you need electric power. In fact, you need a lot of electric power. If you plan to recharge your car’s battery overnight you will need to beef up your wiring and the electric utility will have to beef up all the lines between your house and the new electric generating plant that they have to build to supply this power. This generating plant will burn fossil fuel unless you want to pay something like 18 cents a kilowatt hour for all of your electricity. The electric utilities have been afraid of electric cars for years because of the huge increase in capacity that they will require. In fact there is no reason to believe that electric cars will make any difference at all to the fossil fuel requirements. They will simply move it from the car to the generating plant.
The problem is most acute in places like California, where it takes forever to get permits to build either a plant to generate electricity or a power line to bring it in from outside. Thirty-five years ago the American Society of Civil Engineers stated that the cost of getting approval for a new power construction project in an urban area in California was more than the cost of construction and I doubt that the permit process is any easier now. The required lead time then was five years. So if you can’t build a power plant, you can’t bring in fuel from outside, and you can’t build powerlines to bring power in from outside you are going to have a permanent brownout and then nobody will have enough power to charge their cars.
An electric car suffers from a lot of efficiency problems. First of all, the plant that generates the electricity can get efficiency of somewhere near 25%. Figure on a loss of 2% for the step-up transformer at the generating plant. Figure another 8% for the loss in the transmission line and stepdown transformers. This means that you now have 25% minus 10% of that means 22.5%. Next consider the recharging station. You will need at least 10 kilowatts to run a vehicle in the city. If you plan on using it for an hour to work and an hour back you need 20 kilowatt hours. If you plug into your normal wall outlet at 120 volts times 15 amps this gives you 1800 watts so 20 kilowatt hours would take 11 hours if efficiency of battery and charger are 100%. If they are 50%, which is still a high estimate, it would take you 22 hours to recharge. This means that you need to use wiring similar to that for an electric stove to recharge in a reasonable time.
In summary, electric cars do nothing to help the overall energy problem, they simply move it from one place to another. If you burn fossil fuel at a generating plant you will get better efficiency than if you burn it directly in the car but you have to take the electrical losses into account. The only advantage to utilities would be that electric cars would be recharged overnight when other electric power demand is low.
Several years ago a company called Rosen Motors developed a hybrid car that used a gas turbine (only one moving part) and used a flywheel to store energy. They stated that the total pollution caused by operating their vehicle was less than the pollution caused by burning fossil fuel in an electric generating plant if you took into account the losses in the electrical distribution system and the battery. At that time efficiency in batteries was in the neighborhood of 50%. I note that none of the proponents of modern lithium batteries produce figures showing efficiency of their products. Many of them do produce figures showing kilowatt-hours per pound but they are very shy about saying how much power you can actually take out of the battery compared to the power that goes into the charging device.