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BYD, Panasonic and Samsung enter the lithium battery stock race

With demand for lithium-ion batteries set to grow by nearly 28% per year through to 2026, key players like Panasonic, BYD and Samsung SDI are looking to shore up supply to keep up with demand for electric vehicles.

The war in Ukraine has put the spotlight on the supply gap of critical materials in electric vehicle (EV) batteries, as the Donbas region in the east of the country has an abundance of lithium deposits. The shortage has led companies like BYD [1211.HK], Panasonic [6752.T] and Samsung SDI [006400.KS] to enter the lithium and battery technology space in an effort to keep up with soaring demand.

At a global energy conference held by S&P Global in March, Martín Pérez de Solay, CEO of Allkem [AKE.ASX], explained that there are plenty of materials available for battery production, but being granted mining licences and getting the materials out of the ground takes time.

Despite the war in Ukraine delaying extraction plans, existing production hasn’t gone offline. The lithium battery market will only be impacted to a limited extent, according to Interact Analysis.

The market data firm has forecast that global demand for lithium-ion batteries will rise to over 1.6 TWh by 2026, up from 476.3 GHh in 2021, equating to a compound annual growth rate of 27.9%. Shipments to EV manufacturers are expected to account for 75.9% of the demand.

Lithium mine investment will cover BYD’s battery needs

At the end of March, the Chinese conglomerate backed by Warren Buffett stopped producing new gasoline engines for full combustion vehicles. It’ll continue to make them for hybrid vehicles, but much of its future focus will be on EVs.

BYD sold 114,000 new energy vehicles (NEVs) in May, up 8% from April despite ongoing lockdown-fuelled disruption, and up 360% year-over-year. It took total NEV sales for the first five months of the year to 507,314, up 348% from 2021. With the possibility that the pressure on the battery supply chain may ease in the second half of 2022, BYD is well on track to achieve its previously set target of 1.2 million NEVs this year.

Going forward, a Chinese government-backed publication reported last week that BYD has purchased six lithium mines in Africa that will see its demand covered for at least the next decade. The mines have combined reserves of 25 million tonnes, which would produce enough 60 kWh batteries to power 27.78 million vehicles. BYD is yet to comment on the report.

Boosted by the strong production figures, BYD’s Hong Kong-listed shares have soared 28.5% over the past month through to 7 June. The stock is up 10.2% year-to-date.

Panasonic provides advanced batteries to Tesla

Tesla [TSLA] received samples of the new high-capacity lithium-ion 4680 battery cells it had ordered from Panasonic last week. The EV maker has claimed they will have five times the energy capacity of current cell types and produce six times more power.

Back in February, Panasonic announced it will build two production lines at its Wakayama factory in the west of Japan to manufacture the 4680 cells. Mass production is expected to start in the fiscal year ending March 2024. There are also rumours that the company could open a gigafactory in Nevada by March 2025 to ramp up production for Tesla. The decision will likely hinge on the profitability of the 4680 batteries, reported Nikkei Asia.

The Panasonic share price is down 3.1% year-to-date but up 3.7% in the past month through to 7 June..

Cutting-edge technology to accelerate Samsung

The battery and energy technology subsidiary of the Japanese electronics giant announced a joint venture with the Chrysler-owner Stellantis NV [STLA] at the end of last month. The two parties will invest $2.5bn into building a manufacturing facility for EV cells in Indiana. Samsung SDI CEO, Yoonho Choi, said in a statement that they’ve “secured a solid foothold in a rapidly growing North American EV market”.

The venture is targeting a 2025 operations start. The facility will see Samsung SDI apply its cutting-edge technology, PRIMX. Launched back in December, PRIMX reduces the resistance inside EV cells and minimises the lithium-ion transport distance.

The Samsung SDI share price has been caught up in the broader selloff among tech and EV stocks. The stock is down 15.9% year-to-date as of 7 June.

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