Interesting thoughts. I know the future is electric, but I’m not certain it’s batteries (and equally, lithium)

And yet GS continue to buy Lithium stocks. All the while suggesting sells on certain Lithium companies and buys on other companies that they have been accruing holdings. Could it be because they missed the initial run in the companies they are suggesting are now sells? Me thinks I have seen this same game played out in other areas. So if previous examples are anything to go by in 6months the sells will become buys because they are now happy with the entry prices and demand was significantly underestimated.

In terms of sales EVs reached 6.1% of US auto sales in Q3 2022:

• Q3 2022 — 6.1%
• Q2 2022 — 5.1%
• Q1 2022 — 4.7%
• Q4 2021 — 4.1%
• Q3 2021 — 3.7%
• Q2 2021 — 3%
• Q1 2021 — 2.5%
• Q4 2020 — 2.3%
• Q3 2020 — 2.2%

Source: Clean Technica - Automakers, EV volumes

Tesla coming in with 130,000 in US sales last quarter and the others car companies 70,000.

With major EV subsidies to come in the US from January it’s hard to believe that this % is not going to go up significantly.

All valid comments, but I just can’t help but see it in the same light as the CD/DVD becoming what replaced tapes and cassettes only to be slaughtered by digital media and even further, streaming!

I know we’re talking about physical products and mass-adoption here with a digital product that can be dispensed far more easily. But maybe that’s part of the problem. There are so many barriers to EV’s (currently on lithium based batteries) for the layperson so maybe, just maybe a solid-state or quicker-charging, longer-lasting battery solution at half the price would be the real and unforeseen game changer.

Agree Lithium batteries may not be the be all car battery product.

However, in the interim Lithium has first mover advantage with no real competitor across cars, phones and lap tops.

When it comes to cars EVs are now in production across most major car brands. This includes quite a few brands now achieving 500-600km on a single charge and charging speeds of 20min for up to 80% capacity.

So I tend to look at it more like iPhone 1 v iPhone 14. Maybe we are at around iPhone 3-4 but by 2030 we could be at iPhone 10 equivalent where longer lasting batteries running over 1000km on a charge and charging speed reduced further. I think at that point the inflection will be considerable and alternatives will really need to step up to the plate.

That’s not to say parallel development of alternative propulsion systems will not continue to take place and possible progress to a significant consumer purchase level. However, from what we can see at this stage, Lithium batteries seem to be in the drivers seat and has significant market opportunity as it relates to EVs.

The question I ask myself is would have car companies changed from ICE to EV if it were not for climate issues? Now that EVs are providing a solution and most car models are able to produce an EV where is the incentive to go and invest billions and billions into an alternative system. At the same time are we in a period where the same investment funds that flowed to Tesla available to companies to explore significant competitive alternatives in the next 5-10yrs.

Maybe we are and somewhere an alternative battery is not far from release which will rapidly replace lithium batteries. I suppose that’s the fun in investing. A bit of luck and backing the right horse at the right time.

Good read, thanks for the discussion.

However, I tend to side with NewbieHK regarding lithium batteries having a considerable first-mover advantage.

Actually, from memory electric cars were invented before petrol cars however because of the level of investment and the quantity of oil and gas, ICE vehicles became the dominant vehicle type. I imagine a similar story will follow for lithium batteries, where there could be a better alternative however there has already been far too much investment for us to go back to a different technology.

As far as lithium stocks go, I'm with pinchofsalt because I think there are other factors at play that will limit both EV supply and demand. I haven't changed my personal stance on lithium stocks, I sold them 2-3 months ago and I still think they are far too expensive for the long-term lithium price considering execution risks. Lastly, if the aim is to make EV cars more affordable for the mass market wouldn't rising lithium and other raw material prices quite literally limit demand itself??

One way my thesis is wrong is if inflation reduces without significant change in consumer spending on EVs AND there is substantial discovery in lithium raw materials to reduce raw material prices OR improved cost savings from battery manufacturing. From a super high-level POV, I see a couple of years of difficult sales/delivery issues imo.

@Dustysandwich @NewbieHK Devil's advocate here - petrol and diesel have the first-mover advantage.

The hurdle for EVs in general is the cost, and arguably time to recharge. The infrastructure can come at a pace that matches EV adoption but the cost won't. Especially while driving an EV is a status-symbol.

If you want a new EV in NSW there is a minimum $50k spend. That gets you into an MG, Nissan Leaf, BYD (Yes, the Chinese company that made all those face masks) or potentially a lower spec Hyundai. $70k after incentives and on-roads is about what you'll pay for a low spec Tesla Model 3 or Model Y, the Model S is still well over $100k and the (not currently in production for RHD) executive Model X with the gull-wings is upwards of $220,000. Let's not talk about the other "options".

Somebody needs to bring out a reliable hatch that does 500km with a smart charging system, a 7-year/200,000km warranty and 5-star safety for under $25k on road. That will change things.

We can assume this American data is similar enough to our Australian market in terms of demographics. It is worth noting that a large portion of the "40-60" age group may even be the registered owners of vehicles purchased for their young-adult children.

The uptake in EVs is also higher in the 'younger' demographic.

When it comes to the next 15-20 years of vehicle purchasing both new and used there is still going to be an enormous lag in ICE vehicles unless there is some sort of government buy-back or Oprah-style "you get a car, you get a car!" event (in which case, production and infrastructure had better be ready to handle it).

Also, electric vehicles still seem to hold up in value up until about 5-7 years at this stage but then the repair costs out of warranty are extortionate. Mainly because we are looking at entire chassis changes or battery replacement rather than bit-by-bit brake changes, fluid replacement and engine part maintenance.

Another concern that I don't believe many people think about is the grid load when it comes to charging time. Unless we all get a workplace that has an enormous solar array over a car park (a substantial and costly 200kW system could charge maybe 15 vehicles from 50% to 90% over the course of a day??) we will be looking at never-before-seen grid consumption in peak periods. Think about 5 million households all plugging in their Teslas at 5:45pm when the sun is going down. It's like running an oven at full-blast while you unwind, watch TV, get the kids ready for bed and binge-watch Netflix til 1am.

What I predict is that energy costs will have to go up to push people into shifting their charge times and then because nobody wants the ICEs they will get cheaper and ironically so will petrol and diesel and then the next generation of drivers remains more confident in a regular old combustion car.

I genuinely think there is a better solution to EVs with batteries. Ever seen those bumper car circuits?

If we go nuclear, we could lay a mesh grid through the middle of every road network and put a small battery backup in each newly classed electric vehicle (you know, to get into car parks, up driveways, across a train track) but then run every car with a little dongle that connects to our mesh providing 100% power 100% of the time.

Anybody on board the quantum leap away from the cars of today which are foolishly shaping the cars of tomorrow?

The pace of technical innovation is quite extraordinary and I am surprised people anchor so hard on todays issues.

In my opinion there are a few high probability outcomes:

1. Batteries will improve
2. The electrical grid will have substantial investment
3. Wind and solar will have substantial investment
4. storage will have substantial investment

All these things are happening already, with items 2,3 and 4 seeing billions spent in Australia each year.

I agree it’s likely to be a bumpy ride, but I expect the electrification trend to continue.

@Llati oh trust me, I'm not anchoring on today's issues - I'm concerned about tomorrow's issues because we're trying to run before we can walk!

1. I agree, but! Batteries will definitely improve, but there are physical limitations on storage, output and charge cycles no matter what material we use. Beyond a certain point, energy density hits a wall and then you need to look at combustible fuels (or radioactive decay).
2. I agree, but! Spending money doesn't always solve problems. Targeted spending at the moment seems to be ironically quite broad and still along the lines of improving todays tech instead of tomorrow's tech.
3. I agree, but! Wind and solar have had massive improvements in recent years but are still extremely expensive. Yes, this is a cost curve that will come down but from someone who has a 17kW PV array and barely any usage during the day until I get home and start cooking, I can assure you that $0.06 per kWh exported for 10 hours a day is not enough to compensate for 3 hours of $0.45 per kWh at 3kWh usage in the evenings :'( (mega sad face) and this still won't solve the problem with the sun going down because we need storage which depends on point 1 taking a big leap beyond technology that we can even conceptualise today.
4. I agree, but! Again, spending doesn't equal a better outcome. There are physical limitations and if this is truly an "investment" then people will be looking at investment returns which are not likely for decades....

I love this space. I love the discussions but mainly I just want to find a reality somewhere in the middle between optimism and scepticism.

Cheers

Noting that strawman is around investing I will limit my comments to that context.

I don’t have a home battery for the reasons which you have outlined. I suspect the money in storage will be made by the massive battery and hydro storage installations - since they are doing it on an industrial scale.

Some have made a fortune in the last year and are rapidly scaling up.

https://www.pv-magazine-australia.com/2023/01/09/neoen-begins-building-fifth-big-battery-in-australia/

Another big play is virtual batteries. Recent EV vehicles have intelligent battery controllers which means the car battery can be scheduled for when it draws power. More importantly, it also means they can send power out to the grid allowing you to use it in the home. It will make it possible for you to plug the car in and sell the cars power into the grid during the peak hours, and the swapping the flow to charging it late at night

@Llati fair call. Didn't mean to stray too far but I do see them as headwinds which will ultimately have an impact on any investment thesis.

Personally, I'm very keen on the V2H protocols in the works right now. That will be the game changer for me and the point in which I make the move to owning an EV. My partner who works from home would primarily keep it in the garage charging from all of our excess solar to avoid cheap export tariffs and then drain it in the evenings. It's really the only way it can work effectively on a small scale. (or small scale at home with mass-adoption)

That protocol however, only works for the minority of people who don't actually use their vehicles to commute, therefore still stuck in the loop of charging in the evenings when base load is high and everyone else is doing the same thing. If the herd moves to charging later at night then our wonderful friends over at the energy companies are likely to take note and charge accordingly. It will be hard to find a sweet spot that isn't large-scale grid independence.

The article is a good read, but it's an enormous investment for a very slow and low payback. It's also a hyper-specific application at this stage and we would need thousands more to come online to even begin to support suburban power use (mainly due to load fluctuations). Plus, if you're right that the technology progresses so far in the next 10 years then the storage systems being built now will be largely obsolete (especially when it comes to profits) so investors would be tripping on their own shoelaces.

I will perhaps also suggest taking a look at Lake Jindabyne currently. For the last 3-4 years it has been above capacity. While Snowy Hydro can technically turn on the taps whenever they want, because we have had great rainfalls over the last couple of years, all of the land downstream towards the town of Dalgety and further (bearing in mind this water source eventually runs into the ocean) cannot take on any more water. So Snowy has been forced to pool water upstream without the ability to do their usual amounts of releases. Hydro power is one of the more exciting power storage options in my mind but the politics 'downstream' have a greater potential to disrupt the anticipated use-case.

Again, there is so much information out there with a tilt to whichever bias the author or company has and I still don't think there is a clear way forward which is a shame, because once I find it I will be devoting 99% of any available capital to that strategy... let me know if you find it though! :D

@Timocracy thanks for the great discussion. Other than saying the obvious (i.e. home solar panels typically are worthwhile) I dont have a clear opinion on how to play this change from an investment perspective.

However, I would challenge the idea that the big batteries have been slow to pay back ...

1. The SA big battery has made a lot of money and looks on track for a 3-4 year pay back. (https://reneweconomy.com.au/tesla-big-battery-in-south-australia-delivers-stunning-windfall-profits-77644/ )
2. The Victorian big battery also seems to be doing quite well.

From the Neoen half year report https://neoen.com/app/uploads/2022/07/PR_Neoen_-H1-2022-results-3.pdf

"Storage adjusted EBITDA totaled €28.2 million, up from €11.1 million in the first six months of 2021. This strong rise was largely driven by the contribution from the Victorian Big Battery, which entered operation in late 2021."

So perhaps their EBITDA from the Victorian Big Batter was ~ €14 million?? How knows, but if we guess at €14 million then thats AUD $21m. Not bad for 6 months...

I couldnt find the cost of the Victorian battery, but it was at least $160m as that was provided by the Federal Government-owned Clean Energy Finance Corporation (CEFC).

The first movers of the big batteries have been doing very well.

Hello @Timocracy.

The irony of it all is electric cars preceded ICE cars by a significant period. The 1830s in Europe and as early as 1890s in the USA. However, the cost, low speed, and short-range of these vehicles, compared to ICE vehicles saw them phased out. After ICE vehicles established themselves we know who accumulated the patents to any new technologies that threatened the ICE industry.  

Many of the issues you raise will require government subsidies and a concerted effort to fund such as improving grid issues. But one does not need to dig to far to see why grid infrastructure have lagged the development of wind and solar production. 

At this stage some countries are considerably further along the support curve. Of course the larger countries where distances are an issue have taken longer but there is no doubt this support is now accelerating.

However, none of this is insurmountable and just as governments have subsidised the ICE industry (just look at the Australian car industry) for decades, subsidies and discounts across the whole system will be required to speed up the shift to EVs. 

In terms of prices, just in the USA this year the GM Bolt now starts at $25,600 (reduced by over $5000) and Leaf at $27,300. Yes it’s USD but the move to address prices in that lower bracket is taking place. 

One only need to see the line up of EV cars in production from the majors to see that within a few years we are going to be provided with a plethora of options in that 30-50k.

Yes we will face a long period of phasing out ICE vehicles but I think the pressing issue of “global warming” will encourage governments to come up with solutions. 

I do like the idea of bumper cars and that would definitely help save on panel beating costs and provide for an entertaining drive to and from work…ha ha ha. 

One thing for sure the areas of EV’s is definitely one of the topics of the next decade! I think one can not underestimate the determination and will of the youth to ensure this changes happens quicker than we might think. 

@Llati Re: grid or fixed battery storage, lithium is an expensive option. Lithium batteries have great power/weight and size characteristics which makes them perfect for anything you need to move (EV, phone, laptop) but for a fixed battery, weight and size are not so important. For this application, you want something cheap that will not deteriorate over may charge/discharge cycles, ideally from 0-100% and back.

ASX hopeful Redflow (RFX) is pitching their zinc bromine flow battery and selling a few in niche markets. Here's a link to ten other flow battery hopefuls Here’s the Top 10 List of Flow Battery Companies | Blackridge Research

Uni of Wollongong has developed a sodium-ion battery that Sydney Water is trialling Sydney Water – Smart Sodium Storage System Project (uow.edu.au). Looks like that technology is being positioned for commercialisation. IPO one day, perhaps.

And the sand battery, which got a lot of press last year, is a very cheap way to store heat. Not really investible but competitive pressure nevertheless.

I reckon most lithium is feeding into consumer products. Consumers can be fickle.

@Llati completely on the same page regarding at-home solar panels. I insisted we do that before commencing renovations because I knew we would run out of money if I left it until last! (now we can't justify fixing up the bathrooms but at least I can run an aircon all day for *free*). Other than starting a solar consulting company that makes a margin on subcontracting, I'm not sure where the good money should go for a return. Of course even then, consumers will want the best pricing so there goes any long-term chance of maintaining margins as competition heats up.

@NewbieHK this is all true, Jay Leno has one of the old (1909) Baker electric vehicles. Funny how we got so far producing ICEs for durability, reliability and 0-100km/h speeds and then reached a point where the only way to do it better is with electric power. Lol. Worth mentioning that around the same time there were also steam-powered "cars" but like you mentioned there was a decision to move into ICEs by the powers that be. Patents are a funny things. Poor old Tesla (Nikola, not Elon's passion project) really got the short end of the stick. If things had been different then maybe we would have cars running on the same alien tech that helped build the pyramids. I wish. Change of government structure, anyone? That might actually help instead of shooting for 2050 and leaving it for the next guy to explain why we didn't get there.

@PinchOfSalt I'm currently working at the University of Sydney (Medicine and health though) but get numerous updates on some of the projects going on. It's actually the first time I saw anything on AXE (Archer Materials, not the body spray) but that's exactly what I mean when I say my opinion is that large-scale lithium grid batteries don't make much sense to invest in right now, if the next 10 years brings non-linear improvements to electricity storage. I too, am a fickle consumer.

Just wanted to throw it out there that EV's (ie cars/trucks) are not the Li-battery powered vehicles albeit they would use the most Lithium by far. Walking into a bike shop the other day, I was surprised to find the mix of electric vs manual bikes on display to be 60% electric:40% human powered. Obviously some tailwinds in healthy lifestyle, saving some money in fuel/rego/parking, saving the environment.

And similarly, there are many other items powered by Li-batteries

• Portable tech - mobiles, laptops. security systems, tracking devices, cleaning robots
• gardening equipment eg mowers, hedge trimmers, blowers
• Other potential home gadgets where cords are a pain - blenders/mixers, pet entertaining devices, audio equipment, electronic musical instruments, portable fridges, all types of robots

@Hands you're probably exactly right, because a lot of those batteries in smaller devices (despite being rechargeable) end up being somewhat disposable. The product eventually goes to landfill but there is a consistent demand for new ones. Life expectancies of 2-3 years rather than 10-15 years for a car.

I too am one of those e-bike riders and try to use it at least once a week to commute. Bear in mind that it's hilly and a bit over 20km each way. Adds about 3x pedal power until 25km/h then any assist cuts out. Visually, you wouldn't know unless you knew what to look for! This bike has required two warranty battery replacements though. More lithium...