Chris’ note: “It’s in the early stages of a revolutionary boom… and those who know how to play it stand to make a fortune in the years ahead.”
Strategic Investor editor E.B. Tucker told me this last week. We spent two days together discussing the biggest money-making opportunities he sees for the rest of the year and beyond.
Let me just say, there was no shortage of ideas. It was a busy two days… And you’ll be hearing about all of these opportunities in the weeks to come.
But there’s one that stood out to me. And after talking about it more with E.B., one thing is very clear: This is a serious trend that needs to be on every Dispatch reader’s radar.
Below, I share one of our conversations on the subject… By the end, you’ll see why you can’t ignore this any longer…
Chris Reilly, managing editor, Casey Daily Dispatch: E.B., you’re one of the best big-trend analysts in our business.
And today, one of the top trends you’ve been covering is the electric vehicle (EV) revolution.
I want to get a sense of just how big this trend really is.
I know we’re seeing more and more EVs on the road… but I’m still not sure many of our readers see this as a real money-making opportunity right now.
E.B. Tucker, editor, Strategic Investor: I’m sympathetic to the readers that you just mentioned, by saying I own three vehicles – and none of them gets more than 12 miles per gallon of gasoline driving.
So, not only am I not a fan of electric vehicles… but it’s going to be a long time before I own one. I enjoy physically driving gas guzzlers. There’s something about the internal combustion engine that I think is fun. And I don’t see myself getting tired of it anytime soon.
Chris: You hear a lot of people say they only invest in things that they like… or things that they actually use. But you’re able to look past that. How?
E.B.: I don’t let my personal ideology get in the way of sound, rational thinking when it comes to investing.
The EV trend is here and it’s not going away.
Chris: What are you seeing specifically that tells you this trend is here to stay… and more importantly, why is it one that could make people a lot of money?
E.B.: In 2018, U.S. EV sales topped 361,000 units. That’s just in the U.S. Overall, worldwide EV sales topped 2.1 million units in 2018. And more than half of worldwide sales came from China.
Plus, EV charging stations are everywhere. As of May, the U.S. Department of Energy reports that there are more than 68,000 charging connections at more than 20,000 stations across the country.
What’s more, this trend should accelerate with new regulations passing nearly every day. So far, 11 countries plan to ban sales of gas-powered vehicles in favor of EVs. That includes China, the world’s largest EV market.
This is a trend that is going to get very, very big.
Chris: Yeah, that was leading me into my next question. I think most people are familiar with the electric vehicle revolution, but they’re not quite sure how to make money off of it. Do you go out and buy shares in Tesla… or in a Chinese electric car maker, since you’re saying they’re leading the pack? How do you make the most profits from this boom?
E.B.: Well, you can do that. But the process of making money from making a vehicle has never really been good.
I mean, if it floats, flies, or drives, they say rent it. This is an old joke that comes from the people that understand that the economics of making transportation-related vehicles is not very good. And I tend to agree with that.
It’s expensive to make cars. You deal with this litany of problems.
So, how do we play the EV megatrend?
It’s not by buying the carmakers themselves, like Tesla…
Nope… to make the most money off this megatrend, we need to take a closer look at what actually makes these cars run.
And to take it further, we need to look at what makes these batteries work.
Did you know the average Tesla model vehicle has 7,000 battery cells in it? 7,000 battery cells…
And every single one of those battery cells contains a key metal: nickel.
Chris: Wow… so connecting the dots here, it’s safe to say we’re about to see a lot more demand for nickel here soon.
E.B.: Exactly. But let me back up…
A couple years ago, my research team and I talked to a man named Dr. Goodenough. He’s a professor and scientist at the University of Texas, Austin.
More importantly, this is the man who invented the lithium-ion battery… the same battery used in most portable consumer electronics, like cell phones and laptops, as well as electric and hybrid vehicles.
My research team talked to him about the lithium-ion battery… and where he sees it going. Now, one thing he told us, which was very interesting, is that there’s a lot of things that you can make batteries out of. You know, they experiment with making batteries from a bunch of different materials.
But, to date, the lithium-ion battery is the single best at holding the charge. So, the purpose of the battery is to take the electrical charge, and it’ll store it without losing it, and then re-deliver that charge when it’s needed later. The lithium-ion battery is the best at doing just that.
Chris: Got it… But wouldn’t that mean lithium is the pure play here?
E.B.: You’d think so… But here’s the thing…
It’s not just lithium in a lithium-ion battery. Everyone thinks there must be a lot of lithium, but that’s actually not the case.
Right now, most of the current batteries use nickel, cobalt, and manganese, with nickel as the largest component…
In the coming months, we’ll see even more nickel in EV batteries.
As Dr. Goodenough told us, the next generation of batteries will have up to 80% nickel.
That’s a lot of nickel. And the investing implications are huge.
According to McKinsey EV Battery Materials Research Group, there were only 3 million EVs produced in 2017. The consultancy expects 31 million EVs produced annually by 2025. That means just over 10 times the number of batteries needed from just two years ago.
For years, the key driver of nickel demand was stainless steel production. That demand isn’t going anywhere. Surging nickel demand from increasing numbers of EVs hitting the road could multiply the need for nickel.
Financial services company UBS expects demand for nickel to grow by 11 times its current level by 2025.
Chris: So how can readers capitalize off this trend?
E.B.: To us, this all means that the price of nickel’s probably going to go a lot higher. In fact, we think it will surpass its 2008 high of $15.10 per pound.
And so, this seems very obvious to us… and that’s using today’s electric vehicle sales projections, which we think are probably a little bit light, because as the batteries evolve, nickel continues to be the most important component in the battery.
And the best way to play it – and the way we’re playing it in my Strategic Investor newsletter – is by buying high-quality nickel producers.
Chris: Great stuff. Thanks, E.B.
E.B.: My pleasure.