Investing in Batteries

Brian Hicks

Updated February 23, 2015

Sometimes the least likely of technologies sneaks its way into the front of the class and ends up becoming the pivotal item in a revolution.

We are living through one of these revolutionary moments — and the unlikely leader is the humble car battery.

Rugged and simple, the automotive battery has risen from supporting player within the automotive industry to the new cross-industry star.

Three separate elements from the month of February, culminating with a major announcement today, hammer home just how big a star the car battery is going to be in the tech sector.

Element 1: The Rumor

Apple (NASDAQ: AAPL) is always the subject of rumor. The company is notoriously tight-lipped when it comes to announcing new projects, so Apple Rumors is almost an industry unto itself.

One of the craziest recent rumors was that Apple has assembled a 200-man development team with the goal of producing an Apple electric car by 2020.

This rumor is only important to us right now because of what caused it: a lawsuit from a company called A123 Systems.

The lawsuit alleged that Apple hired away a group of skilled engineers from A123 in an “aggressive campaign” to develop its own “large-scale battery division.” A123 Systems specializes in energy storage systems for commercial and industrial applications that include electric cars.

Whether these batteries go into electric cars, self-driving cars, or some other energy storage application is really immaterial at this point.

The point is that Apple is ramping up its battery production.

Element 2: The Announcement

Elon Musk has grandiose plans for the future of transportation and energy. His company Tesla Motors (NASDAQ: TSLA) is currently on schedule to open the biggest battery factory in the world.

Called the “gigafactory,” the massive energy concern is slated to begin producing electric car batteries in 2016. With its immense production capacity, the gigafactory will singlehandedly ramp up the scale of the battery industry as a whole, and Tesla will immediately reap the benefits of a scaled — no pun intended — battery economy.

But the scope of Tesla’s business is going to go well beyond automobiles.

During the company’s quarterly earnings call earlier in February, Elon Musk announced that Tesla has plans to sell its lithium-ion batteries for home energy storage within the next six months.

Musk said the company still hasn’t settled on a product unveiling, but it would be “probably in the next month or two.”

Battery storage is an essential element in the future of solar power, and Tesla’s close relationship with SolarCity (NASDAQ: SCTY) will tie the two industries together nicely… united by batteries.

Element 3: The Acquisition

car batteries battery scrap waste recycle

On Monday, Samsung’s battery division Samsung SDI Co. Ltd. announced it would be acquiring the battery pack business from auto parts supplier Magna International (NYSE: MGA).

The acquisition will bring all of Magna’s battery employees, production, development sites, and contracts to Samsung SDI. Financial terms of the deal were not disclosed.

Samsung calls the acquisition “a key strategic step” for advancing the company’s automotive battery business, which is forecast to reach 7.7 million vehicles per year by 2020.

Last year, Samsung SDI made its car battery aspirations clear when it bought battery chemistry and materials company Cheil Industries Inc. for approximately $3.3 billion. That move was seen as a supply chain acquisition. The acquisition of Magna is seen as an improvement to SDI’s portfolio of automotive industry contracts.

The future is battery-powered. Invest accordingly.

Good Investing,

  Tim Conneally Sig

Tim Conneally

follow basic @TimConneally on Twitter

For the last seven years, Tim Conneally has covered the world of mobile and wireless technology, enterprise software, network hardware, and next generation consumer technology. Tim has previously written for long-running software news outlet Betanews and for financial media powerhouse Forbes.

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