It’s all about the battery: Swedish car maker will only make electric cars from 2019

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Today, Volvo announced that from 2019, their entire production line will have an electric motor, marking the end of internal combustion engines at the car maker. The company says the switch is in response to consumer demand.

Piet Schimmel, ABN AMRO  Equity Thematic Expert, calls the move to electric “a bold move,” and notes that “many auto makers are shifting their research & development activities to electric vehicles.”

For investors, Schimmel sees opportunities in the batteries driving electric cars.  “The global battery market has substantial growth prospects, given an expected increase in electric vehicles and electric storage needs. But it is now going even faster than we expected,” notes Schimmel. 

The dominant technology for electric vehicles is lithium-ion (Li-ion) batteries. Companies producing these batteries, as well as lithium mining companies are expected to see significant growth. Mass production is going to be needed to keep up with demand. “It will be a race to see who can do it best,” says Schimmel.

He notes that lithium is mainly mined in South America, and that it takes 4-5 years for new mines to come on line. The barrier to entry is therefore significant. “Existing mining companies may have a leg-up on the competition. It is a segment with great potential.”

Lithium batteries and lithium miners fall with the “Renewables” equity thematic recommended by ABN AMRO. Other areas of investment within this theme include wind turbines and power-grid enhancements.