Battery Investments: A Vector for Sustainable Growth

The demand for batteries is growing rapidly as electric vehicles displace traditional diesel and gasoline models, electric bicycles, scooters come into vogue, and other industries such as construction and agriculture become electrified. The global battery market is expected to reach €450 billion by 2035, showing the promise for investment in the battery market. This is 10 times more than in 2020. So far, the market has developed mainly in Asia: the top 10 global battery manufacturers are China, South Korea and Japan. However, Europe's largest car and consumer goods manufacturers are electrifying their products, creating demand for the European battery industry.

Government support for the battery market and big plans

Government support plays a major role in the development and investment in the battery market. According to a recent Transport & Environment (T&E) study, Europe will meet 100% of lithium-ion battery demand on its own by 2027 due to a significant increase in production capacity. Similarly, the U.S. is investing $2.8 billion as part of a bipartisan infrastructure bill to expand domestic battery production for electric vehicles. The battery industry is also complex and fragmented, with multiple players involved at each stage of the value chain. These include upstream and downstream companies, component and battery manufacturers, as well as end-users and recyclers. 

Investing in the battery value chain

Battery manufacturing involves the steps of electrode manufacturing, assembly, finishing, molding, and testing, which creates challenges in scaling gigafactories in Europe. Asian companies are leading the way in manufacturing equipment for these processes, but few offer complete solutions for the European market. The growth of battery production in Europe is increasing the demand for integrated solutions, which opens up opportunities for European equipment manufacturers and new market entrants. The lack of clear leaders creates conditions for a “buy and build” strategy, allowing investors to quickly gain a foothold in the market. The development of the European battery sector and the desire to localize production create favorable conditions for investing in equipment manufacturers capable of offering efficient and integrated solutions.

Primary Metals: Mining and Refining

The global shift to clean energy and electric vehicles (EVs) is driving demand for battery metals such as lithium, cobalt, nickel and graphite. This boom is fueled by government policies supporting renewable energy, supply constraints in politically unstable regions, and rapid advances in battery technology. Investors can capitalize on this trend by investing directly in mining companies, diversified exchange-traded funds, or supply chain players involved in recycling and reclamation. Private equity and venture capital also offer opportunities for innovative battery technology and sustainable mining. Given the growing demand and supply challenges, battery metals are a promising area for long-term growth and sustainable investment.

Recycling and reuse

Recycling: Dismantling and disposing of old batteries on an industrial scale to return valuable raw materials to the system is worth significant effort: Market prices for battery materials such as metals will remain high. Currently, most battery recycling projects are undertaken by large industrial players such as automobile manufacturers, energy companies and companies with experience in recycling other materials. This industry is still at an early stage, but is expected to become larger in the next 5 - 7 years. Therefore, at least for the time being, the companies involved in it are probably more suitable for private investors. In addition, recycling projects are also actively promoted by government programs. 

Conclusion

Investments in battery metals offer great prospects for sustainable development and long-term growth. The rapidly developing battery market, government support and demand for environmentally friendly solutions create a favorable environment for investments in mining, refining and production. Those investors who take timely positions in this area can maximize the benefits of the global transition to clean energy.