Electric battery makers see shares rally in June on growing demand

Shares in electric battery makers rallied in June, reflecting progress in innovation and growing demand from electric vehicles, energy storage and electric aircraft.

When mentioning battery solutions, investors typically think of electric vehicles, and for a good reason. EV deadlines in some countries like Norway are as close as 2025 and for the UK and Europe in 2030, which is bound to drive up EV sales as those deadlines approach. But growth potential in other parts of the battery sector such as energy storage and electric aircraft should not be underestimated.

A good example is US aviation firm Joby Aviation NYSE:JOBY, which is developing an electric vertical take-off and landing aircraft that it intends to operate as an air taxi service. Shares in the company have risen almost 27% since the start of June (and an impressive 95% since the start of the year) as the company pushes ahead with collaboration with other players in the electric aircraft sector. The venture-backed company has recently signed a contract with GKN Aerospace for the use of thermoplastic flight control surfaces.

Another key player, Finnish technology group Wärtsilä Energy (HEL:WRT1V), has clocked a 28% increase in its share price since the start of the year. The group bagged a contract for a battery super-hub in the UK in late 2022, which will involve building a 50MW/100MWh lithium-ion energy storage facility in Bedfordshire. The lucrative contract with EDF Renewables will help with storing electricity from renewable energy sources.

Electricity from wind and solar sources is inconsistent for obvious reasons. Such storage makes it possible to store power produced during windy and sunny periods to be used when weather conditions are less favourable.

California-based Bloom Energy NYSE:BE manufactures solid oxide fuel cells that produce electricity on-site and has seen their shares rally 10.45% since the start of June. The fuel cell and micro-grid maker is currently still loss-making but with US policy changing in favour of domestic green energy producers Bloom Energy is expected to break even at some point in over the next two years.

One of the laggards in this sector is fuel cell maker Ballard Power [NASDAQ: BLDP], down 6.3% in June and down 9.4% year-to-date. The firm has been struggling with profitability for years and its revenue and gross margins remain weak.

EV battery makers

The prospects for growth for electric vehicle battery makers remains among one of the strongest in the battery solutions sector. Mobeen Tahir, Director of Research at ETF provider WisdomTree, notes that China remains the dominant market, accounting for around 60% of global electric car sales. Europe and the US are following behind. Emerging markets are beginning to play an increasing role with sales in countries such as India, Thailand, and Indonesia more than tripling in 2022.

At the moment, one of the deterrents to even wider sales is the relatively short mileage that can be covered by an EV battery. The battery makers which will be the first to resolve the issue will reap the benefit in terms of share price. High on this list is Chinese firm CATL (SHE300750), the biggest global battery maker. The company recently unveiled its high-energy density battery that could not only meaningfully increase the range of travel for EVs but could also help electrify passenger aircraft. CATL shares are almost unchanged on the month, up 3.9% YTD.

WisdomTree Battery Solutions ETF