The Seoul Stock Exchange has never seen such growth. Last January, 4.4 million South Koreans, almost 10% of the population, tried to buy shares in LG Energy Solution – the world’s number-two battery manufacturer – when the company went public. This popularity resulted in demand for shares 70 times greater than the number reserved for the public at the time of the offering. While the IPO left many disappointed, the lucky few who managed to acquire LG Energy Solution shares did not regret their investment. Introduced at a price of 300,000 won per share, the stock jumped 68% on its first day of trading. Since then, of course, the stock has undergone a correction – like most technology stocks in 2022. However, it is still trading at more than 25% above its opening price.
LG Energy Solution is not the only battery specialist to perform well on the stock market. China’s CATL, the world leader in the sector, has seen its share price soar by almost 1,000% in four years since its IPO in June 2018. Another Chinese company, BYD, has experienced a similar share price rise – more than 600% over the last five years. What is behind such investor appetite? "The battery sector will experience massive growth over the next few years," says Anna Väänänen, Global Environmental Equity Fund manager at Mirova. "These attractive outlooks are appealing to investors."
Currently valued at around $100 billion, the global rechargeable battery market is expected to reach $284 billion in 2030, according to the Indo-Canadian firm Precedence Research. This is a very conservative assessment given that there are several types of batteries – lead, nickel and lithium in particular – and demand for lithium-ion (Li-ion) models alone should drive the global market to much higher levels. In 2021, Li-ion technology generated between $40 to $60 billion. This figure is expected to rise to between $180 billion and $280 billion by 2030, according to estimates by various research firms with varying degrees of optimism.
This very wide range can be explained by the fact that the battery market, although 150 years old, is still in its infancy or, at least, in the midst of a revolution. The appearance of Li-ion models – first marketed in 1991 – has completely changed this century-old industry. Capable of storing much more energy than previous lead- or nickel-based technologies, lithium batteries have enabled the development of mobile electronics since the 2000s and electric mobility since 2010, and will play a key role in stationary energy storage in the future.
"People think the battery sector is already huge. But this is just the beginning," enthuses Michael Pye, an investment manager at Baillie Gifford. "As a comparison, it’s a bit like if we had just installed the first oil wells in Texas. The growth potential is enormous."
"Rechargeable batteries are set to become an essential link in the energy transition," confirms Väänänen. "They will enable the electrification of society, a process that is needed to reduce our consumption of fossil fuels." The electric mobility sector is currently growing rapidly and will be the main driver of demand in the coming years. According to a report by the World Economic Forum, the demand for battery power for transport will increase tenfold, from 229 gigawatt hours (GWh) today to 2,333 GWh in 2030.
Giacomo Fumagalli, a stock market analyst at Robeco, confirms that demand will soar: "In 2021, 6.6 million electric vehicles were sold worldwide, accounting for over 8% of global sales. This means that there is a lot of room for growth," says the analyst. "According to forecasts, sales of electric vehicles could exceed 10 million units in 2022. Despite inflation, the sector will thus continue to grow this year. Moreover, with the gradual banning of internal combustion vehicles (the European Union has voted to ban the sale of new models in Europe from 2035), we expect the penetration rate of electric cars to reach 50% worldwide by 2030."
This transition has been made possible and has accelerated thanks to the steep drop in the price of lithium batteries, which fell to an average of $132 per kilowatt hour (kWh) in 2021 from $1,200 in 2010, a drop of almost 90%. "Prices will fall further in the next few years," predicts Nicolas Jacob, thematic stock manager at Oddo BHF Asset Management.
"They should fall below the symbolic threshold of $100 per kWh in 2025 – the rate at which electric vehicles become equivalent to petrol cars in terms of cost." But isn’t there a risk that the emergence of other technologies, such as hydrogen-powered cars (see the September 2020 issue of Swissquote Magazine) will derail these positive forecasts? Absolutely not, according to Xavier Regnard, Utilities & Energy transition analyst for Bryan, Garnier & Co: "Hydrogen-powered cars are also equipped with batteries," he points out. "Whatever type of mobility we choose in the future – battery, hybrid or hydrogen vehicles – we cannot do without batteries. They are essential for decarbonising transport."