Investment Exposure to Tesla Without Risk

in Finance/Opinion/Technology by

Tesla Motors (TSLA) is more valuable than Ford or GM, but this can not last. Undeniably, Elon Musk’s baby is in a bubble. Having gone up nearly 900 percent in the past 4 years, something is bound to change the moment the company stumbles.

What makes Tesla so special?

Having entered the market as a new company, tesla developed their battery technology from scratch. This allowed them to integrate their batteries into the frame of the car in a move that has as of yet been unrepeated in the industry. But what makes them so valuable?

Their Lithium battery technology.

Although Tesla is overinflated, lithium has been largely overlooked. According to Seeking Alpha:

1) Consumer electronics continue to grow and increased CPU capacity requires increasing battery capacity. I model consumer electronic demand for lithium to rise at 10%pa.

The rise of the global middle class with their insatiable appetite for consumer electronics (think mostly smartphones, tablets, PCs) will drive steady but not spectacular demand for lithium.

2) Electric Vehicles (EVs) sales growing at about 30-50%pa. 2015 growth was 40%.

Electric car global sales are currently 0.85% market share, and I expect this to grow to around 5% market share by end 2020. That equates to an increase from around 774,000 sales in 2016 to around 4.5m sales globally in the year 2020. If we assume the average electric car will have a 50kWh battery then each car will require about 40kgs of lithium. So by 2020 4.5m cars will require 180,000 tonnes of lithium carbonate. Adding to this will be lithium demand from electric buses, electric bikes, and electric trucks.

3) Energy storage sales expected to grow at 50%+ pa between 2016 and 2020.

In 2016 energy storage installations grew 100% in the US. Lithium-ion batteries represented at least 97 percent of all energy storage capacity deployed in 2016. China plans to raise its power storage capacity by ten-fold to 14.5 gigawatts by 2020 (from 2016 ). Citigroup forecast that the global energy storage market will be greater than $400 billion by 2030 from around 130m in 2015, or a growth of a staggering 3,077 fold in just 15 years.

Despite this, there options exist which you an to add to your portfolio if expecting to gain on the much-hyped Tesla Model 3 and the developing Lithium market.

The best bet, check out LIT, a low cost Lithium ETF, which is sure to go up over the long run as electric cars and energy storage dominate, from which, you might also expect short term profit. I prefer ETFs to individual stocks due to their diversification. However, if you prefer stocks in your portfolio, check out: SQM, ALB, and FMC.

Takeaway:

Tesla’s Time of gains are coming to a close and with it, comes the time to invest in lithium.

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