What happened

It's looking like Tuesday's stock market will be a confusing one for lithium battery investors, as stocks of all stripes move in differing directions despite little "new" news.

In 12:10 p.m. EDT trading, for instance, we see shares of Chinese lithium battery manufacturer CBAK Energy Technology (NASDAQ:CBAT) giving up an early 20% gain to settle down up just 2.1%. Things don't get much clearer further up the supply chain, where Piedmont Lithium (NASDAQ:PLL) is up 22% and holding onto its gains, but Lithium Americas (NYSE:LAC) is losing 11.7%.

Let's see if we can make some sense of this mess.

Red arrow swoops up and blue arrow swoops down.

Image source: Getty Images.

So what

We'll begin with CBAK Energy, a small-cap maker of batteries in China that's so under the radar that we haven't written about it here at The Motley Fool even once -- but that is getting some attention here in the wake of Tesla's (NASDAQ:TSLA) ballyhooed Battery Day last month.

Despite sporting a market capitalization just 1,470th that of Tesla, CBAK bills itself as a competitor to the electric cars-and-batteries pioneer. In a press release last week, CBAK argued that its dual "tabless" rechargeable lithium battery was superior to "Tesla's cathode tabless design in its 4680 model," offering "greatly improved" performance.  

Just corporate trash talk, you say? Perhaps. But CBAK says its "32140 large-sized cylindrical tabless battery has officially passed its technical and Pilot Plant tests," and the company is gearing up for "mass product delivery in the first half of 2021." For car companies that compete with Tesla, CBAK's offering of a bigger battery with "5 times" more energy capacity per sell and a "20% reduction in cost per kilowatts" could prove attractive.

Now what

Next, moving up the supply chain just a bit, we come to start-up lithium miners Piedmont Lithium and Lithium Americas, which as I mentioned, are moving in opposite directions. Why might this be?

Analyst reports of an impending crunch in lithium supply are certainly a factor. As Tesla continues to ramp up production, and other carmakers develop and market their own electric car alternatives, demand for both rechargeable batteries and the lithium to make them is sure to rise. Still, at present, neither Piedmont nor Lithium Americas is producing lithium metal at scale. 

The main difference: Piedmont has secured a supply agreement with Tesla, while Lithium Americas has not. Granted, even Piedmont's deal appears to be conditional upon the company being able to begin deliveries before July 2023, which is far from certain. Still, having that deal in hand gives Piedmont a significant leg up over the competition.

This, in a nutshell, is why I think Piedmont stock is continuing to rise today, while Lithium Americas is starting to fall.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.