Solid Power (SLDP +6.89%) designs solid-state battery technology. Founded in 2011, it went public in December 2021 via a special purpose acquisition company (SPAC) merger.
Solid Power intends to license its designs or sell its solid electrolyte for use in production at other battery manufacturers. Its technology is also compatible with existing technologies, so its designs can get to market faster.
In 2024, Solid Power won a $50 million award from the U.S. Department of Energy to produce its electrolyte materials for solid-state batteries. The award should help bolster its cash runway, as its minimal revenue from partners began to stall in the latter half of 2024.
In 2026, the company plans to expand its electrolyte production capacity by 150% to 75 metric tons, and by 2028, it could produce 140 metric tons. Since it's backed by Ford and BMW, it should have customers lined up for its batteries if it can execute on its timeline.
BMW has already begun testing vehicles powered by its battery technology in Munich. Still, there's a risk that its technology won't work as well as expected or that competitors will develop a better product in that time.
Benefits and risks of investing in EV battery stocks
The benefits of investing in EV battery stocks include:
- A secular trend. Automakers are increasing their production of electric vehicles as demand continues to rise. Batteries are the most costly component of new EVs.
- Government support. The Inflation Reduction Act introduced incentives for EV battery production in the United States. Recent legislation has tightened requirements for manufacturers to receive those incentives, but they may still encourage new production and innovation in the industry.
- Nearing an inflection point. As EV battery technology improves and production costs decrease, we may be nearing an inflection point at which the cost of owning an electric vehicle falls below that of an internal combustion vehicle for the majority of consumers, accelerating growth.
The risks of investing in EV battery stocks include:
- Execution risk. EV batteries require extensive testing for both safety and quality. If a product doesn't meet an automaker's requirements or a competitor offers a superior product, it could reduce sales and profitability.
- Supply chain risk. The raw materials and components used to manufacture EV batteries come from all over the world. A single hitch in the supply chain could cause delays and increase costs for manufacturing, weighing on profitability.
How to choose EV battery stocks
There are many different ways to invest in EV battery stocks. You can buy manufacturers, suppliers, auto companies, battery pack component producers, or companies that integrate multiple aspects of those businesses.
But a successful investment in an EV battery stock will find a company with a solid financial footing, unique competitive advantages, and a long runway for growth. If you can buy a company with those three characteristics at a fair price, you're very likely to make a successful investment.
How to invest in EV battery stocks
Investing in EV battery stocks is simple. The following steps will walk you through it.
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Future outlook for the EV battery industry
Demand for EV batteries is expected to continue rising as manufacturers expand their electric vehicle designs to appeal to a broader set of consumers and meet environmental regulatory requirements.
With raw materials such as lithium, a key component in batteries, demand for the element is set to increase, benefiting miners. Meanwhile, the pressure is on EV battery makers to increase battery density and keep prices low as automakers aim to meet consumer price points.
Overall, the EV battery market is set to grow 22.5% per year through 2030, according to Research and Markets. However, investors shouldn't expect growth to be linear, as demand for EVs has been lumpy in recent years.
