The growing ecosystem around electric vehicles

We saw recently the perceived value of EV charging networks when carmakers such as GM and Ford adopted Tesla’s charging design. One could mistakenly think that these moves would be the end of other EV charging networks, but that is not what we have observed in the market. The outcome is rather, that the industry is moving towards one standard, but there will be many providers in the EV charging network industry. Our thinking is that the capital requirements for EV chargers are quite high, and as EV competition heats up and other EV charging networks grow, Tesla will slowly reduce its capital expenditures rate on chargers.

The reason why EV charging networks are interesting is that they will be become the future “oil pipelines” in the electrification and generate attractive returns because just like pipelines and railroads, multiple charging stations are not put close to each other. This also means that the economics of scale will increase over time and we also predict that in the distant future there will only be a few EV charging companies controlling the entire market. Already today, several EV charging companies are profitable or close to become profitable. This is another interesting feature. It is a fast growing industry and doing it with positive profitability.

The table below shows the largest publicly listed companies within EV charging and battery recycling highlighting the growing ecosystem around electric vehicles.

Batter recycling will become a huge market in the future

Yesterday’s bid read in the FT was about battery recycling and why the industry needs a revolution, and today the Wall Street Journal is also writing an article about battery recycling. As EV adoption will happen at a blistering pace and ore grades will deteriorate in the future, recycling of old batteries will be key to keep prices low on batteries and also a necessity for the environment as batteries are quite toxic.

The future growth prospects of battery recycling are so good that one of the biggest players in the global recycling industry, Umicore, has built its entire 2030 strategy, called RISE, around its Battery Recycling Solutions business group. Around 75% of its capital expenditures in the period 2022-2026 are going to be dedicated to battery materials, battery recycling, and fuel cells with battery recycling being the most significant growth business. Umicore already announced a significant scale-up of its battery recycling activities in Europe with a 150,000 ton battery recycling plant which will become the largest in the world.

The biggest pure play on battery recycling is the US publicly listed company Li-Cycle, but here the investor is betting on lithium-ion batteries being the long-term winning battery technology, or at minimum that Li-Cycle can change its recycling business if another technology wins out. In any case, the idea with today’s equity note is provide some inspiration to growing ecosystem around electric vehicles.