Home etftrends.com Disruptive Tech Theme of the Week: Solid-State Batteries

Disruptive Tech Theme of the Week: Solid-State Batteries

There have been several positive developments announced recently related to the development of solid-state batteries technology for electric vehicles. Investors and automakers are excited about the next “disruption” of lithium-ion battery technology, which is smaller and safer. They can charge more rapidly and drive further on a single charge.

Solid State Batteries: The Next Revolution

According to the Financial Times, Toyota, the world’s largest automaker, has recently indicated that it is close to a manufacturing breakthrough in solid-state batteries with a range of up to 745 miles, so no more range anxiety for drivers. Toyota’s solid-state battery technology could be on the road as early as 2027.

EV battery manufacturers are in a race to produce solid-state batteries that are cost-effective, longer-range, and rechargeable in as little as 10 minutes. Those metrics are “super disruptive” and could shake up an industry now dominated by Tesla and China’s CATL and BYD. There also could be some geopolitical ramifications as well, threatening China’s dominance in the EV battery and battery metals space.

According to the IAE, China produced 75% of EV batteries last year. CATL, the world’s largest battery maker, claims a 37% market share. In response to these statistics, the Biden administration is pushing for more domestic battery manufacturing. US startup Factorial Energy just launched a new solid-state battery factory in its home state of Massachusetts.

The Manufacturer Angle

Among manufacturers, Toyota is not the only company in the solid-state battery race hoping to leapfrog China. Other Japanese auto manufacturers, such as Nissan and Honda, are on the solid-state bandwagon. In South Korea, its leading battery producers, LG Energy Solutions, Samsung SDI, and SK, are also on a path to develop solid-state battery solutions by the late 2020s. US public startups QuantumScape and Solid Power have partnered with German auto manufacturers Volkswagen and BMW on furthering solid-state battery technology. And don’t count China out either: Beijing-based WeLion appears to be in the solid-state battery lead, partnering with Chinese EV maker NIO.

Even NASA is working on solid-state battery technology, hoping it could push the boundaries of energy storage, “revolutionizing air travel.”  NASA has developed a new solid-state sulfur selenium battery capable of powering planes with electricity instead of gas.

ETF Plays on This Theme

One way to play this theme is by owning ETFs with exposure to battery technology and the EV supply chain, such as the Amplify Lithium & Battery Technology ETF (BATT). It has exposure to many of the companies involved in solid-state technology, along with the battery materials that will be utilized in solid-state battery chemistry. These materials include lithium, cobalt, nickel, manganese, and vanadium.

The GlobalX Lithium & Battery Tech ETF (LIT) also has exposure to battery technology and lithium metal miners, but it focuses on lithium and lacks exposure to other battery metals.

VettaFi’s Index Research shows that BATT and LIT have approximately a 45% holdings overlap with similar geographical exposure.

The WisdomTree Battery Value Chain and Innovation Fund (WBAT) would seem to fit the theme by name. However, among its top 10 holdings are many aviation names, despite its mandate to gain targeted exposure to companies involved in battery and energy storage solutions and innovation. It’s always a good idea to look “under the hood” and know what you own.

Targeting battery metals and less the battery technology, there is the ProShares S&P Global Core Battery Metals ETF (ION) to consider as a tangential play on battery metals used in EVs, including solid-state chemistries.

Consider the Automakers

Finally, for investors angling to play this theme through automakers like Toyota and pure-play EV manufacturers, there are several EV-focused ETFs to consider. These include the FirstTrust S-Network Future Vehicles & Tech ETF (CARZ), the Defiance Pure Electric Vehicle ETF (EVXX), the GlobalX Autonomous and Electric Vehicles ETF (DRIV), the KraneShares Electric Vehicles & Future Mobility ETF (KARS), the SPDR S&P Kensho Smart Mobility ETF (HAIL), and the iShares Self-Driving EV and Tech ETF (IDRV), to name a few.

Investors wanting to “magnify” their EV exposure can also consider the Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares (EVAV) that seeks to achieve 2X the performance of the Indxx US Electric and Autonomous Vehicles Index.

Electric vehicles were already expected to disrupt gas-powered vehicles. Solid-state batteries could fuel the next acceleration of this trend.

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