The Global X Lithium & Battery Tech ETF (NYSEArca: LIT) is trading slightly higher this year, but expanding battery capacity could prove to be an under-appreciated catalyst for the lone dedicated lithium ETF.
LIT, which is nearly nine years old, tracks the Solactive Global Lithium Index. One of the oldest thematic ETFs, LIT is designed to provide exposure to “the full lithium cycle, from mining and refining the metal, through battery production,” according to Global X.
“Battery metals tracker Adamas Intelligence says that in March 2019, battery capacity deployed worldwide in battery electric cars (including hybrids) nearly doubled from the same month last year,” reports Frik Els for Mining.com. “The Dutch-Canadian research company, which tracks EV registrations and battery chemistries in more than 80 countries, says 9.76 GWh of passenger EV battery capacity was deployed globally – a 94% year-over-year surge.”
Electric vehicles are in the early innings of development and there are signs that there is a lot of pent up demand among consumers whom want to embrace the technology. In 2017, electric vehicle sales represented 1.7% of all vehicle sales globally, exceeding 1 million for the first time and rising 51% year-over-year. The rate could continue to accelerate as a result of EVs becoming more economical than gas-powered cars and as a result of a pro-climate regulatory changes pushing to ban gas-powered cars.
Capacity Matters
Lithium-ion battery capacity is vital because one of the primary factors car buyers consider when evaluating electric vehicles is how long those vehicles can run on a single charge.
“This increase in battery capacity deployed is especially remarkable when considering that global EV sales increased by a mere 25% over the same period, speaking to the fact that a far greater number of high-capacity battery EVs (like the Tesla Model 3) were sold this March than the last,” notes Adamas.
Bolstering the long-term case for LIT is that global automotive industry observers believe electric vehicles will reach comparable price points to traditional internal combustion engine vehicles sometime in the next several years, making it more compelling for drivers to make the switch to electric vehicles.
“Lithium prices have remained under pressure despite the surge in global demand for lithium-ion battery-powered vehicles. The lithium price index compiled by battery supply chain research and advisory firm Benchmark Mineral Intelligence retreated in April and is now down 38% over the past year,” according to Mining.com.
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