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A Gamechanger in Batteries?

InvestorPlace logo InvestorPlace 11/21/2019 Jeff Remsburg

A Phoenix-based startup company is claiming a massive breakthrough in battery technology. So, why are many skeptical?

This is the biggest advancement we have seen in the battery world.

We are not talking about small improvements; we are talking about doubling your cell phone battery capacity. We are talking about doubling the range of BEVs and hydrogen-electric vehicles around the world.

That bold statement comes from Trevor Milton, founder and CEO of Nikola Motor, a Phoenix-based startup focused on building futuristic electric semi-trucks.

Just two days ago, he claimed that his company has developed a new type of battery cell that offers double the energy density of current lithium-ion batteries, yet comes at only 40% of the weight and half the cost.

For any readers who aren’t aware, lithium-ion batters are the current batteries used in Teslas and other consumer-market electric vehicles, as well as many other electronic devices such as cell phones and laptop computers.

But, wait …

How is it that this startup has allegedly accomplished this quantum leap in battery technology while the rest of the industry has been making slower progress over the last few years?

From Milton:

They were looking in the wrong place, trying to make design improvements in what was already there. We started with a completely different approach to this, that gets all those metals out.

In today’s Digest, let’s dig into what we know about this breakthrough. It’s still shrouded in mystery, but what’s been revealed is exciting — in fact, there’s a huge plot twist in all this, which we’ll reveal at the end of this Digest.

It’s all just one more reason for investors to be bullish about the future of electric vehicles.

***Building a better mousetrap

Nikola isn’t providing many details at the moment, and a public demonstration won’t happen for about 10 months. But here’s what we know …

Today’s lithium-ion batteries use nickel, cobalt, and manganese. Ironically, earlier this week, the Digest covered the growing importance of nickel in today’s battery technology.

From that Digest:

Originally, cathodes comprised one part nickel, one part cobalt, and one part manganese. But cathodes with 80% nickel are expected to dominate the industry in the coming years as technologies advance.

But the news from Nikola — if accurate –upends this battery composition.

From Milton:

It’s the world’s first free-standing electrode automotive battery. We went to a whole different type of chemical, with a lithium component. It’s hard to explain what it is without giving up the secret sauce.

Milton claims that by avoiding using metals, his next-generation battery cuts cost and weight. Nikola’s battery cells will allegedly be exactly half the price per kilowatt hour.

So, lower cost and less weight. But how would such a battery perform?

From Forbes:

Battery packs using the new cells, which don’t use nickel, cobalt and other metals typically found in 2170 lithium-ion cells favored by Tesla, could boost range for current electric passenger cars from 300 miles per charge to as much as 600 miles with “little or no increase to battery size and weight,” the company said.

Nikola has subjected its cells to heavy-duty testing and says that charging and depleting them “over 2,000 times has shown acceptable end-of-life performance.”

That’s equivalent to driving a vehicle several hundred thousand miles, says Nikola CEO and Founder Trevor Milton …

If these battery packs do what Milton claims, it would be a gamechanger.

***The broader industry is skeptical

Now, before we give up on nickel as a way to play the electric battery revolution (like we talked about earlier this week) and lithium-ion batteries in general, let’s pause …

Nikola’s claims are being met with some skepticism by the broader industry.

From Inside EVs:

We tend to cultivate skepticism as a healthy tool not to create false expectations nor to make fools of ourselves when reporting anything. At the same time, we love to share good news and to talk about technology breakthroughs. But we are still undecided on how to classify Nikola Motors’ latest announcement …

What would (Nikola’s alleged breakthrough) represent to electric pickup trucks? That would have a massive impact on everything that is being done today.

That’s why we need more evidence that this is for real before celebrating anything. Unfortunately, Nikola did not provide that so far …

Nikola is in talks with “a world-class battery engineering team to help bring the new battery to pre-production.”

Did this team develop the revolutionary cells? Or was it a Nikola development? None of this is apparent at this point, so we are left just with the promises of what it could make.

Electrek went even further with its skepticism …

Like with any battery breakthrough, you need to take it with a grain of salt, but I’d take this one with a major grain of salt.

We are talking about Nikola Motor here.

Electrek goes on to reference a “patent trolling” lawsuit Nikola brought against Tesla, which Electrek calls “ridiculous.” It then paints the startup in a less-than-flattering light, concluding with:

… I’ll believe it when I see it. And by that, I mean to see it in a viable product in volume production because it’s not the same as a prototype.

***Regardless of how this drama with Nikola plays out, let’s remember the bigger picture

Whether fueled by a groundbreaking battery such as the one Nikola is claiming to have developed, or some other cutting-edge technology, we have enormous growth in front of us with electric vehicles.

And any battery breakthrough — regardless from where — will only accelerate that.

Remember, batteries are a huge expense with electric vehicles. Today, an electric car’s battery makes up between 30% and 50% of the cost of an electric vehicle. For context, a 500 km-range battery costs around $20,000. Plus, you have to add another $2,000 for the electric motor and inverter. Compare that with a gasoline engine that costs around $5,000.

So, any battery breakthrough that would slash this cost — leading to significantly lower overall electric vehicle prices — would have a massive impact on electric vehicle demand.

But what’s unclear at present is how to play this news as investors …

What does Nikola’s announcement mean for nickel? What does it mean for efforts to develop a solid-state battery? If Nikola’s battery is the real deal, will it partner with a major auto manufacturer to bring it to market? What would it mean for overall industry adoption?

And this brings us to the “plot twist” we referenced at the top of this Digest.

While being skeptical of a breakthrough is understandable and healthy, here’s a reason why we might want to take Nikola’s claims more seriously …

The company claims it’s going to share its technology — even with competitors.

If Nikola didn’t have something big, why make that claim?

From Transport Topics:

Due to the impact this technology will have on society and emissions, Nikola has taken what it described as an unprecedented position to share the intellectual property with other vehicle manufacturers, even competitors, that contribute to the Nikola IP license and new consortium.

a screenshot of a cell phone© Provided by InvestorPlace Media LLC

How will this all shake out?

At the moment, it appears we’ll have to wait until next fall when Nikola puts on a public display at its Nikola World technology summit in Phoenix.

You can be certain we’ll keep you informed here in the Digest.

Have a good evening,

Jeff Remsburg

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