Goldman Sachs names 6 EV battery stocks to watch beyond Tesla

Published Mon, Mar 1 20211:42 AM ESTUpdated Wed, Mar 3 20219:58 AM EST

The future of electric vehicles is going to be dictated by the firms who are trying to improve the batteries that power them, according to Goldman Sachs analysts. While Tesla is arguably the go-to stock for investors who want to back EVs, Goldman analysts believe there's money to be made on companies working on niche battery technologies. These firms, the investment bank says, are particularly well placed to make breakthroughs in the current lithium ion batteries, and the next generation of all solid-state batteries, or ASSBs. Here's the full list: Goldman has a buy rating on Japanese car giant Toyota, which it sees as a "good all-round player in battery technology" and a firm that is close to commercializing ASSBs. "The company is laying the groundwork to adapt to rapid advances in vehicle electrification," said autos analyst Kota Yuzawa in a research note on Feb. 20. It said the stock has a potential upside of 23.6%. With at least six electric cars coming in the next 12 months, German car giant Volkswagen is another buy rated stock for Goldman. "We believe Volkswagen's advantage with respect to batteries is the company's absolute scale and, importantly, the scale of VW's BEV (battery electric vehicle) ambitions," said European autos analyst George Gallier. He expects VW will sell more than 500,000 battery powered EVs in 2021 and launch up to 75 new models in the next nine years. It has a potential upside of 11.9%, according to Goldman. Goldman is also bullish on Belgian materials company Umicore. Goldman's European chemicals analyst Georgina Iwamoto sees the Brussels-headquartered firm as a "key enabler of the transition to EVs" and a company that could help deliver much needed improvements in battery density and ultimately cost. It says it has a potential upside of 5.7%. Denka is one of a handful of global companies that supplies a key component for lithium ion batteries called "ultra-pure acetylene black," also known as AB, and Goldman has it down as a buy. AB can help achieve the high density needed to increase the range of some EVs, prevent battery short circuits, and improve battery defect rates, according Atsushi Ikeda, a Japan chemicals analyst at Goldman. Ikeda points out that Denka has a dominant market share in its space of around 80% and says it has a potential upside of 24.2%. Goldman also likes the look of Zeon whose battery binder technology brings together the different components in lithium ion batteries. But that's not all it does. "As company strengths, we spotlight Zeon's ability to provide battery makers with product solutions, including battery design," said Ikeda. "Another strength is its ability to use a variety of approaches to improve core battery features, which we believe is a key factor contributing to the difficulty of replacing its products with rival mater