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Is there a force in the known universe that can rein in Tesla (TSLA)? The stock is up another 50%, in just a month.

But I’m not here to kick up a fuss about the prices of electric vehicle (EV) stocks. Instead, I’ll show you an off-the-beaten-track—and possibly more profitable—way to invest in the EV revolution.

The world’s leading investment bank, UBS, recently released an in-depth report on battery materials for its institutional clients. And I have their permission to share some of their mind-boggling estimates with you.

Spoiler: at today’s prices, lithium might run out by 2025. And as electric cars begin to take over the roads, lithium stocks could turn out to be some of the biggest winners.

I’ll go over the numbers in a moment, but first let’s talk cars.

EVs are going mainstream very soon

EVs are still pricey and often impractical.

And, unfortunately, being the most fervent environmentalist in the world won’t get you a Tesla with a maxed-out battery. That’s why—despite all the fuss—EVs made up less than 1% of the world’s cars last year.

But at least one of those roadblocks is going away very soon.

UBS analysts crunched the numbers on the progress of seven different battery technologies (in tech lingo: “battery cells”). They estimate that EVs will reach a cost parity with gas-powered cars by 2024.

Let that sink in.

As soon as four years from now, EVs will cost no more than the “dirty cars” most people are still driving. That's the tipping point that will make people go from “One day I’ll buy...” to “Hmm, should I buy an electric or gas car?”

For this reason, UBS projects that EVs will make up nearly half of all new car sales by 2030, as you can see here:

That said, 10 years is a long time, and telling what those cars will be is a flat out guess. But you can count on one thing: they’ll all be stuffed with tons of lithium-ion batteries.

EVs will need more batteries than we can wrap our heads around

As you probably know, lithium-ion batteries have been around for decades. Right now, and every day all day, they power billions of devices: Bluetooth earbuds, cameras, laptops, and e-scooters—anything you don’t need a cord for.

But all the world’s gadgets are just a drop in the ocean compared to the battery power 3,500-5000 lb vehicles will eat up. Take a look at this chart which shows how EVs will explode battery demand in the coming years:

By 2030, EVs will need 2,700 GWh worth of lithium-ion batteries a year. For perspective, that’s equivalent to 225 billion iPhone 11 batteries—and 13X more battery power than we use today.

Now, lithium batteries are made of a number of materials and chemical compounds. And their composition varies based on technology. I’m not a chemist, but I can tell you one thing: no lithium-ion battery can be made, well, without lithium.

It’s the lightest metal on earth and the key component of today’s rechargeable batteries. And obviously, as demand for batteries grows, so will demand for lithium. In fact, UBS analysts estimated that the lithium market will grow 8X by 2030. 

Problem is, where will we get all this lithium?

Lithium producers are not ready for the coming wave of EVs

Lithium is not a rare metal. There’s plenty of it, but it’s tucked away in the earth’s crust. That means you need mines and often large-scale operations to extract it—and these might take years to explore and set up.

And here comes the kicker.

Since 2018, lithium prices have crashed 60-70% to rock-bottom lows. The drawdown forced miners to cut back on operations and call off the exploration of new mines. And now there’s a very limited number of projects making lithium.

Take a look at this chart. It shows how much lithium we’ll need vs. how much all the world's mines could supply in the coming years:

As you can see, by 2025 swelling lithium demand will most likely outgrow the supply of all the known lithium projects.

“There is not sufficient supply to meet this demand projection based on our knowledge of known projects today. That includes all projects whether they are under construction, in feasibility or still in exploration,” wrote Glyn Lawcock, Global Head of Mining Research, in the report.

And as long as lithium prices stay low, producers aren’t inclined to lift a finger to dig up new mines. For this reason, UBS analysts think that lithium prices have to go up 20% to avoid a crunch in the long run.

Great news for lithium producers

You don’t have to be a Wall Street trader to connect the dots here.

Millions of battery-powered cars will hit the road in the 2020s. And each year they’ll need more and more and more lithium. Meanwhile, record-low lithium prices are holding a heavy lid on the lithium supply.

And that means two things.

Lithium demand will go up. One bullish point to lithium producers who will sell more lithium.

Then as lithium demand soars, so will lithium prices to spur the build-out of new mines and meet the growing demand from EVs. Another bullish point to lithium producers.

All this hints that lithium producers might be in for a hell of a decade. And there are a couple of ways to invest in this.

You could look into lithium producers—such as Albemarle (ALB), the world’s largest lithium producer. Or you could go broad and buy an ETF tracking a basket of lithium stocks. The biggest one is Global X Lithium & Battery Tech ETF (LIT).

Invest in the EV revolution with a hedge fund manager by your side

Early next year, we are launching our first investment advisory service led by a hedge fund manager who oversaw $10 billion in assets for some of the biggest U.S. institutions—including Ivy League colleges.

More on that very soon, but I can tell you this… I’m confident this is going to the best “tool” on the internet to learn how to think and invest like a Wall Street pro—for life. (No get-rich-quick stuff.)

Meanwhile, you can join the waiting list and reserve your seat.

Disclaimers:
The Information contained in this newsletter is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. Everything you've read doesn't constitute individual investment advice and is not designed to meet your personal financial situation. People involved in the making of Meanwhile in Markets may from time to time have positions in the securities or commodities covered in the publication.