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Electric vehicles (EVs) have cemented themself in the automobile industry, with several legacy automakers planning or already selling a range of electric cars. Tesla (Nasdaq: TSLA) still holds the biggest EV market share, but now names such as General Motors, Ford, Volkswagen, and Toyota are rapidly electrifying their production line-ups as demand soars. 

These automakers are spending big cash to solidify themselves within the EV market, hoping to captivate consumer attention with faster, sleeker, and more efficient models than their competitors. 

While companies are putting their money where their mouth is, governments on the other hand have also vouched their support for a more sustainable automobile industry with a wave of progressive green deals and tax policies that are helping accelerate the global EV transition. 

As automakers are revving up their performance for yet another record-breaking year, despite economic and political difficulties hampering their growth, behind-the-scenes electric car battery manufacturers and lithium suppliers are making as much noise, attracting widespread investor attention. 

Industry research by McKinsey shows that the demand for EV batteries is expected to grow by 30%, nearing 4,500 gigawatt-hour a year globally within this decade. Further estimates show that between 2020 and 2030, the battery value chain is expected to grow by as much as ten times to reach an annual revenue as high as $410 billion.

While predictions and estimates are somewhat translucent at this point, as supply chain issues could damper such ambitious revenue growth, electric car battery manufacturers and suppliers are building a new market of opportunities, fueled by innovation and a growing desire for sustainability. 
 

EV battery stock picks for a solid investment in 2023 

Investing in EVs can be diverse, with automakers, producers, raw material suppliers, and component manufacturers for electric cars making up an intrinsic value chain. While there are major opportunities across the board that could pivot inventors into a new generation of portfolio diversification. 

Given current broader macroeconomic circumstances investing in EV battery makers provides both an upside and downside in the near term, requiring investors to be more agile with their investment strategies. 

Nonetheless, while there are several difficulties that EV battery manufacturers can face, here’s a look at some of the most promising stock options for investors that are eager to get their share of the electrifying automobile industry. 
 

Panasonic Corporation 

As a household name for kitchen and entertainment electronics, Panasonic (OTCMKTS: PCRFY) has more than four decades of industry experience. In fact, the company has the same amount of expertise in battery cell and systems production, which is exactly why it’s currently partnered with Tesla. 

In its portfolio, Panasonic has a diverse selection of supplying electric and hybrid car makers with batteries and has held to its legacy as being one of the leading producers of battery cell systems over the last several decades. 

Based on recent stock market indicators, year-to-date (YTD) performance has jumped by 25%, showing solid year-over-year growth indications. Additionally, the company reported growing revenue and net income for its financial year ending December 2022. 

There is however a potential downside to Panasonic, although stock performance has been strong, the company does however have a diversified portfolio of interest, which not only focuses on battery cell system production. Other services could have a difficult time this year, as consumer spending starts to slow down. 
 

Albemarle 

Known as one of the leading producers of lithium, a key component and requirement in EV batteries, the mining and materials company Albemarle (NYSE: ALB) has recently narrowed its focus toward lithium supply as this business segment has shown continuous growth.

ALB has shown steady performance on the stock market, although YTD prices have come down by 7%, after peaking at $285 per share back in mid-February. Despite sluggish growth, ALB currently has a pay-to-earnings (P/E) ratio of 6.37 as of May 2023, and a dividend yield of 0.81% for the same period. 

There is however the fact that Albemarle operates on a cyclical business model, which could see stock prices ebb and flow during the year as demand, price and supply for lithium batteries fluctuate. 

Nonetheless, the company is positive that revenue is expected to grow between 55% and 75% this year, and the American mining giant is currently in talks with Chilean officials to nationalize the industry. This could help boost its dominance in the region, but some factors could further hamper its growth if geopolitical tensions tighten. 
 

BYD 

The Chinese electric car maker BYD (OTCMKTS: BYDDF) has made headlines in recent weeks, following the news that the company is now looking to start production of its vehicles in Vietnam. This could present a major upside for an EV maker to tap Southeast Asian markets but could be a strong rival for the country’s well-known EV startup giant, VinFast. 

Nonetheless, BYD has solidified itself as both a car maker and EV battery producer, giving them and investors a diversified selection of market segments that the company is successfully tapping into. 

The company is one of a few Chinese EV makers that reported strong revenue growth, with YOY revenue up by a whopping 410% for the full financial year of 2022, ending March 2023. With a healthy balance sheet and substantial cash flow, there's a growing opportunity as the company looks to become a pioneer for electric cars on the global stage. 

BYD brings diverse expertise to the marketplace, having its business focused on both electric vehicles and batteries. This means that most components are manufactured in-house, and the company has minimal outsourcing, lowering additional expenditure, and keeping their labor costs low. 
 

Sociedad Quimica y Minera de Chile

Perhaps not a direct manufacturer of EV batteries, Sociedad Quimica y Minera de Chile (NYSE: SQM) proves to be an undervalued lithium stock option but plans to nationalize Chile’s lithium mining sector has sent alarm bells across markets in recent weeks. 

Unfortunately, political outcomes stretch far beyond investors, but with steady performance on the back of industry-wide problems, from labor shortages, supply chain issues, and rising costs, Sociedad has held steady over the last year, with prices sliding by 7% YOY. 

Starting with its bottom line, the company reported full-year revenue growth of 189% for last year, ending December 2022. Additionally, its net income rose to $1.15 billion, and cash from operations climbed to $1.14 billion over the financial period. 

SQM has received two separate Buy ratings over the last six-month period, but near-term turbulence could rattle investors, with further potential looking more promising at the back end of the year. As of December 31, 2022, Navellier & Associates, a Nevada-based investment firm is the company’s top investor, with a $6.6 million stake in Sociedad Quimica.
 

Looking forward 

While there are other stock options to mention along these picks, it’s possible to see these companies outpace the wider market competition in the latter half of the year, as they hold steady cash flow, market influence, and a combination of lucrative partnerships with electric car makers. 

Tight macroeconomic conditions could see a retraction in consumer spending, which could lead to slower demand for both EVs and EV batteries. Nonetheless, these companies provide a valuable upside to the overall growing industry, as they've positioned themselves well within the business and production chain. 

Going forward, investors should consider how these and other companies can weather down potential economic volatility, including a looming recession, a banking crisis, and the impending U.S. debt ceiling. Regardless, it’s smart to strategically plan for the future, not only in terms of where investors want to take their portfolios but also in the bigger picture of sustainability and clean energy. 

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