Electrovaya Takes on the Lithium Ion Battery Market

The lithium ion battery market is a huge, and it’s growing every year. However, due to the high cost of entering this market, there aren’t a lot of newcomers to the space.
Electrovaya (TSX:EFL), a small lithium ion battery company, is set to change this. Although the TSX-listed company only has a market cap of $226.92 million, it’s starting to make significant waves in this multi-billion dollar sector.

What is Electrovaya?

Lithium ion batteries are Electrovaya’s bread and butter. The company develops, manufactures, and markets Lithium Ion SuperPolymer batteries and related products for the cleantech transportation, utility scale energy storage and smart grid power, consumer and healthcare markets. So far, this focus seems to be working. As the world turns away from coal and oil and gas towards electricity, the demand for these lithium ion batteries is increasing.
As Das Gupta states, “we know how to generate clean energy (be it solar, wind or nuclear) and we know how to use it. However, we don’t know how to deliver it.” That’s where these batteries come in – they are uniquely suited to transport clean energy where it’s needed most. Indeed, Das Gupta describes lithium ion batteries as “solar in the night, wind on a calm day.” Essentially, they are the missing piece in the cleantech puzzle.

Lithium ion battery market

Currently, the lithium ion battery market is dominated by some of the biggest names in tech. Das Gupta explains that Panasonic (OTCMKTS:PCRFY), LG (NYSE:LPL) and Samsung (KRX:005930) virtually own the market. The reason for this highly concentrated is because of the high cost of entering the lithium ion market: “you need an absolutely gorgeous battery factory, without that you can’t deliver.”
Tesla (NASDAQ:TSLA), one of the few smaller participants in the lithium ion battery space, has recently teamed up with Panasonic to create a $5 billion plant in Nevada. Electrovaya, for its part, managed to mitigate this enormous upfront cost by acquiring Europe’s largest 0.5 Gigawatt hour plant, Litarion GmbH, back in spring 2015. At the time of acquisition, the plant was producing for a German Automaker. The plant was put on sale because it wasn’t core to their business. Electrovaya jumped on this opportunity and made off big time. Because of this successful acquisition, Electrovaya was able to enter the market in a way that proves impossible for most other small (and large) tech companies.
In addition to purchasing the plant, “Electrovaya purchased the rights to a very good ceramic separator that the previous company developed.” Due to this separator, Electrovaya was able to distinguish itself as producing the safest lithium ion batteries on the market. It’s this degree of safety – in addition to a multitude of international patents – that mean that Mercedes Benz (OTCMKTS:DDAIF) relies on Electrovaya for all of their lithium ion battery needs.

Future plans

Electrovaya has been on a hot streak in recent months. On May 26, the company announced a multi-year master service agreement with a Fortune 1000 company for the supply of lithium ion batteries. Over a three year period, the agreement is expected to generate revenues upwards of $80 million. Meanwhile, in June the company announced another significant agreement: a $220 million deal with leading European battery OEM who designs and integrates battery systems for e-mobility applications, including electric buses. This deal was fortuitous for the company, considering that ID TechEx Expert analysts predict that the electric bus market will need $32 billion of lithium batteries in coming years.
All told, these recent deals suggest that Electrovaya is headed for big things fast. Right now, the company is a little bit under the radar. Das Gupta describes it as a “hidden stock.” For investors looking for the next lucky break in the lithium ion batteries, Electrovaya might just present the opportunity they were looking for.