Editor’s Note: We’re continuing Jeff’s discussion of the future of electric vehicle (EV) batteries. As he shared yesterday, EV batteries are in deep need of more metals…

And today, he goes further into the problems we need to solve in this space… and where the battery industry is moving in the years to come…

Dear Reader,

The mass adoption of electric vehicles (EVs) has been called a “revolution.” And it will be.

As my longtime readers know, we are in the early stages of a multi-year trend in the adoption of electric vehicles, as this chart shows:

But the EV revolution won’t be easy, and it won’t be without setbacks. Yesterday, we discussed one of those obstacles: the rising cost of battery metals and the impact this is having on the affordability of EVs.

For the mass adoption of electric vehicles, we will need the production costs of these cars to be on par with internal combustion engine (ICE) vehicles. We’ve still got some work to do on that front.

But there’s another issue that current generation electric vehicles are facing… The current lithium-ion batteries just aren’t that good.

Current EV batteries have limited range, take a long time to recharge, have decreased battery life in extreme temperatures, and can sometimes spontaneously catch fire…

There must be a solution. And there is.

Today, I’ll share the latest research on the next generation of electric vehicle batteries… and what it means for the industry – and for us as investors.

Competing with the Internal Combustion Engine

Today, most electric vehicles are used as “commuter cars.” We can drive our EVs to work or to the grocery store. But when it comes to longer trips – several hundred miles – there are problems.

For starters, most EVs have a range of around 200 miles per charge. That’s fine for getting around town, but it’s a far cry from the 400+ miles we’d typically expect from an ICE vehicle with a full tank.

Charging these EVs is also a time-consuming process. Even Tesla’s incredible “Superchargers” take around 30 minutes to deliver a full charge. Again, compared to the time it takes to fill our tank, EVs lose out.

And as I shared yesterday, current lithium-ion batteries have been known to spontaneously combust. Chevrolet had to recall tens of thousands of its Chevy Bolt EVs last year because of this.

These are all obstacles the industry must overcome if we want EVs to be the dominant form of transportation in the years ahead. Fortunately, there is a solution.

The Future of EV Batteries

The future of the EV industry will be with solid-state batteries. But before I show how this technology works, it’s worth looking at how current generation EV batteries operate.

At a very high level, current generation lithium-ion batteries look a bit like the graphic below. On one side, we’ve got something called an anode. And on the other side, we have a cathode. The device in the middle is called a separator.

And all the little yellow circles below are lithium ions…

That’s why they’re called lithium-ion batteries. The light blue is an electrolyte – a non-aqueous liquid material through which lithium ions can pass very easily. The separator is porous, which allows the lithium ions to pass back and forth.

The anode holds the lithium ions in a charged state. And when we need to use electricity, the power goes out, and the lithium-ion shuttles back to the cathode without the charge to get ready to be charged up again. This is the process that makes current EV batteries “run.”

The separator is important. Because if we mix an anode and a cathode together, we’re going to get fire.

That’s where the real issue with lithium-ion batteries comes in…

The Problem With Lithium-Ion Batteries

The problem with lithium-ion batteries is the lithium ions. They latch onto the anode and grow dendrites – little metallic microstructures.

And the dendrites continue to grow as you use these batteries. In the worst-case scenario, they grow through the separator and into the cathode.

Here’s what it looks like:

Dendrite Growth Under Different Currents

Source: Battery Power Online

As we move to the right, we increase our amperage and typically get more dendritic growth.

Here’s another visualization:

Dendrites Crossing Separator

Source: Wikipedia

When dendrites cross the separator, it happens throughout the battery, not just in one spot. And that’s when we hear about batteries catching fire.

Obviously, this is a huge problem. In recent years, many of us have likely heard stories of EVs catching on fire and causing injuries or property damage.

And while this is rare, it is one big reason the auto industry is investing billions of dollars trying to figure out how to make the next great battery tech.

And catching fire isn’t the only issue we’re trying to solve…

As I mentioned above, range and charging times are hurdles for the industry if we ever want to reach mass adoption.

All of these issues have left the industry looking for technology that can improve our battery performance and safety.

So what’s the solution?

What Comes Next

The industry believes the answer is solid-state batteries. There are a few clear benefits. Let’s a look at the image below…

Lithium-Ion Vs. Solid-State Batteries

Source: C&EN

On the left, we’ve got the traditional lithium-ion. That’s what we’ve been discussing.

On the right is an example of a solid-state battery. We still have an anode and a cathode. But the solid electrolyte in the middle acts as the barrier, the medium through which lithium ions can go back and forth.

There are some strong advantages to having a design like this if we can make the chemistry work.

On the solid-state side, we get higher energy density and lower weight with respect to the energy that we’re carrying. When we lower the weight of a car, we get more margin in the range of the vehicle.

What does this mean in terms of range? Some researchers estimate that solid-state batteries would result in 80% more range for an electric vehicle. We would be looking at potentially 400+ miles of range per charge. That’s on par with what we’d expect from many gas-powered cars.

Those same estimates predict that charging time would also decrease. Charging a solid-state battery from 10% to 90% would take less than 20 minutes. That’s a game changer.

And a solid-state battery theoretically can be designed to not be flammable. That’s – obviously – another big positive.

These batteries can also perform well at high temperatures. So if you’re in a warm climate, a solid-state is going to be better than our lithium-ion batteries.

The only advantage of lithium-ion batteries is they’re cheaper because we’ve been manufacturing them for decades. And it’s a very well-proven technology.

But lower costs for solid-state batteries will likely come with time. And the good news is that some very innovative companies are working on this problem now.

Companies to Watch

One early-stage company I like right now is Enovix (ENVX). Unlike other companies working on solid-state batteries, Enovix has a strategy for revenues in the near term.

The company is starting off with smaller batteries, and they’re targeting the consumer electronics industry. And over time, they’ll expand the size of the batteries and start building them for EVs. That’s smart.

Enovix is commercially producing products for a well-established, high-volume market. They’re going to get a lot of experience, generate revenue, and eventually get to the stage where they can serve the EV market.

Now, it’s worth understanding that this is an early-stage company. It will be very volatile, especially in a market like this. So I encourage all readers to be rational with position sizing for an investment like this.

But for those of us looking to gain early exposure to the future of battery technology, Enovix is a great place to start.

Regards,

Jeff Brown
Editor, The Bleeding Edge