Li Auto Stock – Why Lithium Americas, American Lithium, and Piedmont Lithium Stocks All Popped Today

What happened

Stocks related to lithium, the far-upstream source for renewable energy lithium batteries, are on fire today — in a good way. As of 12:10 p.m. EST, shares of Lithium Americas (NYSE:LAC) are up 10.8% while the similarly named American Lithium (OTC: LIACF) is gaining 12.5%, and Australia’s Piedmont Lithium (NASDAQ:PLL) is taking on 13%. Better-known, more established lithium miners like Albemarle (NYSE:ALB) and Livent (NYSE:LTHM) are enjoying more muted gains, up 3.2% and 6.3%, respectively.

And you can thank The Wall Street Journal for all of it.

So what

In a no-bones-about-it headline, Fintech Zoom announced over the weekend that “the battery is ready to power the world,” declaring that battery costs have reached “a tipping point” and “the rechargeable lithium-ion battery is poised to disrupt industries” once as dominant as the oil and gas industrial complex.  

Lithium batteries are of course used in all sorts of products, from cellphones to laptops to cars. Citing automotive industry experts in particular, though, the Journal notes that “electric vehicles are currently the main source of demand for battery cells,” and predicts that this trend has now become irreversible. Within five years, it predicts, it will cost consumers no more to buy an electric car than it costs to buy one powered by gasoline or diesel.

Now what

General Motors has already seen the writing on the wall, announcing late last month that it will phase out sales of internal combustion engine cars by 2035. Of course, that does pose one problem: Where to mine all the lithium that will be needed so that GM (and many other automakers) can build millions and millions of new electric cars and trucks?

As the Journal notes, with “nearly 65% of lithium-ion batteries [being made in China], the rise of rechargeable batteries is now a matter of national security and industrial policy.” And this fact explains why investors are so attracted to Canada-based Lithium Americas, as well as American Lithium and Piedmont Lithium, too, which is based in Australia but plans to do its lithium mining in the United States.

Investors can expect the rally in lithium stocks to be worldwide, however, as demand for the metal gets greater and greater. (Solid-state lithium metal batteries, for example, once they become mass-market items, are expected to boast much greater energy density — affording much greater driving range — but their greater use of the metal will only increase demand for it.)

For this reason, investors might be best advised to hedge any bets on unprofitable start-ups Lithium Americas, American Lithium, and Piedmont Lithium, by buying a few shares of more established, usually profitable — but perhaps less exciting — players like Albemarle and Livent, as well.