Warren Buffett bet on lithium-ion batteries. How can you make money?

Lithium-ion battery prices are dropping, and electric car makers are growing in appeal to investors. Automakers have big plans for the future, and Omaha-based Oracle is among the investors in the sector

The electric car market has seen a marked recovery over the past decade. At the end of 2018, there were already 5.1 million electric cars worldwide. And that’s 60% more than at the end of 2017.

Many motorists switched to electric cars after regulators tightened their requirements for the amount of harmful exhaust emissions. This is due to the fact that electric cars are considered a more environmentally friendly mode of transportation.

Over the decade, the prices of electric cars have fallen dramatically. The fact is that along with the growth in sales of electric cars, the production of rechargeable (lithium-ion) batteries has increased, the cost of which has also decreased by 85%. Batteries are one of the most important, but until recently extremely expensive, parts of an electric car. Just a few years ago, they cost up to half the price of a car.

In addition to cars, lithium-ion batteries are used as energy storage in many areas of the economy. So there are many ways to make money from batteries, according to CNBC. The most obvious investment might be the securities of car companies – such as Tesla or Ford.

Lithium-ion batteries were developed back in the 1970s. But it wasn’t until 1991 that Sony found its first commercial application. It built them into a portable video recorder.

Now you can find them in almost anything, from iPhones to medical devices, airplanes and the international space station. Last year, the three scientists who developed the lithium-ion battery were awarded the Nobel Prize in Chemistry.

Lithium-ion batteries are the key to reducing dependence on fossil fuels, CNBC writes. Swiss bank UBS estimates the energy storage market could grow to $426 billion over the next decade.

Tesla was the first car company to put on the market an electric car powered by a lithium-ion battery: the all-electric Tesla Roadster sports car was introduced in 2008.

At the time, automakers were developing hybrid models that combined gasoline and electric engines. There was no talk of all-electric propulsion, as such cars were not cheap. For example, Tesla was selling the Roadster for $110,000.

Now it is more profitable and less labor-intensive than producing cars with gasoline engines. Virtually all automakers either already sell or plan to produce all-electric or at least hybrid cars.

In November, Ford said it was starting to take orders for the Mustang Mach-E. This is an all-electric car of the legendary model. Ford designed the Mustang Mach-E as one of the first in a line of 40 electric cars Ford plans to make by 2022.

Volkswagen revised its plans for electric cars in March. The company intends to produce 70 new electric car models by 2028. The previous benchmark was 50 cars.

Last year, GM CEO Mary Barra told investors that the company plans to reach break-even production of electric cars in 2021. And Britain’s Jaguar Land Rover, owned by India’s Tata Motors, intends to turn the company into a pure electric-car manufacturer within the next decade.

According to the International Energy Agency, 1.98 million externally-powered electric cars were sold worldwide in 2018 alone. As we wrote above, the total number of electrically-powered cars was 5.1 million. This is still relatively small, since there are now more than 1 billion cars on the road in aggregate. However, experts expect the share of electric cars to grow.

Bloomberg NEF predicts that by 2040, electric cars will account for 57% of total sales.