To The Moon

Strategy 1

The Battery Inflection Point

At the beginning of the last decade, electric vehicles were limited for a key reason: the batteries were too expensive!

The average cost for batteries was about $1,000 per kWh. To put that in perspective, the base level Model 3 Tesla announced in 2017 had a 50 kWh battery. Meaning at 2010 battery prices, the car would have had $50,000 in battery costs alone!

When you look at the numbers, it becomes clear why Elon Musk started with a roadster and luxury car: Those were the only segments where electric cars could com- pete while battery production costs were driven down.

Today, the battery situation is much different. Last year, a Chinese company broke the $100 per kWh barrier.

"With battery costs falling 90? in little more than a decade, this is setting up a key inflection point where EVs could soon be cheaper to produce than gas-powered cars. This price point advantage will rapidly drive EV volume."

So, while the cost of batteries faces price pressure in the coming years, their improved economics will also drive a massive influx in volume.

In addition, batteries are the very foundation of an electric vehicle. Maintaining a technology and manufac- turing edge in this space could drive the winners in the coming era of electric and self-driving vehicles.

BYD ($BYD(01211)$ & $BYD Co., Ltd.(BYDDF)$ ) Market Cap:65.84Bil (Recommended)

(Not only a leader in battery tech but owns its manufacturing)

The leader of BYD — Wang Chuanfu — has been called the Henry Ford of China. In the past 15 years, he’s taken the company from less than a billion in sales to more than $20 billion today.

Along the way Warren Buffett became an investor (his investment is now up 30-fold), and BYD became what we’re confident is the best all-around bet on the electrification of vehicles.

BYD is big in not just cars but also trucks, buses, and even monorails. Most importantly, the company not only is a leader in battery technology but also controls its own manufac- turing. As battery costs and technology reach an inflection point, BYD should form a corner- stone position in your portfolio.

Strategy 2

Next-Generation Batteries

While battery technology today is already approaching an inflection point where its reduced costs drive EV prices below gas-powered cars, there’s a second strategy to pay attention to in batteries that could produce incredible upside for in-the-know investors.

That is: There are a number of battery technologies that could become game-changers if commercialized.

Behind the scenes, battery technology is experienc- ing rapid change. In September, Tesla hosted a “Battery Day,” where it claimed new battery cell designs would give vehicles a 54% boost in energy density and range. Translation: EVs Tesla recently sold with a 300-mile range will soon sell with 500 miles of range at the same price point. (And this new battery technology could even allow Tesla to push entry-level cars down into the $25,000 range.)

Yet, behind the drumbeat of technology and progress from the largest battery producers like Tesla and BYD, there are ideas in battery technology that could prove extremely disruptive.

Let’s take a look at the battery technology QuantumScape [NYSE: QS] is developing — solid-state batteries. The promise of this technology is it provides extremely fast charging and significantly higher energy density than today’s battery technology.

The problem: Solid-state battery technology has never been viable because past prototypes created needle-like deposits of lithium that would short-circuit and cast fires. QuantumScape claims to have solved this problem. As always, what works in the lab and

at full-scale production can be very different, but you can see for yourself in the chart below the step change QuantumScape’s technology (lithium-metal batteries) provides over today’s technology.

The bottom line: If next-generation battery tech- nology takes off, it creates a far larger market than most investors realize today. The economics of batteries

not only push an EV inflection point in cars, but other transport like buses and semis.

In addition, every advance in battery technology makes their use in power generation and storage that much more compelling, creating a “virtuous cycle” in the demand for batteries across the world.

QuantumScape ($Quantumscape Corp.(QS)$) Market Cap:47.39Bil (Recommended)

(A risky yet high-upside battery technology investment)

We described QuantumScape’s battery tech- nology above. If it works at full production, it could be a game-changer for the battery space.

However, please be aware this is a higher-risk play than many of our other recommendations. Before investing in QuantumScape, make sure to read our full recommendation to understand both the upside and risks of this investment.