Bernstein said the U.S.’s imposition of higher tariffs on Chinese electric vehicles will have an impact on the U.S. battery supply chain and create investment opportunities. The White House said higher tariffs on Chinese electric vehicles and other products from the Asian giant were necessary to protect U.S. industry from unfair competition. Bernstein said in a May 13 report that these tariffs will benefit the U.S. battery supply chain, where demand is expected to grow at a compound annual growth rate of 25% to 30%. “We believe that the introduction of cheaper and better electric vehicle models will help drive the adoption of electric vehicles and reach an inflection point in the next few years,” Bernstein said. In addition, the Inflation Reduction Act (IRA) Subsidies relocating the battery supply chain to the United States also “had the desired impact,” it added. Bernstein pointed out that Korean companies currently “dominate” the U.S. battery supply chain. “We believe Korean companies are among the biggest beneficiaries, having stepped up investments in North America,” the report said, listing companies such as LG Energy Solution and Samsung SDI, which own more than 65% of U.S. batteries. Manufacturing capacity. “As the United States seeks to decouple from China, Korean companies are by far the biggest beneficiaries of the IRA and the shift to electric vehicles,” Bernstein analysts wrote. LG Energy Solutions has an added benefit, they added, That’s what’s most susceptible to growth and IRA benefits. But Bernstein said it currently prefers Samsung SDI to LG Energy Solution because the former offers “growth at a reasonable price.” In the cathode market, Bernstein said LG Chem is “the most prominent Korean company” and expects it to “eliminate the valuation discount” with LG Energy Solutions as its battery materials business grows. In fact, cathodes are the “most diverse” in terms of suppliers in the US market, with major companies not only from South Korea but also from Europe. European companies include Umicore and BASF. Bernstein gives Samsung SDI and LG Chem an outperform rating and LG Energy Solution a market perform rating. Bernstein has a Market Perform rating equal to a Hold rating and an Outperform rating to a Buy, the firm said. “Some of these companies are trading at very high valuation multiples, and the success of these companies will depend on how quickly electric vehicles are adopted and how big of a moat the IRA provides,” Bernstein said. Others have U.S. battery manufacturing capabilities, the company said. Companies include Panasonic, Tesla, Ford and Freer. In which areas will American companies have a greater share? Bernstein said domestic companies are focusing on next-generation battery technologies, such as solid-state battery technology, which could lead to “significant cost reductions.” Bernstein said major U.S. companies developing solid-state battery technology include QuantumScape, Solid Power and SolidEnergy Systems. —CNBC’s Michael Bloom contributed to this report.
