We recently published a list of the 11 Most Promising EV Battery Stocks According to Analysts. In this article, we are going to take a look at where Rio Tinto Group (NYSE:RIO) stands against the other promising EV battery stocks.
Despite the electric vehicle industry growing at a fast pace, some challenges remain. The major ones are range anxiety among consumers, slow battery charging time, and the availability of charging infrastructure. However, even with these challenges, the industry remains healthy and a lot of energy and resources are being contributed toward it.
The infrastructure market is expected to grow at a phenomenal pace as PwC expects the EV supply equipment (EVSE) market to grow from $7 billion to $100 billion by 2040, at a 15% compound annual growth rate.
For electric vehicle components, governments around the world are incentivizing EV production. For example, the U.S. Department of Energy (DOE) recently announced $1.7 billion in funding to transition 11 vulnerable auto manufacturing plants across eight states to EV production and related components. For more details, you can read 8 Best EV Stocks to Buy According to Short Sellers.
Advancements in EV Battery Technology
Due to the environmental impacts of internal combustion engines, scientists have also been working tirelessly to solve the current problems faced by EV batteries. Researchers, led by the University of Colorado Boulder, have uncovered the cause of battery degradation, a common issue that leads to reduced capacity over time. Their study, published in Science.org, may pave the way for improved lithium-ion batteries, which are crucial for EVs and energy storage.
Using advanced X-ray technology, they discovered that hydrogen molecules from the battery’s electrolyte bind to the cathode, taking spots meant for lithium ions, which weaken the battery’s performance. This new understanding could help engineers develop longer-lasting, cobalt-free batteries for EVs, which would increase driving range, reduce costs, and address environmental and ethical concerns related to cobalt mining.
Additionally, according to a research report published in Frontiers in Quantum Science and Technology, Yuji Hatano and his team explored the impact of transverse magnetic fields on diamond quantum sensors for EV battery monitoring. Their research aimed to improve measurement accuracy for temperature and magnetic fields, which are crucial for determining the state of charge (SOC).
The study showed that diamond sensors enhance SOC estimation, which could potentially increase the EV cruising range by 10%. A prototype demonstrated high precision with currents up to 1,000 amperes, and misalignment detection was highly accurate. The findings suggest diamond quantum sensors could significantly improve battery monitoring in EVs and other industries.
Moreover, solid-state batteries could also reduce the charging time in batteries which could drastically improve the consumer sentiment and increase the demand for EVs. It was suggested by Mark Fields, former Ford CEO and President on CNBC’s ‘Squawk Box’ and we discussed it in our article on the best EV stocks for the long term. Here is an excerpt from the article:
“Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station…
…He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.”
Our Methodology
For this article, we identified over 20 EV battery stocks through screeners and ETFs. We narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 12. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 hedge funds as of the second quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of an open pit mine, with workers extracting minerals.
Rio Tinto Group (NYSE:RIO)
Average Analyst Price Target Upside as of September 12: 27.18%
Number of Hedge Fund Holders: 29
Rio Tinto Group (NYSE:RIO) is a British-Australian multinational corporation, which is recognized as one of the largest mining and metals companies globally. The company continues to be a leading force in the global mining industry, contributing to various sectors, including copper, aluminum, diamonds, and most recently, lithium projects. It is our 9th most promising EV battery stock according to analysts.
Rio Tinto (NYSE:RIO) is strategically investing in its lithium capabilities by developing its own projects, especially the Rincon lithium project in Argentina, which includes a planned battery-grade lithium carbonate plant. In Serbia, the company is working to develop the Jadar lithium project, which has the potential to fulfill a substantial portion of Europe’s lithium demand.
On August 29, Bloomberg reported that Rio Tinto (NYSE:RIO) is one of the companies that have been shortlisted to develop lithium assets in Chile’s Altoandinos project. The initiative, announced by state-owned Enami, is part of a broader strategy under Chilean President Gabriel Boric to expand lithium extraction and boost output.
The Altoandinos project consists of three undeveloped salt flats, which are projected to produce 20,000 metric tons of lithium by 2032, with output expected to triple by 2037. Enami plans to finalize partner selections by March and is currently negotiating terms with the listed companies.
Apart from lithium, Rio Tinto (NYSE:RIO) is also a major producer of copper which is a key component of batteries. In the first half of the year, the company mined approximately 327 kilotonnes (kt) of copper and is on track to mine 660 to 720 kt in 2024.
Rio Tinto projects a 2% growth in copper equivalent production for the year and aims for a 3% annual increase from 2024 to 2028 through its ongoing and upcoming projects. The company expects to see more cash flow from the Oyu Tolgoi underground copper mine and additional benefits from their investments in the Simandou project and the Rincon lithium project. The Oyu Tolgoi mine has increased its copper production by 15% compared to H1 2023 and is on track to produce 500,000 tonnes of copper annually from 2028 to 2036.
9 analysts have covered Rio Tinto (NYSE:RIO) stock with an average price target of $78.75. The price target represents an upside of 27.18% to the company’s stock from September 12 levels.
In the second quarter, 29 hedge funds held positions in the company, at a combined value of nearly $1.3 billion. As of June 30, Fisher Asset Management is its largest shareholder with 17.04 million shares, worth $1.12 billion.
Overall RIO ranks 9th on our list of the most promising EV battery stocks. While we acknowledge the potential of RIO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RIO, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.