We recently compiled a list of the 11 Best Lithium and Battery Stocks To Invest In. In this article, we are going to take a look at where Sigma Lithium Corporation (NASDAQ:SGML) stands against the other lithium and battery stocks.
The West Auto Industry Faces Uncertainty with Potential Tariffs and Policy Reversals
According to a Reuters report from November 6, automakers are preparing for potential changes under President-elect Donald Trump, including new tariffs on vehicles imported from Mexico and the reversal of pro-electric vehicle policies. Trump has indicated plans to rescind EPA and Transportation Department regulations and may reduce or eliminate EV tax incentives.
Moreover, the Zero Emission Transportation Association expressed a willingness to collaborate with Trump on future EV development. Trump has also warned of tariffs of up to 200% on Mexican vehicles and is considering similar measures for imports from other regions while encouraging foreign automakers to build plants in the US.
Additionally, in October, Reuters reported that the European Union approved additional tariffs on Chinese electric vehicles, ranging from 7.8% to 35.3%, on top of the existing 10% duty, in response to what it calls unfair subsidies by China. These tariffs, effective October 30, aim to address concerns over subsidized raw materials, batteries, and financing, with China opposing the decision and calling for negotiations to prevent further trade tensions.
China has launched its own probes into EU imports, including pork, dairy, and brandy, potentially retaliating against the EU measures. Chinese EVs currently account for 8% of the EU market, a figure expected to grow to 15% by 2025, with their prices typically 20% lower than European counterparts. The investigation has caused division within the EU, with Germany opposing tariffs while France supports them.
Future of Electric Vehicles in the U.S. Amid Political Changes
GlobalData lowered its 2030 U.S. EV market share forecast from 33% to 28%, citing weakened emissions standards and a focus on lower oil prices after the 2024 elections. Bloomberg reported on November 7 that Mark Wakefield of AlixPartners highlighted that $129 billion in EV investments through 2027 and the $7,500 EV tax credit may be at risk. Automakers are expected to cut EV spending, delay new models, and shift production toward hybrids and gasoline vehicles, like Volkswagen’s adaptation at its South Carolina plant. While reversing Biden’s Inflation Reduction Act could prove challenging, changes to fuel economy standards are likely, though their impact may not be felt until later in the decade.
Optimism for Lithium Demand Amid Market Recovery
The lithium market has experienced a huge decline over the past several quarters due to oversupply and lower demand. However, Ana Cabral, Co-Chair & CEO at Sigma Lithium is positive about the future demand for lithium as discussed in a September interview with CNBC. She noted that lithium prices hit a low point in August but have been recovering steadily. The Chinese recovery package, the largest since COVID, has especially boosted the market, as China accounts for more than half of global EV sales.
While the U.S. has seen slower EV adoption compared to China and Europe, with growth in China outpacing the U.S. and Europe, the fundamentals remain strong. As China continues to dominate the EV market, it plays a crucial role in driving demand and lithium prices. Regarding other uses of lithium, Cabral emphasized that EV batteries remain the primary driver, especially as automakers shift away from combustion vehicles, which is expected to create further demand in the coming years.
Our Methodology
For this article, we used stock screeners to identify around 20 lithium and/or battery stocks and chose the 11 stocks most widely held by institutional investors. The stocks are listed in ascending order of their hedge fund sentiment, as of Q3 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).
A mining truck hoding a payload of mineral ore, a visual representation of the companies resources.
Sigma Lithium Corporation (NASDAQ:SGML)
Number of Hedge Fund Holders: 16
Sigma Lithium Corporation (NASDAQ:SGML) is a major global lithium producer focused on providing carbon-neutral, sustainable lithium concentrate for electric vehicle batteries. The company operates its Grota do Cirilo facility in Brazil, where it produces Quintuple Zero Green Lithium. This process is distinguished by its commitment to environmental and social sustainability, using zero carbon energy, no potable water, no toxic chemicals, and no tailings dams.
Phase 1 of production began in Q2 2023, and Sigma Lithium has approved a Phase 2 expansion, which will increase its production capacity to 520,000 tonnes of lithium concentrate. In Q3, the company secured BRL 487 million (BRL1 = US$0.17) from Brazil’s Development Bank (BNDES) to fund its second Greentech Carbon Neutral Plant and expand production at Grota do Cirilo. It covers 99% of Phase 2 CapEx, with favorable terms including a 2.5% fixed interest rate and 16-year maturity.
On December 3, Sigma Lithium (NASDAQ:SGML) announced that it is in the process of shipping 27,500 tonnes of its Quintuple Zero Green Lithium from the Port of Vitoria to IRH Global Trading LTD in Abu Dhabi, showing the company’s operational efficiency and ability to meet sales goals. The company achieved a peak production of 900 tonnes per day, reaching an annualized production rate of 270,000 tonnes, a level expected to be maintained. It is focused on expanding production capacity, with plans to reach 100,000 tons of LCE by 2026, backed by new plant construction and further cost optimization efforts.
Overall SGML ranks 7th on our list of the best lithium and battery stocks to invest in. While we acknowledge the potential of SGML 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 SGML but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
