FREYR: A Lean, Green, Battery Making Machine
October 04, 2022
Read Time 3 MIN
This is the first entry in a regular series on our portfolios companies that we believe are at forefront of current trends in their respective areas, characterized by innovation, technological advances, and superior management.
Go Leaner, Go Greener
In our view, there few companies as well positioned to benefit from the tailwinds of energy transition policy in the U.S. and Europe than FREYR*.
Based in Norway, FREYR manufactures lithium–ion based batteries for industrial and electric vehicle (EV) applications, using a novel process that reduces cost by over 50% versus conventional methods.1 What’s more, FREYR does this with a dramatically lower carbon footprint by – among other means of reducing its greenhouse gas emissions – using 100% renewable energy to power its facilities.
As we build out the new energy supply chain to focus on domestic supply and with a lower environmental impact in mind—lean, green, and ultimately highly competitive – is where we look to be positioned.
Battery Landscape Shifts Dramatically
Prior to 2020, the top 10 battery manufacturers were all headquartered in China, Japan and South Korea, with the top three – Contemporary Amperex Technology Co., Ltd. (CATL)*, LG Energy Solutions*, and Panasonic – comprising approximately 70% of the total market.2 Meanwhile, the U.S. only accounted for around 10% of total EV production and 7% of global battery capacity, while Europe contributed very little to the overall battery supply chain (other than through cobalt markets, where it has averaged around 20% of global processing capacity).3
By 2022, the landscape for battery manufacturing had shifted dramatically, with nearly every major auto manufacturer announcing plans for EV model launches within the decade. A rapid increase in EV sales during the pandemic, coupled with the Russia–Ukraine war, had placed tremendous pressure on supply chains and input prices. In addition, a slew of net–zero ambitions globally for transport electrification resulted in an estimated tenfold increase in planned EV battery capacity by 2030.
Why “Cheaper” Matters
When we look toward potential winners in the battery manufacturing sector – a capital intensive, competitive margin business – we are looking for companies with a sustainable business model focused on innovation and cost competitiveness.
FREYR licenses its manufacturing process from a Massachusetts Institute of Technology (MIT) startup, 24M. 24M’s process takes a conventional 15–step battery production process and reduces it to 5.4 The end result is a battery with the same performance attributes, but manufactured at a meaningfully faster rate using less equipment and materials.
Most Capital–Efficient “Gigafactory” in Europe?
Source: FREYR. Data as of June 2022. Estimated manufacturing costs per FREYR’s 2Q 2022 Earnings Presentation.
A battery typically accounts for around 40% of the total cost of an EV.5 So, a structurally cheaper battery stands to be highly competitive to auto manufacturers—particularly those trying to innovate and capture price–sensitive consumers all while battling dramatic cost inflation.
Net Zero EVs start with a clean battery
FREYR’s Giga Arctic Factory in Norway – slated for a 2024 start – is expected to be among the most capital–efficient battery plants in Europe. Based on the company’s current projections, the plant will have a capacity of around 43 gigawatt–hours, making it one of the largest battery manufacturers on the continent.6
Location is a critical element of the factory’s potential success as it sits within a region of Norway that is supplied by an abundant amount of low–cost renewable energy. Combined with its efficient manufacturing process, we believe this should result in a total manufacturing cost of around less than half that of current competitors’, globally. The factory’s carbon footprint should also be meaningfully lower – roughly 80% less than the global average7 – which reflects the ultimate sustainability of its battery.
Significantly Lower Carbon Footprint
Source: FREYR. Data as of June 2022. Estimated carbon emissions reductions per FREYR’s 2Q 2022 Earnings Presentation.
This particular business model is being expanded through joint ventures into the U.S., where it should remain competitive with its innovative manufacturing process and, additionally, benefit from the recent federal level incentives provided by the Inflation Reduction Act.
The energy transition is undoubtedly disrupting the current flow of how we produce and consume electricity. Acknowledging that transitions can also take time, we remain committed to finding companies that can innovate and operate sustainably, with an eye towards the future.
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Important Disclosures
* Note: As of August 31, 2022, FREYR represents 1.34% and 4.62% of net assets for the VanEck Global Resources Fund and VanEck Environmental Sustainability Fund, respectively. As well, CATL and LG Energy Solutions represent 1.54% and 1.83% of net assets for the VanEck Environmental Sustainability Fund, respectively.
1 FREYR, 2Q 2022 Earnings Presentation, July 2022.
2 Visual Capitalist, Ranked: The Top 10 EV Battery Manufacturers, September 2021.
3 International Energy Agency (IEA), Global Supply Chains of EV Batteries, July 2022.
4 FREYR, Company Presentation, February 2022.
5 IEA, Global Supply Chains of EV Batteries, July 2022.
6 FREYR, 2Q 2022 Earnings Presentation, July 2022.
7 Ibid.
The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
The views and opinions expressed are those of VanEck. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.
VanEck Environmental Sustainability Fund: You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. An investment in the Fund may be subject to risks which include, among others, investing in derivatives, equity securities, emerging market securities. environmental–related securities, foreign currency transactions, foreign securities, investments in other investment companies, management, market, new fund risk, non–diversification, operational, sectors, small and medium capitalization companies, special purpose acquisition companies. Small–and medium–capitalization companies may be subject to elevated risks.
The Fund’s sustainability strategy may result in the Fund investing in securities or industry sectors that underperform other securities or underperform the market as a whole, and may result in the Fund being unable to take advantage of certain investment opportunities, which may adversely affect investment performance. The Fund is also subject to the risk that the companies identified by the Adviser do not operate as expected when addressing sustainability issues. Regulatory changes or interpretations regarding the definitions and/or use of sustainability criteria could have a material adverse effect on the Fund’s ability to invest in accordance with its sustainability strategy.
Companies that promote positive environmental policies may not perform as well as companies that do not pursue such goals. Issuers engaged in environmentally beneficial business lines may be difficult to identify and investments in them maybe volatile. Environmentally–focused investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by the Adviser or any judgment exercised by the Adviser will reflect the opinions of any particular investor.
VanEck Global Resources Fund: You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with concentrating its investments in Canadian issuers, commodities and commodity–linked derivatives, commodities and commodity–linked derivatives tax, derivatives, direct investments, emerging market securities, ESG investing, foreign currency transactions, foreign securities, global resources sector, other investment companies, management, market, operational, small–and medium–capitalization companies and special purpose acquisition companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation.
Investing involves risk, including possible loss of principal. Please call 800.826.2333 or visit vaneck.com for a free prospectus and summary prospectus. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and summary prospectus contain this and other information. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
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Important Disclosures
* Note: As of August 31, 2022, FREYR represents 1.34% and 4.62% of net assets for the VanEck Global Resources Fund and VanEck Environmental Sustainability Fund, respectively. As well, CATL and LG Energy Solutions represent 1.54% and 1.83% of net assets for the VanEck Environmental Sustainability Fund, respectively.
1 FREYR, 2Q 2022 Earnings Presentation, July 2022.
2 Visual Capitalist, Ranked: The Top 10 EV Battery Manufacturers, September 2021.
3 International Energy Agency (IEA), Global Supply Chains of EV Batteries, July 2022.
4 FREYR, Company Presentation, February 2022.
5 IEA, Global Supply Chains of EV Batteries, July 2022.
6 FREYR, 2Q 2022 Earnings Presentation, July 2022.
7 Ibid.
The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
The views and opinions expressed are those of VanEck. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.
VanEck Environmental Sustainability Fund: You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. An investment in the Fund may be subject to risks which include, among others, investing in derivatives, equity securities, emerging market securities. environmental–related securities, foreign currency transactions, foreign securities, investments in other investment companies, management, market, new fund risk, non–diversification, operational, sectors, small and medium capitalization companies, special purpose acquisition companies. Small–and medium–capitalization companies may be subject to elevated risks.
The Fund’s sustainability strategy may result in the Fund investing in securities or industry sectors that underperform other securities or underperform the market as a whole, and may result in the Fund being unable to take advantage of certain investment opportunities, which may adversely affect investment performance. The Fund is also subject to the risk that the companies identified by the Adviser do not operate as expected when addressing sustainability issues. Regulatory changes or interpretations regarding the definitions and/or use of sustainability criteria could have a material adverse effect on the Fund’s ability to invest in accordance with its sustainability strategy.
Companies that promote positive environmental policies may not perform as well as companies that do not pursue such goals. Issuers engaged in environmentally beneficial business lines may be difficult to identify and investments in them maybe volatile. Environmentally–focused investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by the Adviser or any judgment exercised by the Adviser will reflect the opinions of any particular investor.
VanEck Global Resources Fund: You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with concentrating its investments in Canadian issuers, commodities and commodity–linked derivatives, commodities and commodity–linked derivatives tax, derivatives, direct investments, emerging market securities, ESG investing, foreign currency transactions, foreign securities, global resources sector, other investment companies, management, market, operational, small–and medium–capitalization companies and special purpose acquisition companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation.
Investing involves risk, including possible loss of principal. Please call 800.826.2333 or visit vaneck.com for a free prospectus and summary prospectus. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and summary prospectus contain this and other information. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
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