Why so many mega factories? It’s not just electric vehicles that are driving demand

Anyone who witnessed the cleantech bubble that burst a decade ago and invested heavily in emerging markets must be familiar with the current battery boom.

But this time around, they’re definitely bigger: the number of electric vehicles on the road, for example, has more than doubled in the last seven years, and demand doesn’t seem to be slowing down. The market share of EVs has grown while the broader car market has weakened in recent years.

It was enough to convince automakers and battery makers to invest nearly $300 billion in building a series of gigafactories around the world, more than $38 billion in the United States alone. That confidence swept the market, fueling waves of investment resulting from more than $42 billion in venture capital and private equity funding for battery research, development, commercialization and manufacturing.

For battery startups like Michigan-based Our Next Energy, going all in on the notoriously volatile auto market can be a risky proposition. Demand for cars and trucks usually falls when the economy collapses. Historically, electric vehicle sales have been tied to an even more volatile indicator: gasoline prices. And as COVID has shown, a few ripples in the automotive supply chain can send shockwaves through the market. Although the car market is large, that does not make up for the fact that margins are often tight.

When it comes to investing, the auto sector doesn’t seem like a good place to make the big long-term bets that gigafactories demand.

And yet the money keeps flowing, and companies like ONE and their investors are increasingly confident that this round of investment in climate technology will be very different from the last. What is behind this courage?

Source: La Neta Neta