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Chapter 1: What is the ACDC ETF and its significance in the battery technology market?
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Chapter 2: How has the battery technology industry evolved over time?
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And before you acquire or apply for a financial product, please read the PDS or product disclosure statement, which should be available on the issuer's website. Lastly, please keep in mind that past performance is not indicative of future performance. Kanishka, thanks for joining me on the podcast again. No, thanks for having me, Owen.
It's always a pleasure to come on and talk ETFs with you, to talk investing. This time we're talking a mega trend, which is battery supply. And in particular, we're going to call out the ACDC ETF, which is one of the ETFs from the range of ETF securities, ETFs that you manage. I think a really good way to set the scene for ACDC is to just maybe we can start at the beginning.
People may have come across the ticket code. It's got a bit of a fun ticket code. But maybe I'll just hand it over to you to give us a bit of background into, you know, I guess, renewable energy and battery storage in particular and how that market has evolved.
Chapter 3: What are the differences between lithium, nickel, and cobalt in battery production?
And then we'll talk about some of the, I guess, the more intricacies of what's actually inside the ETF.
Yeah, definitely. So it's funny. I think what you mentioned earlier, We've had this ETF now out since August 2018 and is covering the broader spectrum of the megatrend of battery technology and also lithium as well. So people will run into that in a bit more detail later, but people need to be aware that it's not just the technology side, it's also the resource aspect as well.
But taking a step back, you know, batteries and of what batteries is, I was actually looking at some research and the oldest found battery was called the Baghdad battery. It was found from 2,000 years ago. It was basically a ceramic pot battery. There's still not much known specifically around, you know, what it was used for, but did that
the time that the term battery was first used was actually Benjamin Franklin used in 1749 when he was doing experiments with electricity. And the first true battery was in 1800 by an Italian physicist, Alessandro Volta. So it was only until 1980 that you actually had this American physicist by the name of Professor John Goodenough, and he invented a new type of lithium battery.
And, you know, obviously we'll talk about why lithium is really now the future of battery technology.
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Chapter 4: Who are the major players in lithium production and battery technology?
But if you take that, 2000 years, essentially. It's a bit of a slow, innovative sort of journey. But since 1980 and since 1991, which is when Sony commercialized the first lithium battery, you've really seen this massive sort of innovation that's occurred around battery technology and specifically also on the lithium side. Now, why is that? So why have we just seen this big push?
I think there's two reasons for this. One, There is this big push, not only from consumers, but also from governments and corporations as well, to look at more renewable sources of energy. And batteries comes into that. So trying to move away from oil, coal power plants, et cetera, and finding new technologies and ways in which
You know, we'll talk about the Paris Agreement or, you know, to try to really consider what is going to be, you know, the most sustainable future for the world. And batteries is really going to be the focus of that. And that's why we've been seeing this big, I guess, push on the innovation side.
The other aspect is, as you've seen more technology in the battery side really grown, you've actually seen greater uses of battery technology.
Chapter 5: What is the methodology behind selecting companies for the ACDC ETF?
So when Sony first launched the first lithium battery, essentially, it was mainly... used in diskmans, as you and I may know of them. People that are listening to this podcast may not know what a diskman is, but MP3 players, cell phones at the time, laptops, so small battery cells.
And if you think about how much a cell phone uses or how much a laptop uses, it's essentially a laptop is using about 50 watts, watt hours. Now, as the technology has improved and the storage of lithium,
the density or the size of the lithium batteries the the life of them as well and the recharging aspect so this will talk about the value chain soon but an electric vehicle uses about 40 kilowatt hours for 40 000 watt hours so A massive jump up, but that's what we've seen is that evolution in the battery technology industry and the battery technology side.
So it's slowly moved away from just being, you know, if you looked around your room right now and even someone that's listening to this podcast, they're going to be listening to it on the phone. So they're using a lithium battery. But we're just at this inflection point of what the market can look like.
So my understanding from what you just said there, Kanish, is effectively the battery technology driven by lithium has actually become more efficient and more effective while at the same time it's being used in more devices and more applications.
Exactly right. So we're looking at some research in terms of what the size of the market is as well. If you take it back a step and you go, well, the entire battery market in 2017 valued about 110 billion US dollars.
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Chapter 6: How has the ACDC ETF performed since its inception?
Now, the lithium battery market in 2019 was about 36, 37 billion US dollars. If you look forward by, you know, sort of 2027, for example, we're expected to be, the total battery market will be about 310 billion US And the lithium battery, so the lithium portion of that, will be about $130 billion.
So the total battery market, that's running at about a 14% compounded annual growth rate, and the lithium is running at about an 18% compounded annual growth rate from 2020 to 2027. That may actually be less than what it will end up because simply being this big push that we've currently got at the moment towards the
sort of green solutions, green projects, especially with Biden coming in as well and his big focus of trying to revolutionise this entire industry as well.
It's one of those things where I think as human beings, we often underestimate the ability for things to change, especially when there's compounding involved. What that figure in 2027 ends up being could be radically different.
My perception would be that it would be a bigger number than perhaps even what some of the researchers are considering, just simply because even anecdotes around me would be that friends and family are asking about these things now more than ever. And then on the investment side, one of the questions that
we get a lot is talking about the ACDC ETF, talking about ethical ETFs with this particular focus on sustainability. And so we're getting it from almost every angle, with consumers, businesses, government, and investors. Everyone is, every stakeholder is pushing for this. So it's a really interesting industry. Kenneth, we talked a bit off air about
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Chapter 7: What are the risks associated with investing in the ACDC ETF?
And you alluded to it there about lithium being potentially a better source of energy for batteries than what we've seen in the past. I'm not sure if you know much about this, but maybe if you can shed any light on the difference or why lithium is the choice for many smartphones and different products these days.
So I guess lithium ion batteries, they have the highest charge density. Essentially what that means is they give you a ton of energy without being very heavy. So that's really what it comes down to. So when you're talking about carrying your phone, you don't want your phone to be weighing one kilo, for example. That's not going to make it portable.
When you're driving a vehicle, you want it to have the most power and the longest storage of energy. So I've never driven a Tesla myself before.
but from watching, you know, Top Gear and et cetera and from seeing people that, you know, drive a Tesla and say that that ludicrous mode where some of the Teslas now can do sort of zero to 100 kilometres in sort of sub three seconds, which is extremely fast, that sort of Formula One sort of speeds, that is really only possible from the use of a lithium battery.
So it can provide that real big source of power But now as the technology is improving, you can actually have a Tesla at the moment where you don't need to charge it every day. It can run for sort of 300 miles, for example. 275 miles, I think, is the capacity, depending upon the type of Tesla you get and the long range, et cetera. So that's sort of what we're looking at.
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Chapter 8: How can investors participate in the ACDC ETF?
Lithium is the highest charge density, so it gives you a ton of energy, not very heavy. When you consider... cobalt and nickel and the other types of technology that exists. There are certain limitations with some technologies and cobalt is one in particular. So cobalt is a natural material. It's very, very short in supply. It's only found in a few places on earth.
And obviously because of its use within the chemical compound that makes up lithium batteries, it actually is seeing its demand rising. So prices of cobalt is really increasing. There's a bit of a concern around the supply of cobalt, for example. or even nickel.
And what you're actually seeing in Tesla, Elon Musk came out last year creating the first Tesla vehicle that wasn't using cobalt in its battery at all. And that was for just a Model 3 in China. So you're starting to see developments in terms of trying to phase out some of these materials so that they're not as reliant upon them. And that's probably one of the things we've seen is
the reason why the adoption of electric vehicles, which really is going to drive most of the battery sort of technology space and the battery demand looking forward for the next 20 or 30 years, has been slightly slower than what experts may have felt, you know, have wanted is because of the cost.
And it's really the initial drive away cost that when you walk into a dealership, they say, yep, sweet, I'm going to buy this battery electric vehicle. But the cost is quite high. It's because of some of these inputs such as cobalt and the price of cobalt really rising.
Yeah, I have noticed that I have friends and family who have even looked, not so much with the automotive side, but just with their off-grid housing, just trying to put a battery alongside their solar panels is often, it is the most costly part of the whole setup. So they've almost been put off by how expensive it can be. You mentioned something earlier on there, Kanisha.
I think you talked about the value chain when it comes to battery technology and lithium. Can you explain what you mean? Because I think this is going to tie in nicely with the ACDC ETF. It's kind of that how does the battery become a battery and then who are the key players in that space and how can we as investors profit, I guess, is where we're going.
yeah definitely so think of the battery value chain it's made up of a number of different industries across the globe so start at the at the beginning you need the mining and the chemical industry so these are the ones that are producing your raw materials to actually manufacture the battery cell components so that is companies in australia has a number of these and within our etf acdc we
We actually have a few lithium mining companies within the portfolio. So companies like Galaxy Resources, Pilbara, et cetera, they are companies at the raw material stage. Then you start to progress forward and you've got the manufacturing.
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