Considerable consumer uptake and government tax credits are driving the rate of EV adoption. Therefore, the prospects for the EV battery market look bright. However, not all EV battery stocks are well-positioned to benefit. Although Morgan Stanley (NYSE:MS) recently upgraded the rating of FREYR Battery (FREY), concerns over a lithium shortage and the company’s fundamental weakness led the investment bank to downgrade the rating for QuantumScape (QS). So, let’s discuss.Electric vehicle (EV) adoption has increased in recent months due to growing concerns about the environment and climate change. The bipartisan infrastructure bill recently signed into law provides $7.50 billion to encourage mainstream EV adoption. And last week, the House of Representatives passed the broader $1.75 trillion Build Back Better Act, which includes an up to $12,500 per vehicle tax incentive for EV owners.
Given EV’s great prospects, the global EV battery market is expected to grow at a 26% CAGR to reach $175.11 billion by 2028. Therefore, Morgan Stanley (MS) has upgraded the EV battery stock of FREYR Battery (FREY).
Conversely, a shortage of lithium supply, an essential component of EV batteries, could disrupt the battery-making process. And lithium supply is expected to be in severe deficit by 2027. Given this downside and its weak financials, the investment bank has downgraded QuantumScape Corporation (QS).