Most Wall Street players are, for good reason, very bullish on the emerging electric vehicle market. It’s not hard to see why considering industry research firm MarketsandMarkets forecasts 21.1% CAGR from 3.27 million EVs in 2019 to 26.95 million units by 2030. To that point, leading EV manufacturers like Tesla (NASDAQ: TSLA), Nikola (NASDAQ: NKLA) and ElectraMeccanica Vehicles Corp. (NASDAQ: SOLO) have charged ahead to record highs.
For those not interested in chasing EV makers, there are other ways to play the space, such as ETFs like Global X Autonomous & Electric Vehicles ETF (NASDAQ: DRIV) and ancillary plays, including miners of battery materials like Sociedad Quimica Y Minera De Chile SA (NYSE: SQM) and innovative tech companies that are part-and-parcel to the battery industry, namely KULR Technology (OTCQB: KULR), a pioneer in thermal management technology and battery safety built upon its core carbon fiber architecture. A great thing about KULR is the company is even more than just an EV play.
The company is well regarded for its work in space, a field that doesn’t necessarily create brand recognition for a small company here on Earth. With the products tried and true in zero gravity, though, KULR is heading for commercial markets with new technology the gives them a leg up on competition.
Bringing a Whole New Meaning to “Field Tested”
San Diego, CA-based KULR could legitimately make the argument that it is not just a global leader, but a “galaxy leader” in thermal management, considering its technology has been validated on Mercury and the International Space Station and is awaiting take-off this month as part of the Mars Rover in the upcoming NASA-JPL 2020 Mars mission. NASA selected KULR to provide thermal management for vital components in the Rover as part of the SHERLOC (Scanning Habitable Environment with Raman & Luminescence for Organics & Chemicals) that scans the dirt on the Red Planet for past life.
Quite simply, NASA wants to mitigate any risk of lithium-ion batteries suddenly exploding and a catastrophic fire spreading on Perseverance, which ultimately could destroy tens of millions of dollars of equipment and compromise a mission that cost over $2 billion. For that, NASA has turned to KULR and its PCM (phase change material) heat sink technology that is used to hold the proper temperature for the “eye” of SHERLOC in an extreme environment where the outside temperature averages -81 degrees Fahrenheit.
As explained by Dr. Timothy Knowles, Co-Founder and Chief Technology Officer at KULR, in a phone conversation with Baystreet.ca, thermal management isn’t always just about removing heat; there are dynamics to cold as well, particularly in contained systems in space.
The company’s space age technology has been frequently featured on mainstream media, including ABC, CNN and The Wall Street Journal. KULR’s list of partners and collaborators reads like a Who’s Who in Aerospace, including NASA, Boeing (NYSE: BA), Lockheed Martin (NYSE: LMT), Ball Aerospace (NYSE: BLL) and Leidos (NYSE: LDOS), amongst others.
That’s some pretty impressive company and credentials for tightly held – and little known – KULR.
From a Mars Rover to a Highway Near You
While work on Mars is great for the resume, KULR’s real value will be recognized by leveraging its roots in space to bring its Passive Propagation Resistant (PPR) battery design with Thermal Runaway Shield (TRS) to a litany of commercial applications. Potential uses abound, including EVs, energy storage, battery safety (including logistics), 5G infrastructure (Knowles calls this emerging market opportunity “gargantuan,” but that will be reserved for another discussion), cloud computing, defense and additional aerospace applications.
In a comprehensive analyst report by Litchfield Hills Research last month, the firm estimated that KULR technology has an addressable market of $8 billion. The analyst further expounds: “Both the growth of electric-motor based transportation and demand for increased safety of lithium-ion batteries are key drivers for KULR,” continuing, “KULR has what we believe to be better and lighter materials for thermal management.”
One of the biggest obstacles for Li-ion-using products (albeit a cordless drill, a child’s toy or a Tesla) is managing the considerable heat that is generated. Removal of heat is important not only for performance, but also longevity, as there is a direct correlation between temperature and battery degradation.
When heat isn’t controlled, a cell can combust, immediately causing the adjacent cell to explode and so on. In a nutshell, KULR’s carbon fiber technology goes between the cells to encapsulate the initial faulty cell (and fire) while keeping the others around it cool. This video provides a little color on how efficient KULR technology truly is at controlling the fire should one occur.
Of course, the beauty of the technology is the displacement of heat to prevent a fire in the first place.
As expected, Knowles was tight-lipped about any direct comments with respect to any penetration into the EV space, only commenting that striking a deal with any real player in the EV space takes plenty of time, demonstrations and negotiations. “We’re biased, of course, but we believe our technology is head and shoulders over any competition and we remain optimistic towards the opportunity in a still very young EV marketplace,” he said.
A Total Solution
The opportunity crystalizes with the understanding that KULR brings a total solution to battery safety to commercial markets. This is accomplished by utilizing ultra-lightweight and pliable carbon fiber material (vertically stacked Carbon molecules) with superior thermal conductivity and heat dissipation. Years of R&D have positioned KULR with products for testing and shipping Li-ion batteries in addition to the thermal management for the primary purpose of the battery system.
As consumer devices shrink, miniaturized and more powerful batteries have become increasingly popular, with Li-ion batteries the preferred source of energy. Allied Market Research estimates the Li-ion battery market will top $100 billion by 2024. In a similar lane, MarketsandMarkets estimates the global lithium-ion battery recycling industry was worth $1.5 billion in 2019 and projects it to grow to $18.1 billion by 2030. This bears mentioning because every, single one of those batteries has to be shipped safely each time around.
Now and again, the public hears about a Tesla catching fire or maybe a hoverboard owing to their rechargeable Li-ion batteries, but the reality is that thermal runaway is more frequent than anyone sees in the news. As it goes, the Federal Aviation Administration reports that since 2017 Li-ion battery incidents involving smoke, extreme heat, fire or explosion happen, on average, once every 8 days on a plane or at an airport.
The disturbing thing is that demand is continuing to grow for Li-ion batteries, and more powerful versions of them. Without the adoption of next-generation technology to replace legacy technology, the expectations should be for an accelerating trend towards an escalating number of “incidents”.
These batteries are in more places than one might recognize at first blush in addition to the hundreds of millions of batteries used every day in cell phones, laptops, power tools, etc. For instance, in April, Southern Motion issued a recall for about 2,300 pieces of Wireless Power reclining furniture where the Li-ion batteries powering the furniture could overheat a pose a fire hazard. Yes, rechargeable batteries are in furniture now too. If something uses power, odds are high that there is a Li-ion version of it.
From 2012-2019, the Consumer Product Safety Committee reported that the number of recalled products utilizing Li-ion batteries came in at almost 5 million.
KULR’s proprietary PPR technology can be a true value add to the life cycle of Li-ion batteries and it appears that companies are recognizing it now that KULR is making a more concerted push towards commercialization. In April, KULR took a significant step into this market via a new agreement with Americase, for which Americase is exclusively utilizing KULR’s PPR technology and source the core materials from KULR to produce its patent pending Battery Bag to prevent lithium-ion battery thermal runaway propagation during storage and transportation.
Americase is the go-to company in DDR (Damaged, Defective, or Recalled) battery shipments, controlling a 70% market share, including handling the infamous Samsung Galaxy Note 7 recall in 2016 and recalls for essentially every consumer electronics manufacturer.
Effectively, Americase can now expand the use of their US Department of Transportation Special Permit to encompass a wider variety of battery types and sizes.
Furthermore, KULR is taking its rightful spot at the table as an industry thought leader, partnering in April with Hazmat Safety Consulting, LLC (HSC), which has over 60 years of combined experience in developing, influencing, and interpreting lithium battery safety regulations for the safe transport of lithium batteries. HSC President Bob Richard described the partnership a coming at "a critical crossroad considering how the current regulatory initiatives will impact the way batteries are designed, manufactured, and packaged for transportation.”
Richard’s words are one more indication that KULR is coming to the commercial markets at the exact right time.
A Final Thought
The opportunity is there, as is the massive addressable markets. There is no questioning the quality of KULR’s technology given the fact that it has passed the rigorous testing of NASA and its big-board partners as measured by subsequent orders meeting different deep-space challenges.
In a savvy move, the company is snatching the low-hanging fruit in a large recall market (with minimal competition) first while it works towards other markets, including EVs. Management is also collaborating with an unnamed “Tier-1 power tool manufacturer” to improve its next generation brushless DC motor (BLDC) products by implementing KULR’s Fiber Thermal Interface (FTI). Companies are always very defensive about outwardly naming companies for competitive reasons and KULR is standing firm on that front, but there aren’t many Tier-1 cordless tool makers out there, considering four companies control 48% of the power tool market, including Stanley Black and Decker (NYSE: SWK), Hong Kong-based Techtronic Industries and Illinois Tool Works (NYSE: ITW). Other giants generating over $5 billion annually in power tool sales include Bosch, Makita, Hilti, TTI and Snap-On. Regardless of who it is, the fact it is a Tier-1 company should have investors at the edge of their seat looking for additional disclosure as to what the deal can mean going forward.
Against this backdrop, it becomes much easier to understand why Litchfield Hills Research initiated coverage with a “buy” rating and a $5.00 price target. That’s a lot of upside potential for a stock currently trading around $1.50 per share.
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