Why am I bullish on the EV industry?

It is clear to me that EVs are the future of the automobile industry. The top automobile manufacturers in the world have adopted the tech and are busy developing all-electric cars. And further mainstream adoption is already underway. 

Sweden is consistently ranked as the most sustainable country in the world. And the nation just witnessed record-breaking EV sales last month. EVs made up 50.1% of all automobile sales in July 2022. This was a big jump from 2021’s 37.6%. In fact, globally, June saw the highest EV sales in history with 913,479 new registrations in June, which is 54% more than a year ago. This could take global sales past 10m units next year.

And as manufacturing steps up pace to meet the demand, battery metals like lithium and copper have become highly valuable. There are some emerging mining UK shares with a focus on soft battery metals. And I think investing in these companies could boost my growth portfolio returns over the next decade.

UK shares to buy in the EV sector

Elon Musk stated earlier this year that the lack of battery-grade lithium is a major roadblock in EV production today. And Atlantic Lithium (LSE:ALL) is a company looking to address this issue.

The company owns and operated the Ewooya lithium project in Ghana. While still under exploration, the mine is estimated to hold 30.1Mt of Lithium ore. And recent drillings have found deposits much closer to the surface, which reduces the time required to reach extraction. 

Copper is another metal that batteries require. And thanks to the demand, copper prices have gone up by 125% since 2020. Taseko Mines (LSE:TKO) is a copper producer in Canada that owns and operates the Gibraltar Mines. The company produces an average of 130m pounds of copper and 2.5m pounds of molybdenum per year.

While most UK shares in this space are still under exploration, Taseko is an established business. It had its best quarter ever this year, amassing US$38m in revenue, up 61% from Q1 2021.

However, there are some big risks to consider. Mining is a cash-intensive operation and profits are highly dependent on commodity prices. Prices of these metals are currently high but could fall rapidly when demand stabilises, cutting profits.

Atlantic Lithium is yet to reach production, making it highly speculative. But I think its tie-up with Piedmont Lithium, a Nasdaq-listed mining giant, is a huge plus. Piedmont has a deal with Tesla that could make Atlantic Lithium a direct supplier to the most-recognised EV brand in the world.

Both UK shares are well-backed and fit right into the EV supply chain. And this is why I am willing to invest a £1,000 lump sum in these two companies if market performance is positive across 2022. 

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Red metal mammoth

I think Taseko Mines (LSE: TKO) could prove to be a great stock for me to buy as electric vehicle sales explode.

According to the Copper Development Association, a vehicle running on an internal combustion engine tends to contain 23kg of copper. That compares with the 40kg that’s loaded into the average hybrid electric vehicle. Or the 83kg that sits inside a battery-powered car.

The copper Taseko hauls from Canada’s colossal Gibraltar mine will be needed in huge quantities to make these vehicles. That’s without considering the large amounts of the highly-conductive metal that’ll be needed to create a charging infrastructure for these vehicles.

Gibraltar is the fourth-biggest copper mine in North America and is expected to continue operating until 2038. Taseko also owns the low-carbon Florence Copper project in Arizona. This is on track to produce its maiden output in 2023. And it is looking to begin construction on the gigantic Yellowhead mine in British Colombia towards the middle of the decade. This Canadian asset’s proven and probable red metal reserves sit at an eye-popping 820m tonnes.

It’s all well and good sitting on blockbuster mining projects. But bringing their riches to the surface can be extremely problematic. Any development, construction and production issues could bring Taseko’s profits expectations crashing down. And with it the share price. Still, on balance, I think this UK mining share has plenty going for it.

Another dirt-cheap UK share I like

Companies are spending massive sums on marketing and advertising to recover the revenues lost during the global pandemic. Analysts are expecting such expenditure to keep rising in 2022 too, which bodes well for The Pebble Group (LSE: PEBB).

Through its Brand Addition and Facilisgroup divisions it sells a vast range of promotional goods to big corporations and allows SME promotional product distributors to peddle their wares.

Revenues at The Pebble Group rocketed 39.3% year-on-year in the first half of 2021, to £46.8m, as businesses turbocharged marketing spend. But this UK share is more than just a flash in the pan. It has built long-term relationships with global blue-chip companies. This means more than 90% of revenues are recurring, providing the company with excellent profits stability.

The promotional products market is growing rapidly as they enable firms to raise brand awareness at relatively low cost. The Pebble Group estimates that around 10% of total marketing spend is dedicated to producing logo-stamped T-shirts, mouse mats and the like.

I am aware that earnings at companies like this are highly sensitive to broader economic conditions. I’d therefore expect the recent recovery at The Pebble Group to suffer should the pandemic continue to worsen. Still, from a long-term perspective, I reckon The Pebble Group provides plenty of opportunity for lovers of cheap UK shares like me.

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