SMALL CAP IDEA: Ilika has cracked problems that have beaten BYD, Toyota and Samsung
I’m going to jump down the rabbit hole of solid-state battery technology, potentially transformative for the electric vehicle industry, to reveal how a small UK company finds itself at its vanguard.
Ilika, the business in question, also appears to have resolved many of the limiting issues that have thwarted the world’s biggest carmakers and battery manufacturers. And yet this pioneer, listed on AIM, really doesn’t appear to be receiving the recognition it deserves.
Before we start, it is worth understanding what solid-state power packs are and how they differ from the lithium-ion units found in EVs, and for that matter inside your smartphone or laptop.
I’ll do this through the lens of the challenges faced by the automotive industry, but, as we’ll see later, the opportunities are not confined to the sector, as Ilika is proving with a tie-up with 3i-backed US med-tech group Cirtec.
Why liquid is the enemy
Okay, here’s the problem with the traditional rechargeable lithium-ion battery. It has a fundamental weakness: its liquid electrolyte, the chemical medium that carries electrical charge between electrodes, is flammable.
Solid-state batteries replace that liquid with a solid material, eliminating the fire risk and unlocking a cascade of other advantages.
The major upside is they can store significantly more energy in the same physical space, meaning an electric vehicle equipped with one could travel considerably further on a single charge.
Ilika appears to have resolved many of the limiting issues that have thwarted the world’s biggest carmakers
They also charge faster, degrade more slowly over time, and perform better in extreme temperatures, addressing four of the most persistent complaints about battery-powered vehicles.
The catch is manufacturing them at scale without defects, a problem that has defeated engineers for decades.
Lian Yubo, the chief scientist of BYD, the world’s largest EV maker, recently namechecked multiple roadblocks, suggesting solid-state is at a ‘critical breakthrough stage’, rather than being commercially viable.
Speaking at a China automotive policy seminar, Lian stated that the transition from pilot-line output to large-scale vehicle deployment still faces challenges in engineering complexity, cost control, and production yield.
Toyota, Samsung, QuantumScape, and a clutch of well-funded startups are all racing to crack the issues, with billions of dollars committed to the effort.
How Ilika cracked the code
Ilika’s researchers have tackled them by carefully selecting materials that keep chemical reactions stable and allow ions to transfer freely across the solid-solid interfaces in a cell.
CEO Graeme Purdy told Proactive its prototypes already charge at competitive speeds and last through a high number of charge cycles without significant degradation.
Ilika has also sidestepped one of the field’s most stubborn failure modes: the formation of dendrites, tiny metallic filaments that can grow inside a battery over time, eventually piercing internal barriers and causing a short circuit or fire. By using silicon-based anodes rather than lithium metal ones, the company says it has found a material far less prone to sprouting these destructive filaments.
Small is beautiful…for now
Here’s where the Ilika story gets interesting. It has gone small to provide commercial proof-of-concept with its tiny Stereax batteries, designed for medical implanted devices, wearables and ophthalmics, while keeping an eye on the larger EV prize.
It has shipped its first order of electrodes to Cirtec, with which it holds a 10-year licensing deal covering electrode supply and a royalty on sales.
City broker Cavendish sees significant potential in this arena, which it believes the market has most likely underestimated.
Collectively, it says, active implantable medical devices and wearables represent multibillion-dollar addressable end-markets for Stereax batteries, with Cirtec bringing the medical accreditations and production scale to meet future customer ramp-up expectations.
Ilika’s larger-format Goliath battery is aimed squarely at the electric vehicle market, which the company sees as a longer and more substantial commercial opportunity. If it reaches full commercial production, the company believes it could help bring down the cost of electric vehicles, extend their range, and produce battery packs that last longer and are easier to recycle.
Beyond cars, Ilika sees opportunities in consumer electronics and defence, where the appeal of a battery that cannot catch fire and packs in more energy per kilogram is self-evident.
Goliath stirs
The company says its material choices and battery architecture for its Goliath 10Ah prototype have been deliberately matched to those target markets. It already has evaluation agreements with 27 vehicle manufacturers and tier-one automotive suppliers, the large component makers that sit immediately below car brands in the supply chain.
Ilika is also working with Agratas, the battery business owned by Indian conglomerate Tata Group, as a partner in its SiSTEM industrialisation programme, focused on manufacturing large-format pouch cells such as Goliath.
Agratas, which intends to supply batteries to Tata Motors and Jaguar Land Rover, is building Britain’s biggest gigafactory, a 40 gigawatt hour plant in Bridgwater, Somerset, close to Ilika’s HQ, which makes the collaboration a natural one.
One key differentiator is that gigafactories churning out traditional lithium-ion batteries can be retrofitted to handle solid-state production without, as Purdy puts it, ‘too much drama and reinvestment,’ reducing a significant barrier to entry. Competitors such as QuantumScape have been forced into greenfield development, which requires enormous capital.
Cavendish believes Ilika is close to proving that its Goliath solid-state battery performs as intended, with its 10 ampere-hour prototype cells set to form the basis of Ilika’s minimum viable product, marking a significant step towards full commercialisation.
The licensing window is open
Purdy acknowledges that with 27 evaluation agreements in hand, interest in the technology is not in question. Getting Goliath into a production vehicle, however, will take time. The nearer-term prize is a licensing deal, and he expects one to materialise within 18 months. ‘That’s the guidance that we’ve given to investors,’ he says. ‘The licensing window is open.’
Cash reserves of £6.9 million, plus an R&D tax credit, provide a runway to mid-2027, enough financial breathing room to get a deal done.
Purdy also points out that Ilika’s current automotive prototypes, using 10 ampere-hour cells, are already close to what defence applications require, making the existing technology immediately relevant without further development. The company has received positive feedback from a UK defence agency and is fielding significant commercial interest from equipment developers.
There is a supply chain argument here too, and it is gaining urgency across Western governments. China currently dominates global battery production, and defence planners are increasingly uncomfortable with that dependency. A domestically produced solid-state battery removes that vulnerability entirely, and Ilika, Purdy notes, is the only company currently commercialising solid-state battery technology in the UK.
The disconnect
The usual caveats apply. This analysis reflects management guidance and publicly available information. Battery technology programmes rarely progress without setbacks, though Ilika’s execution to date has been disciplined and its development milestones have held.
The bigger uncertainty is commercial timing. Automotive qualification cycles are long, revenue remains years away, and investor patience for deep-tech stories is not unlimited.
Yet the disconnect is striking. Here is a company with a credible path to a minimum viable product, growing interest from defence customers, 27 evaluation agreements with vehicle manufacturers and tier-one suppliers, and a supply chain argument that is becoming more politically compelling by the month.
That leaves a single, pressing question: how long can a company making tangible progress across med-tech, automotive, defence and consumer electronics continue to pass largely unnoticed?
As Purdy puts it: ‘Ilika is the only commercial solid-state battery company in the UK, and actually pretty much in Europe as well. We have a unique investment proposition in that regard.’
For all of the market’s breaking mid- and small-cap news, go to www.proactiveinvestors.co.uk
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Freetrade
Freetrade
Investing Isa now free on basic plan
Trading 212
Trading 212
Free share dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.