BYD has to pay punitive tariffs - How will this affect Altech Advanced Materials and Volkswagen?

BYD - Reacts calmly and has a plan

BYD has prepared for the EU's latest punitive tariffs with the strategic foresight of a chess master. The Chinese car and bus manufacturer announced the construction of a new factory in Szeged, Hungary, back in December 2023, even before the full impact of the tariffs hit. This smart decision is in line with their existing bus manufacturing facility since 2017 and aims to avoid the relatively moderate punitive tariffs of 17.4%. The Company is, therefore, taking a relaxed approach to the situation. The Chinese company has also already developed a strategy for the US to circumvent possible punitive tariffs by means of a factory in Mexico.

Since the beginning of June, BYD has officially had the order to supply Tesla with battery cells for its energy storage division in China. From Q1 2025, BYD's subsidiary FinDreams will supply the cells to Tesla's energy storage factory in Shanghai. This marks a significant step in the collaboration between the two companies in the field of energy storage solutions. For Tesla, this means that FinDreams will strongly complement CATL as the main supplier. For BYD, this opens up a new revenue stream, which should be beneficial in the highly competitive EV market.

In addition, BYD and Nio have received the green light from Chinese regulators to test their autonomous driving technologies on public roads. These approvals will allow testing in major cities such as Beijing, Shanghai, and Guangzhou. Operationally, things are going well for BYD. There is also a tailwind from the analyst side. In the last 90 days, two analysts have covered the share, and both have given it a strong "Buy" rating. The share has been climbing since mid-March and is currently trading at EUR 27.83.

Altech Advanced Materials - Consolidated after the capital measures

Altech Advanced Materials has taken a significant step in battery technology and is not directly affected by punitive tariffs. Its newly developed CERENERGY® battery, based on sodium chloride, offers decisive advantages over conventional lithium-ion batteries. The solid-state battery impresses with its non-flammability and high-temperature tolerance without additional cooling or heating. Another plus point is the long service life of over ten years, which lasts significantly longer than its lithium counterparts. The supply chain is less susceptible to geopolitical risks because the battery does not require critical materials such as lithium, cobalt or graphite.

The Company plans to build a production facility in Saxony, Germany. This plant will start with an initial capacity of 120 MWh per year and will require an estimated investment of EUR 180 million. Financing will be provided through a combination of government funding, venture capital, and a green bond. The Company has already completed a detailed feasibility study, which forecasts an EBIT margin of 47% and an internal rate of return of 19%. The securing of purchase agreements with major energy suppliers for the first 5 years is also in full swing. The economic conditions for the CERENERGY® project are promising.

In addition, Silumina Anodes™, a new type of silicon and graphite coating process developed by the Company, is in the starting blocks. The process increases battery performance by at least 30% in terms of energy density and service life. A feasibility study completed last year showed promising results. Altech plans to industrialize the Silumina Anodes™ technology and produce the coated anode material on a large scale to potentially supply it to automotive and battery manufacturers. The share price came under pressure last Friday, likely due to the admission of 4,717,500 new shares. The share is currently trading at EUR 3.60.

Volkswagen - Concern about countermeasures

Volkswagen firmly rejects the EU's planned punitive tariffs on electric vehicles from China. The Company believes that this is the wrong approach, which impairs free trade and raises fears of an escalation of the trade conflict with China. VW warns of possible countermeasures by China, which could hit German vehicle manufacturers particularly hard. With a significant presence in China, VW sees considerable risks for its own sales market due to a deterioration in trade relations. Other German automotive groups like BMW and Mercedes also share these concerns.

Especially after the European vehicle market recorded a remarkable growth of 13.7% in April, Spain grew by an impressive 23.1%, Germany rose by 19.8%, France recorded an increase of 10.9%, and Italy scored with an increase of 7.7%. This development led to a total of 913,995 new registrations, according to data from the European Automobile Manufacturers' Association (ACEA). Such figures are good for vehicle manufacturers like Volkswagen, as these figures show signs of a stabilizing European economy.

The Company plans to launch affordable electric vehicles in Europe from 2027, which are expected to cost around EUR 20,000. This initiative follows the failed partnership attempt with Renault. Volkswagen aims to bring the price and launch date of the ID.1 series in line with Renault's electric Twingo. The punitive tariffs could protect the European market from Chinese vehicle brands in the short term. However, if the Chinese government wants to retaliate, this will make it more difficult for European manufacturers to enter the Middle Kingdom. Investors fear exactly that and have sent the share price plummeting. One share currently costs EUR 104.05.

Despite the EU's punitive tariffs, BYD is proving resilient with its strategic expansion in Hungary and cooperation with Tesla. At the same time, Altech Advanced Materials remains unaffected with its innovative CERENERGY® batteries and silicon anodes and is expanding in Germany. Volkswagen rejects the measures out of concern for possible Chinese retaliation but still plans to introduce affordable electric vehicles in Europe from 2027. It will be interesting to see the reaction from China.