April 17th, 2023 | 09:30 CEST
E-car surprise in China: Mercedes-Benz, BYD, Grid Metals
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"[...] We know exactly what we are doing and are implementing what we consider to be a proven technology in an industrially applicable and scalable way. [...]" Uwe Ahrens, Director, Altech Advanced Materials AG
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Mercedes-Benz versus BYD: Here is how the figures look
Sales of e-cars at Mercedes doubled in the first three months of 2023, with Mercedes-Benz selling a total of 51,600 e-cars. Particularly noteworthy is the fact that more and more customers are buying e-cars, especially in the US. There, sales in the first quarter of 2023 soared by 327%, while in Europe, it was only 41%. But what do the absolute figures say? A look at China quickly reveals the balance of power in the international car market. BYD sold 264,647 cars in the first quarter - that was still 87% more than in the same period last year. That makes BYD the market leader in the most important sales market for cars in China, regardless of the drive system. BYD sold a whopping 484,545 cars in China in the first quarter, while Mercedes is only in 9th place with 138,742 units and a market share of 3.25%. By comparison, Volkswagen is just behind BYD in sales statistics, with a market share of 10.4%. Even BMW is slightly better positioned in China than Mercedes.
For investors, Mercedes' weak market position in China is a warning signal. Looking only at sales of e-cars, the Swabians did not even make it into the top 10 in China in the first quarter. BYD is extending its lead over the competition here and dominates with around a quarter of the market share in China. Since China is considered the most important market in the world for cars, companies like Mercedes have to make an effort not to fall behind. Above all, the North American and European markets play a significant role in this context. Here, Mercedes made around 55% of its sales in 2021.
Hoping for the unique selling point ESG
While the supply of critical raw materials for battery production is incomparably more straightforward in China than in Germany, there are also stricter environmental regulations. However, this is precisely where companies like Mercedes-Benz have an opportunity to differentiate themselves from top dogs like BYD. Especially with electric cars, many customers appreciate it when all the components of the expensive cars are also sustainably produced. In sales markets such as North America, innovative companies have long been positioning themselves to supply the automotive industry with urgently needed battery metals in a sustainable way.
Grid Metals: In the fast lane with battery metals
One exciting company is Grid Metals. The Canadians are pushing ahead with projects in the districts of Manitoba and Ontario. The Makwa Mayville Nickel Cobalt PGE project near Winnipeg is characterized by the industrial metals nickel and cobalt and hosts metals from the platinum family. A preliminary economic feasibility study in accordance with mining standard NI 43-101 is already available. This makes Makwa Mayville Grid Metals' flagship project. Equally interesting, however, is Donner Lake Lithium in the immediate vicinity. This property is located in the middle of a lithium zone that also feeds the world-famous Tanco mine. The property can be developed quickly, and Grid Metals is also planning an interim economic study for the lithium project as soon as possible. Further south, Falcon West is another prospective lithium property. Grid Metals' lithium projects are considered attractive despite their early stage because there is already a letter of intent with the Tanco lithium mine for the possible processing of Grid Metals' lithium deposits. The East Bull Lake Palladium Project in Ontario is also considered promising due to apparent platinum group metal deposits but has not been systematically explored since 2002.
In recent months, Grid Metals has released drill results on several projects and is committed to advancing its projects quickly. A resource estimate for Donner Lake should be available in the third quarter of 2023, and lithium mining in cooperation with Tanco should begin in 2025. As the share is currently valued at only around CAD 23 million and a constant news flow can be expected due to the numerous projects, investors can make a note of the share. Especially in the North American sales market, projects like those of Grid Metals should soon be sought-after partners of battery manufacturers. The share is currently trading at a low, making it all the more worth a look.
When investors want to invest in e-mobility, they face a difficult choice: Do they bet on the market leader BYD and accept that the associated mining in China is anything but clean? Or do they prefer to invest in Western car manufacturers who are struggling in the most important market for cars? A good compromise could be promising raw material projects that are designed to be sustainable. Grid Metals is planning such projects for the North American market and is focusing on lithium and other industrial metals. However, given the low market capitalization, the stock must be considered infinitely more speculative. Investors should take this into account when determining their position size and can gradually accumulate shares subject to their own analysis.
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