January 3rd, 2023 | 08:34 CET
E-mobility - Tesla in crisis! BYD, Almonty Industries, Mercedes, Porsche - Who is the best performer in 2023?
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"[...] While tungsten has always played an important role in the chip industry, it is now being added to batteries for e-cars. [...]" Lewis Black, CEO, Almonty Industries
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
BYD - Tesla in crisis, how is China doing?
If Tesla goes under, the question inevitably arises as to what will happen to the entire automotive industry in terms of e-mobility. State subsidies in Germany will be reduced for the time being at the start of the year. From January 1, 2023, the federal share of the subsidy for battery-electric vehicles and fuel cell vehicles with a net list price of up to EUR 40,000 will be EUR 4,500 instead of EUR 6,000 and with a net list price of between EUR 40,000 and EUR 65,000 only EUR 3,000 instead of EUR 5,000. Electric vehicles with a purchase price of more than EUR 65,000 will continue to receive no subsidy.
In recent weeks, electric car sales in China have been hit hard by the COVID-19 outbreak, but it has not affected all manufacturers. Weekly shipments of the leading mid-priced NEV brands fell only slightly, with even Li Auto, Leapmotor and BYD posting slight gains, but sales of the two startups, Nio and XPeng, slumped 22% from the previous week. The US electric car producer Tesla, which plans to almost completely suspend its vehicle production in China in January 2023, was also hit hard with a 13% drop in deliveries.
Things are still looking quite good for market leader BYD. However, in addition to the semiconductor shortage, the Chinese electric car producer is also affected by the renewed outbreak of the Corona pandemic in China, which is leading to further cost increases. BYD has now raised its prices again for January 2023 as subsidies on NEVs, which have been cut since November, reduce margins. Tesla's closest competitor had still cut its prices in the Chinese market in the final quarter of 2022 to further boost sales in the face of supply pressure and a weakening economy. The new year is likely to bring a few more surprises in e-mobility.
BYD shares have turned after hitting a low of EUR 20.80 and are trading at EUR 23.60 at the beginning of the year, but last year's high was EUR 41.80. Everything indicates that BYD will also make considerably smaller profits. It is likely to be difficult for the high-priced Tesla models in China and Europe. BYD is interesting in the long term in the EUR 15 to EUR 20 corridor.
Almonty Industries - Over 1,000 applications for a rare metal
Few people know that in e-mobility, about 1.4kg of tungsten is installed in each vehicle today, in addition to lithium, graphite and copper. This figure could expand to as much as 2.5kg with the introduction of tungsten-based cathode coatings in Li-ion batteries. Tungsten is a lustrous white metal of medium hardness and high density and strength that is ductile in its pure state. At 3,422°C, it has the highest melting point of all chemical elements and, at 5,930°C, also the highest boiling point. The metal is, therefore, essential in the manufacture of over 1,000 high-tech applications worldwide.
Canadian explorer and producer Almonty Industries (AII) has already fully focused on this tight tungsten market with its three sites in Spain, Portugal and South Korea. With the ongoing development of the Company's Sangdong mine in South Korea, world supply could shift by about 5% to a friendlier jurisdiction. And that is where the sticking point is: tungsten is found in only a few parts of the world besides China and Russia. CEO Lewis Black is convinced that leading industrial nations are looking for viable alternatives, especially in the current fragile geopolitical environment: "I think three months ago Apple announced it was buying tungsten from Russia. Apple is indicative of all our customers, and they demand absolute transparency about their supply chain. Therefore, we only operate in jurisdictions where we can guarantee that transparency," he said at the recent International Investment Forum in December (https://ii-forum.com/).
Digitization is an accelerator for the demand of the rare metal, which is why it has already landed on the EU's list of strategic metals. Almonty's current share price (AII) in Canada is a low CAD 0.68, but it tested the CAD 1.00 mark more than once in 2022. In a recent report, First Berlin rated the stock a "buy" with a 12- to 24-month price target of CAD 1.70. The signs point to a storm. The Company could become a top pick among mining stocks in 2023.
Mercedes and Porsche - Who will take off in 2023?
Uncertainty is circulating among European automakers about their continued success in e-mobility. That is because, in view of declining public subsidies, skyrocketing electricity prices, and battery ranges that are still too low, the incentives to purchase a Stromer are low. The lack of tax incentives means consumers could continue to trade in their used cars for existing combustion technology. After all, there is no public proof that the overall eco-balance of an e-vehicle is at all positive compared to the cleanest BlueTec diesel because modern diesel vehicles can already demonstrate an efficiency of over 30%. However, more than 50% of the energy is lost in the generation of electricity and on the transport route to the socket or is generated as waste heat. More than 40% of electricity is still generated from fossil fuels.
Mercedes and Porsche had a conciliatory year on the stock market in 2022. While the DAX had lost 14% by the end of the year, Mercedes was only 10% behind, and Porsche even gained 15%. The largest IPO in the history of the German stock exchange went off furiously at the end of September, although the environment became increasingly gloomy due to rising geopolitical uncertainty. Without exaggeration, the Porsche share was one of the best IPOs in Europe. A look at the fundamental data gives the Mercedes share a 2023 P/E ratio of 5.4 at EUR 63.70 and a whopping 7.8% dividend yield. The new Porsche AG is listed at EUR 92.60 with 1.3 times sales and almost 20 times earnings. However, the corporate strategies of both manufacturers differ significantly: while Mercedes is fully on board with the e-mobility trend, Porsche will likely continue to earn money from its sought-after combustion sports cars. In a direct comparison of facts, the Mercedes Benz Group is likely to offer greater opportunities. From a chart perspective, the picture for the Swabians also looks like a bottom reversal.
The triumph of e-mobility currently has many question marks. BYD is interesting again after the strong correction, and Mercedes and Porsche are also attractive. Almonty Industries will likely start its production in Korea in 2023, so the stock is highly interesting.
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