First Phosphate, Volkswagen, BYD – The automotive industry is in a flurry again

First Phosphate – An insider tip for the growing LFP battery market

Most people associate phosphate with fertiliser, but high-purity phosphate is now needed for the production of the growing market for electric vehicles. Automakers are increasingly turning to lithium iron phosphate (LFP) batteries, led by BYD with its blade batteries. The reasons are increased safety, cost efficiency, and environmental friendliness. The market is expected to grow from USD 10 billion in 2021 to USD 50 billion within 7 years. First Phosphate's Bégin-Lamarche project has 2 of 3 components for LFP. According to the preliminary economic assessment (PEA), the property can produce 900,000 tons per year of phosphate concentrate with a phosphorus pentoxide (P2O5) grade of 40% and 380,000 tons of magnetite with a grade of 92% iron oxide.

The mine is expected to have a lifespan of 23 years. The Company is fortunate to have access to high-purity magmatic phosphate rock that contains hardly any harmful elements. The high purity of the raw material makes it ideal for refining into purified phosphoric acid. The Company has secured a leading licence to use the technology to produce high-quality phosphoric acid. A total production capacity of 600 t P2O5 per day is possible. On December 18, the Company announced the signing of two long-term purchase agreements for P2O5. At the same time, discussions are being held with the Pekuakamiulnuatsh First Nation regarding a financial stake in the project.

The offtake agreements improve First Phosphate's chances of future financing. In addition, the Company was able to raise around CAD 2.7 million through a private placement at the beginning of January. Larry Zeifman, a director, also increased his stake by 285,714 flow-through shares. To date, insiders have also purchased roughly 4.6 million shares in the market since the company first listed publically in February of 2023. This shows that the Company's officers are also convinced of the strategy of establishing a fully integrated LFP battery supply chain in North America. In addition to phosphate, the Company can generate further revenue from recycling waste products such as gypsum and the sale of magnetite and ilmenite. The share price has risen by over 125% since early December at its peak and has been consolidating since the high of CAD 0.435 and is currently trading at CAD 0.36.

Volkswagen – Positioned for Recovery

After a challenging year in 2024, Volkswagen's challenges remain high in 2025. Last year, vehicle sales in China slumped by 10% to 2.93 million. This marks the lowest level since 2012 in the world's largest automobile market. In Europe, sales figures are 500,000 vehicles below the pre-corona years. In addition, high costs, inefficiencies due to the Company's transformation towards e-mobility, and regulatory requirements have resulted in a slim profit margin of just 2.3%. To address this, a savings program called "Accelerate Forward" has been initiated, which is expected to save around EUR 10 billion by 2026, thereby improving the margin to 6.5%.

To attract more buyers, the Company plans to offer more affordable electric vehicles. The key to this is the LFP batteries that will be used in the future, for example, in the ID.2. Thanks to their longer lifespan, greater safety, and lower costs, electric vehicles can likely be offered for less than EUR 25,000. This is intended to appeal to buyers who would like an electric vehicle but for whom the price has been too high up to now. If this move is successful, the Company could win back market share.

CEO Oliver Blume reacted calmly to Donald Trump's announcement of tariffs. He sees the North American market as an important building block for further growth. The Company is investing USD 15 billion in the US and USD 5 billion in Canada. Even though around 640,000 vehicles are currently exported from Europe to the US, Blume is counting on the economically minded Donald Trump and wants to work with the US administration. With its two existing production plants in Chattanooga and Columbia, the Company is in a good negotiating position. The share price has been on the rise since the beginning of December and is currently trading at EUR 94.24.

BYD – Expansion in the US is becoming more difficult

Currently, there is uncertainty among Chinese automakers, especially BYD. It is still unclear how the new US president will deal with Chinese products or how high the tariffs will be. BYD wanted to avoid high tariffs by building a factory in Mexico. However, it is now clear that tariffs on goods from Mexico are to be raised by 25%. This would make it more difficult for the Chinese industry leader to access the US market. It remains to be seen how BYD reacts to the new circumstances. Otherwise, the Chinese automaker is doing extremely well.

While other automakers were struggling, BYD was able to report record sales of around 4.3 million vehicles, exceeding even its own expectations. Of the 4.3 million vehicles, 1.76 million were fully electric, with the remainder being hybrid vehicles, placing BYD just behind Tesla in terms of deliveries of pure electric vehicles. The main advantage, in addition to vertical integration, lies in the blade battery, an LFP battery. These batteries are installed not only in the Company's own vehicles but also in other electric vehicles from major brands.

Analysts expect revenue growth of 25% and earnings per share to jump to around 20% in 2025. However, according to experts, the Chinese market alone will not be the source of the Company's growth, as demand there is expected to weaken. If there is consolidation, BYD can benefit from it because the Company can also accept lower prices thanks to a higher profit margin. The Company has further growth potential, but there are also some risks. The share has held up well despite possible new US customs duties and is trading at EUR 33.91.

The world could be drawn into a trade war, which would also impact the automotive industry. Reliable supply chains are essential to ensure access to critical raw materials. First Phosphate is benefiting from the booming market for LFP batteries and is setting up a corresponding supply chain for North America. Volkswagen aims to use LFP batteries to make its electric vehicles cheaper and thus attract new buyers. The Company believes it is well-positioned in terms of tariffs. Meanwhile, BYD has had a record year and plans to expand further. However, the new possible US tariffs are hindering market entry there.