05. February 2021 | 10:35 CET
NIO, Varta, Nevada Copper: Here's where the e-car boom is still favorable
Electric cars are very much in vogue. While Tesla and Co. were still rare a few years ago, the US pioneer models can now be found more and more often on German roads. Plug-in hybrids are also in great demand, especially among premium brands - buyers benefit from subsidies and have a clear conscience at the same time. It remains to be seen whether it makes sense to chauffeur heavy batteries around in cars that already weigh several tons. The fact is, however, that the trend is intact and will continue: E-cars are booming. While some manufacturers are already expensive, there are still opportunities along the value chain. We present three titles.
time to read: 3 minutes by Nico Popp
NIO still has a lot to do
NIO, the Chinese manufacturer of electric cars, recently reported record figures for deliveries of its models in January: up by more than 352% compared to January 2020. This figure shows that the Company is on a growth trajectory. It also shows that the Corona Crisis seems to be finally over in the markets and the minds of consumers - against all odds. While NIO remains a small automaker with a total of 7,225 vehicles delivered in January, growth alone counts on the stock market - especially in the current bull market.
NIO's stock recently bumped its head twice, just above EUR 50. Although this is a warning signal, the stock currently shows no signs of weakness. Speculative investors can continue to try to jump on the bandwagon at favorable conditions. China's central government continues to promote electromobility, new batteries are to increase NIO's range, and the Company is also planning to expand its capacities. These are all good conditions for the hype surrounding the share to continue for a while. However, the fall height is already high.
Varta: Is history repeating itself?
Investors also complained about a large drop in the German battery specialist Varta - and then the stock started to correct. Within the last five days, the share price fell by around 10%. Varta produces batteries such as those we know from hearing aids, headphones and other electrical appliances. The Company also wants to get involved in batteries for electric cars and has received a government subsidy. But is that enough for further share price gains?
Varta rightly has a good reputation for its batteries. Above all, the capacity and longevity are convincing. But when it comes to batteries for electric cars, Asian manufacturers have long been ahead. The past has already shown how things can turn out when German companies, supported by subsidies, compete with Asians: After initial successes, the German solar cell industry experienced its decline about ten years ago. Even then, the competition from the low-cost Asian companies could not be beaten. Varta is an exciting share but is currently already very ambitiously valued. However, in the short term, a rebound cannot be ruled out due to the market situation.
Nevada Copper: Turnaround story with e-car fantasy
More and more experts are now naming copper as a worthwhile investment target when it comes to investments in electromobility. The experts at investment house Brandywine Global see copper as a welcome combination of inflation protection and investment in the future. The reason is the high demand for copper for electric vehicles and the associated infrastructure, such as charging stations. While professional investors rely exclusively on bonds issued by larger companies for this purpose, speculative investors can also take a closer look at smaller companies. US company Nevada Copper is the first new US copper producer in the past decade. The Pumpkin Hollow project in Nevada is fully permitted and already in production. Final work is currently underway to fully bring the underground mine into production by the middle of the year.
Nevada Copper has another property in the immediate vicinity that has also already been fully approved and is to be exploited by open-pit mining. Here, the Company expects great growth as soon as the construction work around the underground mine is completed and the project is operated profitably. Assuming a total copper production of 25,000 tons in 2021, production costs of USD 2 per pound and a selling price of USD 3.50 could result in a profit of around USD 80 million. However, this is still pie in the sky and cannot be calculated precisely. Nevada Copper has required numerous rounds of financing in the past and the stock has fallen into a bit of disrepute. However, with KfW as a financing partner, the Pumpkin Hollow project should be brought into production. It could be a liberating move for the stock, which was trading almost three times higher just a year ago.
Location advantage North America and Europe
While manufacturers of e-cars are in greater demand than ever on the stock market but are also ambitiously valued, small copper companies often still lead a shadowy existence. But demand for the industrial metal is high. Efforts to promote battery production increasingly outside Asia are playing into the hands of raw material projects in North America and Europe.