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October 5th, 2023 | 09:10 CEST

Plain talk from the "Auto-Pope" - this changes everything! Mercedes-Benz, NIO, Power Nickel

  • Mining
  • Nickel
  • Electromobility
  • Batteries
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Ferdinand Dudenhöffer heads the CAR Center Automotive Research in Duisburg and has been the go-to media expert for cars for decades. Over the years, Dudenhöfer has seen many trends come and go. In his latest guest commentary in Handelsblatt, Dudenhöffer did not mince his words and identified a new development that, regardless of the electrification of the industry, could determine success or failure - what new manufacturing means and how the upheaval could affect auto stocks. We provide an analysis.

time to read: 4 minutes | Author: Nico Popp
ISIN: MERCEDES-BENZ GROUP AG | DE0007100000 , NIO INC.A S.ADR DL-_00025 | US62914V1061 , Power Nickel Inc. | CA7393011092

Table of contents:

    Terry Lynch, CEO, Power Nickel
    "[...] Nickel, therefore, benefits twice: firstly from its growing importance within batteries and secondly from the generally growing demand for such storage. [...]" Terry Lynch, CEO, Power Nickel

    Full interview


    Can Mercedes-Benz build "Lego cars" too?

    When Henry Ford introduced the assembly line more than a hundred years ago, it had a significant impact. It transformed workshops into factories, and Ford suddenly became a mass manufacturer. According to car expert Ferdinand Dudenhöffer, Tesla has taken this principle to the extreme. Instead of offering customers a lot of equipment and thus choice, Tesla keeps it simple and offers its Models Y and 3 in just a few variants. Tesla even lags behind the German carmakers when it comes to colour selection. Contrary to what one might expect, customers do not see this as a disadvantage and are happy to buy the off-the-shelf models. Tesla has long since delivered differences via software and, according to Dudenhöffer's assessment, relies on the Lego principle in car construction: First rough work steps and then precise assembly.

    For example, die-casting machines are used that produce the front and rear end from hundreds of kilograms of liquid aluminum in a single step - whereas many European manufacturers, such as Mercedes-Benz, still use welding. The situation is different in China, where similar machines are already in use. According to the automotive expert, established Western automakers, in particular, would find it challenging to convert their processes accordingly. Even if such a change were possible, it would result in enormous write-offs. As a result, companies stick to the tried and tested principle.

    Mercedes and NIO: Here is how the shares are doing

    This development is likely to further widen the gap between Chinese and European carmakers. For Mercedes-Benz, manufacturing cars using the Lego principle is not particularly practical for several reasons. In addition to the high depreciation costs mentioned earlier, Mercedes-Benz, as a premium manufacturer, is less capable of achieving economies of scale through high sales volumes. Furthermore, its market position in China is not particularly strong, preventing it from benefiting from economies of scale in the world's most attractive market. The Mercedes-Benz share did not cut a good figure in 2023. The low P/E ratio of less than 5 and the dividend yield of around 8% are not currently attracting investors. This is a warning signal** and suggests keeping some distance from the stock.

    On the other hand, if we look at the share price of Chinese carmaker NIO, one could get the idea that the situation there is similarly poor. However, the stock may have experienced a stronger decline over six months because it was previously hyped up during the speculative phase of the stock market. In the medium term, NIO could benefit from its market position in the domestic market and really start to play out the economies of scale in the wake of New Manufacturing. Risk factors such as growing protectionism may already be priced into NIO. A comeback attempt like at the end of July is again possible for NIO, but there is also room for downside in the short term.

    Power Nickel: Focus instead of dispersion

    In keeping with the motto "When two quarrel, a third rejoices," investors can also take a look at the share of Power Nickel. The Company is pushing ahead with its NISK project in Canada, where it plans to mine nickel for e-car batteries. At the same time, the Company focuses on sustainability and scores points with affordable and clean hydroelectric power.. The Company recently concluded a spectacular agreement: The international nickel company CVRM is supporting Power Nickel in its feasibility study work and has also invested. "Power Nickel benefits from the collaboration primarily in two ways: We will be able to cover a larger area of the value chain in the future, and we have remained largely independent despite the far-reaching cooperation with all its positive consequences. Such a constellation rarely exists," commented Power Nickel CEO Terry Lynch on the deal in a recent interview.

    In the comprehensive dialogue, Lynch also discusses the outstanding infrastructure around the NISK project, emphasizes the positive framework conditions in the Canadian district of Quebec, which include tax benefits, and provides insight into the ongoing drilling program. The CEO expects to announce drill results later this year. Also imminent, according to Lynch, are results from a metallurgical study that is a prerequisite for the release of a resource estimate, also expected later this year. "We anticipate that this resource will show that we have sufficient nickel (NiEQ) to run a mine. In our view, this would be at least 100,000 contained tonnes of NiEQ," Lynch commented.

    While automakers around the world are challenged to emulate Tesla and leverage economies of scale via New Manufacturing, Power Nickel needs to be anything but bogged down. The experienced commodity seekers can now focus even more than before on finding nickel - experienced partner CVMR is now doing much of the detailed work. While the shares of Mercedes-Benz and NIO are still bobbing along, Power Nickel has formed a bottom in recent weeks and shown the first signs of momentum. Given the market capitalization of only CAD 28.4 million, speculative investors should follow the stock closely.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Nico Popp

    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.

    About the author

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