Rheinmetall, European Lithium, BYD – Drastic measures

BYD – Big in Japan

The Chinese market leader in electric vehicles is defying all obstacles and continuing its expansion. While the class leader is threatened with punitive tariffs in the US and the European Union, the Company, co-financed by Warren Buffett, wants to conquer Japan and take on local automakers such as Honda, Toyota, and Nissan. In the past financial year, BYD sold around 2,200 vehicles in the Land of the Rising Sun.

Accordingly, the introduction of up to eight models is planned by 2027; in addition to purely electric vehicles, BYD also wants to offer plug-in hybrids. While the Company is still in the expansion phase in Japan, BYD was able to achieve a significant milestone in Singapore. With a sales volume of 6,191 units, the Company knocked Toyota off its throne as the best-selling vehicle brand.

In Europe, too, the Chinese automakers are not giving up when it comes to the EU import duty. Thus, in addition to BYD, Geely and SAIC also objected to the import duties imposed by the ECJ and submitted the corresponding statements of claim last Tuesday, one day before the end of the appeal period. At the end of October, the European Union introduced tariffs on electric vehicles produced in China.

This followed the completion of an anti-subsidy investigation. The newly introduced tariffs amount to 17.0% for vehicles from BYD, 18.8% for Geely, and 35.3% for SAIC, in addition to the standard EU import tariff of 10% for motor vehicles.

European Lithium – Discrepancy in company valuation

The shares of the Australian company European Lithium have attracted attention in recent weeks due to their high volatility. After hitting lows of EUR 0.014 in mid-November, the exploration company, which focuses on the extraction of lithium and rare earths, skyrocketed by around 250% to its current year-high of EUR 0.05. Currently, the European Lithium stock, which has a market capitalization of AUD 81.20, or EUR 48.55 million, is reducing the overbought situation and was trading at EUR 0.032 on Monday. Despite the recent declines, the analysts at First Berlin still see a potential candidate for multiplication with a 12-month price target of EUR 0.14.

The reason for this positive outlook is the fact that European Lithium holds a 74.3% stake in the NASDAQ-listed company Critical Metals Corp., whose market capitalization currently stands at USD 635.56 million. Based on this share, the stake is worth USD 472.22 million or EUR 448.97 million. As a result, this value alone has ten-bagger potential.

In addition, European Lithium's portfolio includes other promising projects spanning several continents. In Ireland, the Company owns a high-grade lithium deposit with an exploration potential of up to 105 million tons of lithium oxide. In Ukraine, two projects are in the planning stage despite current political uncertainties, which have the potential to increase significantly in value. A further three projects in Austria are located in the immediate vicinity of the Wolfsberg Lithium Project, which, after the spin-off of the subsidiary Critical Metals Corp, contains 12.88 million tons of JORC resource at 1% Li2O and is supported by a financing commitment of USD 15 million from BMW.

In addition, European Lithium owns a 7.5% stake in the Tanbreez Rare Earth Project in Greenland, with Critical Metals holding 42% of the shares.

Rheinmetall – Trump's demands boosts

The demands of the old and new US President Donald Trump, who is calling on NATO allies to further increase their defense spending, estimating that five percent of gross domestic product would be appropriate, are likely to have been grist to the mill of European defense companies. It is now clear to everyone that this is likely an overestimation and that Trump is once again gambling. In the US alone, military spending as a percentage of GDP in 2023 was "only" around 3.4%.

Rheinmetall CEO Armin Papperger also spoke out in favor of an increase in defense spending to at least 3% in an interview with "Spiegel", solely to restore the country's defense capabilities. Overall, the Company's CEO is calling on the future German government to realign economic and defense policy and to redefine the debt brake.

Meanwhile, the Rheinmetall share continues to rise from high to high and passed the EUR 700 mark last week. The major Swiss bank UBS recently raised the target price from EUR 630 to EUR 805, leaving the investment recommendation at "Neutral". The reason for the increase was the above-mentioned rise in defense spending.

Despite the threat of punitive tariffs in the US and Europe, BYD is continuing its global expansion strategy. Rheinmetall is likely to benefit from the potential increase in defense spending. European Lithium is drastically undervalued compared to its subsidiary Critical Metals Corp.