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June 12th, 2024 | 06:45 CEST

Volkswagen changes strategy! Can Power Nickel and Rheinmetall benefit?

  • Mining
  • Nickel
  • Defense
  • Electromobility
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In an increasingly volatile global economy, companies face unprecedented challenges and opportunities. Although Volkswagen, Power Nickel, and Rheinmetall may appear to represent different industries at first glance, the companies are often interconnected. Now that Volkswagen, as an automotive giant and key player in the mobility sector, is suddenly adjusting its strategy, it is worth taking a closer look at the impact on other companies. We explain Volkswagen's adjustments and where there are overlaps with Power Nickel and Rheinmetall.

time to read: 5 minutes | Author: Armin Schulz
ISIN: VOLKSWAGEN AG VZO O.N. | DE0007664039 , Power Nickel Inc. | CA7393011092 , RHEINMETALL AG | DE0007030009

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


    Volkswagen - Investing in combustion engines

    Volkswagen is changing its previously ambitious electric vehicle plans and is now planning to invest more in combustion engines. While EUR 180 billion was originally earmarked for the development of electric vehicles, according to CFO Arno Antlitz, EUR 60 billion will now flow into the further development of combustion engines. This strategic realignment reflects the current market conditions, as electric mobility is faltering due to high costs and insufficient government incentives while combustion engines continue to achieve strong sales figures. Volkswagen is not alone in this adjustment - other luxury and sports car brands, such as Porsche and Bentley, are also increasingly looking at alternative fuels and their potential to reduce CO2.

    These shifts highlight greater industry uncertainty and the dilemma between stricter emissions targets and market demand. Volkswagen's electric vehicles are not considered very innovative, and competitors such as BYD in China have overtaken the Wolfsburg-based company. This is also shown by an analysis by the environmental research association ICCT, in which Volkswagen lost 2 places compared to last year. Electric vehicles from the Far East are also gaining ground in Europe, partly due to lower costs and more advanced technology. According to experts, the EU's potential punitive tariffs could affect customers and reduce demand.

    Due to the significant drop in demand for fully electric vehicles, the Company intends to increasingly focus on plug-in hybrid solutions. Plans for a new electric vehicle factory have also been put on hold. Analysts at Citigroup remain optimistic due to statements by VW boss Blume, which state that the Company plans to build a mass-produced electric model and accelerate the product development process. The share price has recently fallen due to the dividend payment. The share is currently trading at EUR 112.35.

    Power Nickel - Strategic discovery

    Power Nickel has discovered copper, cobalt, gold, silver, lead, platinum, and palladium in addition to nickel at its flagship Nisk project in Quebec. This major discovery on May 10 fundamentally changes the Company. Many of these raw materials are critical to the automotive industry, regardless of whether it is an electric or combustion engine vehicle. Power Nickel's project is located in one of the world's best mining regions, surrounded by infrastructure such as highways and carbon-free hydropower, which provides significant advantages. The Company has planned a CO2-neutral mine, which further enhances the value of the raw materials. It is also partnering with Karbon-X to offset the carbon footprint of 30,000 meters of drilling.

    On June 4, the Company announced the latest drill results confirming the outstanding discoveries. The 4 holes returned peak values of up to 17.9% copper equivalent, 1.91 g/t gold, 73.48 g/t silver, 9.88% copper, 6.23 g/t palladium, 4.56 g/t platinum, and 0.49% nickel. These are the best polymetallic results since drilling began. These high-grade results indicate highly prospective deposits that make the Company and its projects a potential acquisition target for major mining companies. The next drilling program in the successful Lion Zone has already started and comprises 20 drill holes with 8,000 meters of drilling.

    This ensures the next set of news, and after the success of the last drilling program, it is safe to assume that the experts at Power Nickel have chosen their next targets wisely. With the growing importance of technological advances in areas such as artificial intelligence and electromobility, the demand for metals will continue to rise. Access to these critical materials from a carbon-neutral mine strengthens Power Nickel's position in the global market. It offers strategic advantages in uncertain geopolitical times as the Company ensures a more stable supply chain. For nickel alone, industry experts predict an annual increase in demand of 5 to 8%. The share has risen sharply since the beginning of April and is currently trading at CAD 0.73. But according to CEO Terry Lynch in a recent interview, the valuation is low after the latest discoveries and the potential is correspondingly high, he said: "$1 is available for 10 cents right now!"

    Rheinmetall - In sports and space

    Rheinmetall is more than just a defense company. The Automotive division offers a wide range of components for internal combustion engines and their systems but is also increasingly focusing on sustainable technologies beyond the combustion engine. Nevertheless, the main focus is on the defense industry. The Company benefits from rising NATO defense spending due to the Russian invasion of Ukraine. In Germany, there is also a willingness to increase defense spending significantly, and the 2% of GDP demanded by NATO is likely to be more of a lower limit, according to our Minister of Defense.

    The Company was recently in the headlines because of its sponsorship deal with Borussia Dortmund and Düsseldorfer EG. This shows that the Company has shed its grubby image and is also being taken seriously by well-known sports clubs, even though Borussia Mönchengladbach turned it down. In addition to sports clubs, Rheinmetall will also be represented in space. The Company is acquiring a stake in ICEYE, the Finnish operator of the world's largest fleet of low-flying radar reconnaissance satellites. ICEYE's satellites provide real-time data, regardless of the time of day or weather conditions, which is used in military conflicts to improve the positioning and protection of tanks, artillery and air defense systems.

    Rheinmetall can afford these commitments, as evidenced by the figures for the first quarter. Revenue rose by 16% to EUR 1.58 billion, while profits increased by 60% to EUR 134 million. The Weapon and Ammunition division, in particular, recorded a 70% increase in revenue to EUR 362 million. Rheinmetall is looking ahead with confidence and confirms its annual forecast of EUR 10 billion in revenue and a margin of 14-15%. Investors could benefit from the continuing strong demand for defense equipment. One share currently costs EUR 531.40.

    Volkswagen has changed its strategy and is investing more in combustion engines, a move justified by current market conditions. Power Nickel could benefit from this adjustment as its discoveries of key raw materials for the automotive industry could strengthen demand. That said, the Company needs to be re-evaluated after the major discovery. Rheinmetall also supplies automotive manufacturers and sees strong financial benefits from the continued high demand for defense products. At the same time, the Company is diversifying by investing in new technologies.

    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

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author

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