15. November 2021 | 13:11 CET
Volkswagen, Graphano Energy, Varta: Graphite as the new e-car hype?
The mobility revolution is turning the economy upside down. Where steel and components for classic transmissions once dominated, the future raw materials, such as lithium, rare earths and graphite, are now being used. We highlight the tidal shift in the automotive industry and present companies that could benefit from it.
time to read:
ISIN: VOLKSWAGEN AG VZO O.N. | DE0007664039 , Graphano Energy Ltd. | CA38867G2053 , VARTA AG O.N. | DE000A0TGJ55
Volkswagen plans giga-factories and charging columns
Volkswagen is one of the traditional automakers that have mastered the turn to electromobility. Many of the Wolfsburg company's electric models are already in German garages. VW's strong market position in China is also likely to have helped, with the Company selling around half of its cars there. Since China is already further ahead in electromobility, VW was also forced to accelerate its commitment to the technology. Like Tesla, VW is now also talking about giga-factories when it comes to new locations to produce batteries and electric vehicles. Six new factories of this kind are to be built by 2030. In addition, VW wants to create charging infrastructure across Europe and install up to 18,000 fast-charging stations. Energy companies BP, Iberdrola and Enel, are also on board. The latter is currently turning away from fossil fuels and needs a greener image - so it is just right that in the future, fast-charging stations will be supplied with energy from wind power and the like.
The market for graphite could increase fivefold
The numerous charging stations and also the batteries for e-cars rely on raw materials. Alongside copper and other industrial metals, the lithium market, in particular, has recently experienced a rush. Many shares have jumped in recent weeks. But lithium is not the only critical raw material for electromobility; graphite is versatile too. Currently, around 24% of global graphite production is used in car parts or batteries. Other applications include the steel industry (41%), carbon brushes (11%) and lubricants (14%). Demand for graphite is, therefore, on a solid footing. The trend towards electromobility could ensure that the demand for graphite from the automotive industry grows significantly. If analysts are to be believed, sales of electric cars are likely to multiply in the next ten years. That will also increase the demand for graphite. According to analysts at CleanTechnica, it could increase fivefold in the next 5 to 10 years.
Graphano Energy: Project in Canada, valuation low
However, as with some other raw materials, the graphite market is heavily dominated by China. About 62% of global production came from China in 2020. As the pandemic has ushered in a phase of deglobalization and more and more economies seek to become self-sufficient, the need for production facilities outside China is increasing. The growing demand for environmental protection and sustainability also speaks in favor of this. Here is where the young Company Graphano Energy comes into play. The Company is carrying out drilling and metallurgical tests in the current year and aims to obtain initial data on profitability as early as 2022. Pilot production is to be established the following year. The Company could thus attract the attention of battery producers during a phase of graphite scarcity, which would be conducive to obtaining the necessary financing. While this is pie in the sky, Graphano Energy and its Lac Aux Bouleaux project are perfectly positioned to capitalize on rising demand. The Company emphasizes an intact energy and transportation infrastructure and the project's uniqueness in North America. With only 15 million shares outstanding, the Company is valued at a slim EUR 6 million on a non-diluted basis - with CAD 4 million cash on hand. Although 12.3 million warrants are still outstanding, the stock appears to be anything but ambitiously valued. However, the value is still speculative due to the early stage of the project.
Varta: Market focuses on risks
However, the Varta share shows that even established industrial companies can harbor risks for investors. The Company wants to enter into the production of batteries for e-mobility and has received some advance praise in recent months. At times, Varta was even considered the German e-car share par excellence. However, shareholders have already noticed that the mills grind more slowly when establishing a new business unit. While the share was still aiming for the EUR 200 mark some time ago, it is currently only above EUR 100. The market is currently focusing more on the risks of the ambitious plans. The share is cheaper than months ago, but investors must be aware that visions play less and less of a role in the stock market as tangible results become more important.
Volkswagen is also measured against these tangible results. Although things are looking good here, a large part of the share's potential also seems to have been anticipated. The situation is different for Graphano Energy. With early-stage commodity companies, skepticism is typically high and gradually fades. Those who can incorporate such stocks into an existing asset allocation in a measured way and invest with prudence and staying power can take advantage of the characteristics of small and dynamic small caps like Graphano Energy.