FN Media Group Presents Oilprice.com Market Commentary
London – July 26, 2023 – Many EV companies are bleeding cash. Many others are involuntarily ceding market share to traditional auto giants like Ford, Chevy and GM. Companies mentioned in this release include: General Motors Company (NYSE: GM), Ford Motor Company (NYSE: F), NIO Inc. (NYSE: NIO), Joby Aviation, Inc. (NYSE: JOBY), Archer Aviation Inc. (NYSE: ACHR).
Tesla alone is turning a profit, making this a longer-term game for the smaller producers, which are now struggling in an environment of high-interest rates and consumers too squeamish about going for car loans. Add to this a price war, and the EV playing field becomes a risker venue for investors.
Still, the smart money knows that the energy transition is a must for a sound investment portfolio going forward, and the EV industry is one of the most obvious places to park your dollars. In this sea of uncertainty, then, we’re looking for companies along the supply chain that have carved out a niche among the competition and aren’t drowning in debt.
In this case, with global investment in the low-carbon energy transition hitting a record $1.1 trillion, reaching parity with fossil fuel capital deployment for the first time last year, we’re looking to China’s most exciting EVmaker… to a first-mover in the burgeoning electric boating industry … and to a chip-maker that has captivated the auto industry.
#1 Building Your EV Dreams:
Let’s start with the biggest and most expensive of the three–Chinese BYD (Build Your Dreams), which will be on the radar of some investors only because it was backed by Warren Buffett but should be considered a high-growth potential company.
For now, BYD is largely for the Chinese market, but international expansion plans are well underway.
In 2022, BYD sold over 1.85 million electric cars and hybrids, and which comes after the previous year in which the Chinese EV darling tripled sales.
In the first quarter of this year, BYD reported a 93% increase in sales, and going forward, investors should be looking at its new Seagull EV–a mini car intended for city driving at an affordable price.
So, what about Buffett? Buffett’s Berkshire Hathaway has been winding down its position in BYD over the course of the past year. Buffett now holds less than 10% of the company (less than half it used to hold) but had spent previous years praising it. No one knows why he’s been withdrawing from BYD other than a vague statement about not wanting to compete with Tesla (TSLA).
It is understandable to take that statement as a negative indicator; however, what it really says is that BYD is an actual competitor against Tesla–a competition it may lose, but a company that is even considered in the rankings with Tesla should be capable of earning investors some decent returns along the way. And in reality, what Buffett may more likely be doing is cashing in on BYD profits and investing them elsewhere, which has nothing to do with Tesla.
Another factor to consider is geopolitical, in which case BYD does carry some risk. Buffett was dumping shares amid high-level tensions between Washington and Beijing over Taiwan. Chinese companies are always risky, but if BYD gets a real foothold in international markets, nothing will stop it. Year-to-date, BYD is up over 30%, having recovered from Buffett’s share-dumping.
Don’t Forget About Boats, and Look for First-Mover Advantage
Vision Marine Technologies Inc (VMAR)
The EV race isn’t just unfolding on the pavement … it’s very much seaborne, too, and VMAR is set to collect its first revenues from its proprietary PowerTrain battery technology this year.
The $12-billion boat battery battle is all about first-mover advantage, which in this case appears to go to VMAR, the boating tech company that has successfully developed the world’s most powerful marine electric powertrain (motor).
Vision Marine debuted its E-Motion 180 HP electric outboard motor with its proprietary PowerTrain technology in February and recently launched the new H2e Bowrider in partnership with Four Winns. Together, they have produced the H2e Bowrider, the first all-electric series production bowrider on the market.
The E-Motion is the first fully electric, production-ready, high-performance 180 HP, which makes it the key market disruptor. With its proprietary technology, which includes the batteries, the engine and the software, Vision Marine’s E-Motion is now the only turn-key solution for boat manufacturers in its class. That’s a strong first-mover position to be in at the critical junction of a high-dollar energy transition.
Vision Marine’s (VMAR) business plan is to market its E-Motion Powertrain to Original Equipment Manufacturers (OEMs) rather than the public, and they have already received advance orders from Four Winns.
The revenues don’t stop here, either. VMAR is also hitting up the $5-billion+ boat rental market, which it plans to flip fully electric. Its flagship electric boat rental outfit in Newport is annualizing $4 million in revenues with a 35% profit margin, according to the company, and now it’s working to rapidly expand, rolling out two more locations this year and launching a franchise model.
By 2024, it’s full speed ahead with scaling. By the end of 2024, Vision Marine expects to be free cash-flow positive, and by 2025, it expects to have two profitable and growing divisions, after which the scaling will pick up the pace even faster.
The team has taken VMAR from a private company to a NASDAQ listing, successfully raising capital to develop the company’s proprietary technology and commercialize it, earning it the moniker “Tesla of the Sea”.
This is definitely one to watch as the electric summer unfolds.
#3 A Rapid-Growth Chipmaker
Allegro MicroSystems (ALGM)
New Hampshire-based Allegro not only manufactures its own chips … but it also produces its own battery, which has meant some pretty impressive growth, and this may be a good ‘buy-on-the-dip’ opportunity after a recent pullback.
This chipmaker is not fully dependent on the auto industry, or even the EV segment, which makes it slightly more insulated from EV ups and downs. Last year, nearly 70% of its sales, though, were to the auto industry.
Year-to-date, Allegro is up an impressive 68%, and its key growth segments are e-Mobility and Clean Energy & Automation, both of which have grown faster than expected, with profit margins continually improving. Since its IPO in October 2020, Allegro has gained over 180%, outperforming the SPDR S&P Semiconductor ETF (XSD), which only gained 45% in that same time period.
The EV Boom Is Heading To The Sky, As Well
Joby Aviation (JOBY) is pioneering the sector of electric air taxis, extending the scope of electric mobility from the ground to the sky. Their electric vertical take-off and landing (eVTOL) aircraft aims to revolutionize urban mobility, offering an innovative solution to traffic congestion and making short-distance air travel accessible to everyone.
For investors, Joby Aviation represents an investment in the potential future of transportation. The company’s progress, including a merger with Reinvent Technology Partners to become publicly listed, signals a promising journey ahead. However, given the nature of this innovative field, investors should be aware of the regulatory, technical, and infrastructural challenges involved in making air taxi services a reality.
Archer Aviation Inc. (ACHR) is another pioneer in the field of electric vertical takeoff and landing (eVTOL) aircraft. The company is developing an advanced eVTOL aircraft, which is essentially an electric air taxi, designed to transform urban mobility. Their aircraft, with a range of 100 miles and a top speed of 150 mph, is intended to alleviate traffic congestion in urban environments, making commuting more efficient and environmentally friendly.
Archer’s innovative work represents a significant leap in the electric vehicle industry, pushing the boundaries from road to air. The company’s goal to launch an urban air mobility network could revolutionize the way we think about short-haul travel, potentially transforming the transportation landscape of our cities.
Don’t Forget About Traditional EV Makers
General Motors Company (GM), a stalwart of the American automotive industry, has been making determined strides towards an all-electric future. The company announced a $27 billion investment plan in electric and autonomous vehicles through 2025, aiming to launch 30 electric models globally. One of their significant EV advancements is the Ultium battery system, which offers impressive energy capacity and flexibility in powering different vehicle designs.
GM’s considerable commitment to electric and autonomous vehicles signals a new era for the long-standing automaker, paving the way for a sustainable future in the automobile industry. The company’s EV strategy doesn’t just rest on passenger vehicles but extends to commercial vehicles and even electric air taxis. Investors should consider GM’s ambitious plans to transform its portfolio and capture a significant share of the growing EV market.
Ford Motor Company (F) has been gearing up for a major push into the EV market with substantial investment plans and the rollout of new models. The launch of the Mustang Mach-E, the electric version of its popular Mustang brand, and the all-electric Ford F-150 Lightning are part of Ford’s plan to invest $22 billion in electrification through 2025.
Ford’s focus on electrifying its popular models underscores its strategic approach to make electric vehicles mainstream. The electric version of the F-150, America’s best-selling vehicle, has the potential to bring a significant portion of the pickup truck market into the EV fold. From an investment standpoint, Ford’s commitment to EVs and its strategy to leverage its popular brands provide a solid foundation for future growth.
NIO Inc. (NIO) a prominent player in the premium electric vehicle market, has shown robust growth and innovation with its lineup of high-quality EVs. Their groundbreaking “Battery as a Service” (BaaS) model, where users can purchase the vehicle without a battery and then subscribe to a battery plan, has revolutionized the approach to vehicle ownership, reducing upfront costs and allowing easy battery upgrades.
Investors should note that NIO is well-positioned in China, the world’s largest auto market, with substantial government support for EVs. Its user-centric approach, with services such as battery swap stations, charging solutions, and nationwide service network, significantly enhances user convenience and lowers the barriers for EV adoption.
By. Josh Owens
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