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3 Stocks to Play the Electrification of the Auto Industry

The ‘green’ economy is here, a fact of life that will impact a wide range of activities and force adjustments that, for now, are almost impossible…

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This article was originally published by TipRanks

The ‘green’ economy is here, a fact of life that will impact a wide range of activities and force adjustments that, for now, are almost impossible to predict. From power generation to expansion of the recycling industry to the electrification of transportation – those are only a few of the sectors that will turn greener in the coming decades.

So, let’s talk about transportation. Specifically, let’s talk about electric vehicles, a segment which is attracting a lot of interest from, well, everyone, with what appears to be an acknowledgement that this is where the future of transport lies.

For instance, the US Postal Service has signed a 10 year, multi-billion dollar contract for production of a fleet of electric delivery trucks; Ford Motor Company, which in recent years committed $11 billion to the development of electric vehicles (EVs), has doubled that to $22 billion, and has plans to introduce electric versions of the ever-popular Mustang muscle car and F-150 pickup; GM has announced that it will cease production of gasoline vehicles by 2035.

But it’s not just the legacy automakers who will benefit from a shift – however intense – toward EVs. Smaller companies are popping up to fill niches in the overall EV market, while some legacy supply-chain names are changing their public face and turning toward electric applications. We’ve used the TipRanks platform to look up several of these companies, and to check in with Wall Street’s analysts to get a sense of the Street’s sentiment toward the EV sector. Let’s take a closer look.

GreenPower Motor (GP)

We’ll start with commercial vehicles, a segment that in many ways lends itself to electrification. Light-haul buses and trucks, used over short ranges within urban areas and easy reach of charging stations, are a logical place to start for municipal transit authorities. GreenPower Motor plays to this niche, building a line of busses which it markets to transit systems and school districts, and small- to mid-sized cargo vans for utility work. The company also produces, as its prime product, a medium-truck cab and chassis, the EV Star, which can be customized with a variety of trailer and van bodies.

In recent months, GreenPower has capitalized on the political push to expand electric vehicle use. The trend is particularly strong on the US West Coast, in part due to the Democratic Party’s ascendency in the region, and the company’s customers include the Port of Oakland, the University of California system, and Sacramento Regional Transit. The State of California has directed that all new vehicles sold in the state must be electric by 2035 – note, it’s the same target date that GM has announced – giving GreenPower, which is based in Vancouver, British Columbia, a long-term path toward potential regional customers.

GreenPower isn’t just waiting on CA, however. In May, the company announced that it had completed delivery of 5 EV Star cab-and-chassis vehicles to the Berkshire Hathaway company Forest River, a maker of motor homes and recreational vehicles. And earlier this month, GreenPower added WeDriveU, an electric transport company specializing in shuttle buses, to its customer list. WeDriveU is partnering with GreenPower to acquire EV Star shuttle vans to its transport fleet.

In its financial release for Q4 of fiscal year 2021, ending March 31, GreenPower reported a 76% year-over-year jump in revenue, from $2.49 million to $4.38 million. During the quarter, the company delivered 5 all-electric EV250 30-foot busses to LAX airport, where they will be used for shuttle operations, and sold 30 EV Star vehicles to Zeem Solutions. The company also increased production of the BEAST line of fully electric school busses and increased its overall inventory from $6.6 million in the year-ago quarter to $12.5 million.

B. Riley analyst Christopher Souther writes of GreenPower’s potentially bright future, “We expect GP to benefit from the growing number of EV programs and mandates across the federal, commercial, and other spaces in the coming months and years. At the federal level, the Biden administration's proposed infrastructure plan includes a Clean Buses for Kids Program, which would replace 50,000 diesel transit vehicles and electrify at least 20% of the nation's yellow school bus fleet. Currently, about 95% of the U.S.'s public school buses run on diesel fuel. On the commercial side, corporations with significant fleets continue to study the implementation of EVs, and more deals like GP's agreement with Forest River remain potential game-changers for the company.”

Souther’s $34 price target suggests a robust 195% one-year upside, and backs up his Buy rating on the stock. (To watch Souther’s track record, click here.)

Over the past 3 months, this stock has only attracted two reviews from Wall Street’s analysts – but they are both positive, resulting in a Moderate Buy consensus rating. The average price target is $39.50, implying room for an impressive one-year growth potential of 127%. (See GreenPower’s stock analysis at TipRanks.)

Fisker (FSR)

From commercial EVs, we’ll shift gears and look at the personal car market. This is a harder reach for companies, especially smaller start-ups that are jumping into the market whole-heartedly. Fisker is busy designing and taking pre-orders on the Ocean, its custom-made fully electric SUV with a solar panel roof. The Ocean is scheduled to begin production in 4Q22.

This company is new to the public markets, having entered the NYSE through a SPAC merger back in October. The shares gained substantially after the merger transaction completed, and peaked in early March. The company hit a setback at that time, however, when it dropped its much-hyped solid-state battery program. The technology was intended to replace current lithium ion batteries with a new power storage unit of significantly reduced size and increased performance. The company had to admit, however, that development of solid-state batteries for automotive use is not practical at this time.

Despite the battery setback, Fisker has reported recent progress on the Ocean program. Development of the manufacturing facility in Graz, Austria, is on track, and the company expects to begin prototype production soon, with a capacity of 1,500 vehicles annually. As of the end of June, the company reported more than 17,000 preorders for the Ocean vehicle. With 50% of those orders coming from outside the SUV segment, the company sees a broader audience than was first anticipated.

Without a product line in production yet, Fisker’s quarterly reports are more useful as updates on the company’s progress in creating and meeting customer demand. The most recent report, for Q1, showed that Fisker remains well-funded, with $985 million in cash on hand.

In his initiation report for RBC Capital, analyst Joseph Spak believes the company represents a “compelling risk/reward.” He writes, “Fisker plans to bring BEVs to the market in a differentiated way, utilizing 3 rd-party BEV platforms and contract manufacturing. This leverages the billions of dollars the industry is pouring into market. Management's view is that the underpinnings of a BEV are even less differentiated than ICE vehicles, so by saving capital on building out a platform and production facility, Fisker can use capital and resources to differentiate the customer experience (design, software, UX and ownership). The easiest analogy to make is to Apple, which designs its products, but has contract manufacturers assemble/produce them. The model will not be without challenges, but if successful we see scope for an asset-light, lean cost structure entity.”

Spak describes this stock as a speculative risk, but he is bullish long term, giving FSR an Outperform (i.e., a Buy) rating along with a $27 price target that indicates the possibility of a 63% one-year upside. (To watch Spak’s track record, click here.)

Wall Street has a variety of opinions for this stock, but the bulls are in control; FSR shares have a Moderate Buy consensus, based on 8 reviews that break down to 5 Buys, 2 Holds, and 1 Sell. The stock's average target of $24.49 suggests an upside of 47% for the year ahead. (See Fisker’s stock analysis at TipRanks.)

Aptiv PLC (APTV)

Of the stocks on this list, Aptiv is the most ‘established’ name. The company has its origins in Delphi, a major name in Detroit and a part of the automotive supply chain companies that call the Motor City home. Delphi spun off its powertrain segments, and renamed its remaining branch as Aptiv. Aptiv now works on high-tech for high-end automotive applications. The company develops a range of tech platforms, including computing, networking, and software, designed to improve vehicle efficiency and safety.

Aptiv’s product portfolio includes active perception systems to enhance vehicle safety, computing systems and satellite architecture allowing for connected vehicles, and electrical distribution systems to facilitate robust high-voltage connections. The company sees great potential in these directions, estimating the market for active safety systems will reach $17 billion in 2025 and for electrification to reach $14 billion by that same year.

In the first quarter of this year, Aptiv showed $4 billion in revenue. While down from Q4, this was up almost 24% year-over-year and bettered the consensus estimates. EPS came in at $1.03, also higher than the Street’s forecast - by $0.37. Aptiv generated over $252 million in cash form operations during Q1, and finished the quarter with $5.4 billion in available liquid assets.

Looking ahead to the second quarter, Guggenheim’s 5-star analyst Ali Faghri writes, “[We] believe 2Q consensus revenue looks ~$100 mn light based on our analysis, assuming no outgrowth on a sequential basis and neutral mix. Moving down the P&L, we also believe consensus decremental margins of 23% on a sequential basis appear overly conservative, given management commentary at recent industry conferences that cost headwinds are modest and manageable. Putting this all together, we expect 2Q revenue and EPS upside versus consensus.”

Faghri’s bullishness is clear in his rating on the stock; he has upgraded his stance from Neutral to Buy, and his $184 price target implies an upside of 18% for the next 12 months. (To watch Faghri’s track record, click here.)

The analyst ratings on this stock include 11 to Buy and 2 Sell, for a Moderate Buy consensus from the Street. Shares are going for $153.15 right now, and their $167.08 average target suggests they have room to grow a modest 7% this year. (See Aptiv’s stock analysis at TipRanks.)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The post 3 Stocks to Play the Electrification of the Auto Industry appeared first on TipRanks Financial Blog.

Energy & Critical Metals

Daimler Truck’s powertrain plants in Germany will produce electric drive components

Following intensive talks, Daimler Truck AG and the Works Council have agreed that the three powertrain sites in Gaggenau, Kassel and Mannheim will specialize…

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Following intensive talks, Daimler Truck AG and the Works Council have agreed that the three powertrain sites in Gaggenau, Kassel and Mannheim will specialize in different components for electrified drives.

In the future, they will drive the global production of battery-electric and hydrogen-based drive systems in a production and technology network for electric drive components and battery systems, together with the sister plant in Detroit. Significant additional investments in future technologies at the Daimler Truck powertrain plants will drive technological change.

  • The Mercedes-Benz plant in Gaggenau, which specializes in heavy-duty commercial vehicle transmissions, will develop into a competence center for electric drive components as well as the assembly of hydrogen-based fuel cell drive components.

  • The Mercedes-Benz plant in Kassel is expanding its current focus on commercial vehicle axles and will become a competence centre for electric drive systems.

  • The Mercedes-Benz plant in Mannheim, specialized in commercial verhicle engines, is drawing on the more than 25 years of experience of the Competence Center for Emission-free Mobility (KEM) located at the plant and is focusing on battery technologies and high-voltage-systems.

Important scopes for alternative drives, such as the production of electrically driven axle systems, e-motors and inverters, as well as the assembly of fuel cell systems, will be integrated into the powertrain plants in the future, in addition to investments in the reprocessing and recycling of battery systems.

Our industry is undergoing a transformation toward CO2-neutral trucks. Since conventional drive systems will also be with us for some years to come, we are focusing the future orientation of our powertrain plants primarily on flexibility, cost-effectiveness and very well-trained employees. This had to be reconciled in our negotiations with the Works Council. With the production and technology network for electric drive components and battery systems in conjunction with the competence centers at the plants, we have succeeded in doing so. In this way, we are creating optimum conditions for maximum competitiveness for our plants and at the same time laying the foundations for a successful future.

—Yaris Pürsün, Head of Global Powertrain Operations Daimler Truck

Another element of the technology network for electric drive components and battery systems are the innovation laboratories (InnoLabs). In addition to the competence centers, these are being set up at all plants. They specialize in innovative production processes, new technologies and products.

The aim of the InnoLabs is to close the gap between prototype production and series development. Series start-ups are thus to be prepared with maximum efficiency so that products can be transferred from the prototype phase to series production as quickly as possible. With the InnoLab Battery located at the Mercedes-Benz plant in Mannheim, Daimler Truck AG will establish its own pilot battery cell production and thus lay an important foundation stone for future competence in battery technology.

In its transformation toward CO2-neutral transportation, Daimler Truck is focusing on two all-electric drive technologies: battery and hydrogen-based fuel cell. With these, every customer application can be covered with full flexibility in terms of routes—from well-plannable, urban distribution transport to multi-day transports that are difficult to plan. Which solution is used by the customer depends on the specific application.

As the first battery-electric truck, the Mercedes-Benz eActros for routes in distribution transport will go into series production at the Mercedes-Benz plant in Wörth in October 2021, followed by the eEconic next year. The battery-electric eActros LongHaul for long-distance transport will follow from the middle of the decade. Key components be manufactured at the powertrain plants in the future.

In addition to the products, the powertrain plants are to become CO2-neutral from 2022, just like all other European Daimler Truck plants. This will be made possible, among other things, by a green power concept at Daimler: CO2-free power procurement from renewable energy sources will form the basis for CO2-neutral production. As part of this, the sites will purchase electricity from wind and solar farms as well as hydropower plants from 2022 onwards. On the way to becoming green production sites, the Mercedes-Benz powertrain plants are also to operate CO2-free in the long term by successively establishing fully renewable energy systems over the next few years.

The sister plant in Detroit, which is part of the global production network for powertrain components, will continue to strengthen its role in the US market and, as a competence center for electric powertrain components, make an important contribution to shaping sustainable transportation in the American market.

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Energy & Critical Metals

Tata Steel contracts for 27 electric trucks for transportation of finished steel in India

As part of its sustainability initiative, Tata Steel is partnering with an Indian start-up to deploy electric trucks for its steel transportin India. This…

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As part of its sustainability initiative, Tata Steel is partnering with an Indian start-up to deploy electric trucks for its steel transportin India. This marks the first use of EVs by any steel producer in the country for transportation of finished steel.

The electric trucks feature a 230.4 kWh Lithium-ion battery pack with a cooling system and a battery management system giving it capability to operate at ambient temperatures upto 60 °C (140 °F). The battery pack will be powered by a 160-kWh charger setup which would be able to charge the battery from 0 to 100% in 90 min. With zero tail-pipe emission, each electric vehicle would reduce the GHG footprint by more than 125 tCO2e every year.

Tata Steel has contracted for 27 EVs, each with a carrying capacity 35 tonnes of steel (minimum capacity). The company plans to deploy 15 EVs at its Jamshedpur plant and 12 EVs at its Sahibabad plant. The first set of EVs for Tata Steel are being put in operation between Tata Steel BSL’s Sahibabad Plant and Pilkhuwa Stockyard in Uttar Pradesh.

At a virtual ceremony organized on July 29, Tata Steel formally flagged-off the loaded vehicle at the Pilkhuwa Stockyard to move to the Sahibabad plant, 38 km away.

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Energy & Critical Metals

Tesla Is Hiking Prices In The U.S. While Slashing Them In China

Tesla Is Hiking Prices In The U.S. While Slashing Them In China

After posting its most recent earnings "beat", Tesla is taking on two starkly…

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Tesla Is Hiking Prices In The U.S. While Slashing Them In China

After posting its most recent earnings "beat", Tesla is taking on two starkly different strategies for its U.S. and its China business. 

In the United States, the automaker is raising prices in an attempt to boost profit margins, while in China it is keeping prices steady in what is likely an attempt to drum up more demand, Reuters reported

So far, Tesla has raised the price of its Model 3 and Model Y "about a dozen times" in the U.S. this year, the report notes. At the same time, the company also introduced an affordable version of its Model Y in China.

Tesla isn't just facing increased scrutiny in China from its citizens and the government, but is also running face-first into a wall of Chinese EV competitors. 

Toni Sacconaghi of Bernstein has questioned demand in China as a result of the introduction of the lower priced Model Y. He has said that the model "may make sustained margin improvement difficult". Chinese owners were "were less enthusiastic and had lower repurchase intentions than owners in the United States and Europe," a Bernstein survey recently showed.

Meanwhile in the U.S., Tesla continues to raise the price of its Model Y long range, which is now priced at $53,990. In China, the more affordable Model Y is priced at $42,394.

Roth Capital Partners analyst Craig Irwin told Reuters: "I think Tesla is looking to be as competitive as it can be in China. Lower prices will be a part of that aggressive market positioning. There is a very large difference in battery prices in the U.S. and China, as well as local vehicle manufacturing costs."

Hargreaves Lansdown analyst Nicholas Hyett added: "It wasn't so long ago that the group was trimming prices in the U.S. to gain scale and maximize profitability, and it feels like we're now seeing that in China too."

Gene Munster at Loup Ventures attests that the lower prices in China could "have a lasting effect" for the company in the country: "Teslas are on average 3x the cost of a typical EV made in China so they have to be priced less than the U.S. to compete. Prices of Teslas in China will be below (the) rest of the world for the next decade."

Tesla's market share in China has fallen to 11% in the battery electric vehicle market. China makes up 44% of the global EV market. 




Tyler Durden Fri, 07/30/2021 - 10:36
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