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7 EV Stocks To Buy With ‘Tesla Killer’ Potential As China Growth Calls

The electric vehicle market has immense growth potential over the next decade, spurring investors to pour into EV stocks.
A Deloitte study indicates that…

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The electric vehicle market has immense growth potential over the next decade, spurring investors to pour into EV stocks.

A Deloitte study indicates that the global EV market is expected to grow at a CAGR of 29% over the next 10 years. The International Energy Agency believes that there will be 145 million electric vehicles on road by 2030. Clearly, these are big numbers and it’s not surprising that the EV industry is already intensely competitive. The growth outlook has also mean that EV stocks will remain in focus.

Tesla (NASDAQ:TSLA) has been ahead of the curve when it comes to making inroads in the global market. However, the company is already losing market share as competition intensifies. In April 2021, Tesla’s global electric-car market share declined to 11%, the lowest level in the last two years.

With the emergence of several pure-play electric vehicle companies, Tesla is likely to continue facing increasing competition. At the same time, traditional automakers are gradually moving towards a portfolio weighted towards electric vehicles.

This column will discuss seven EV stocks that could be a potential ‘Tesla Killer’ in the next few years. Let’s take a deeper look into the following EV stocks:

  • XPeng (NYSE:XPEV)
  • Nio (NYSE:NIO)
  • Li Auto (NASDAQ:LI)
  • Lucid Group (NASDAQ:LCID)
  • Ford Motor (NYSE:F)
  • Fisker (NYSE:FSR)
  • Arrival (NASDAQ:ARVL)

EV Stocks to Buy: XPeng (XPEV)

Source: Andy Feng / Shutterstock.com

It’s worth noting that Tesla’s China sales more than doubled to $6.66 billion in 2020. For the year, the company derived 20% of its sales from China. Among the EV companies in China, XPeng seems to have the “Tesla Killer” potential.

For year-to-date 2021, XPEV stock has been sideways. Even with strong sales numbers, regulatory headwinds in China have subdued the stock. However, this seems like a good accumulation opportunity.

One reason to like XPeng is the company’s intense focus on innovation. As an example, P5 is the world’s first mass-produced smart EV equipped with automotive-grade LiDAR technology. The company’s positioning as a smart EV manufacturer is likely to deliver results in the long-term.

For Q2 2021, XPeng reported revenue of $582.5 million. On a year-on-year basis, revenue was up 536.7%. With sustained growth in vehicle deliveries, it’s likely that robust top-line acceleration will continue. At the same time, XPeng has been reporting higher vehicle level margins.

XPeng is also well positioned from a financial perspective with cash and equivalents of $5.1 billion. This will allow the company to invest in manufacturing expansion. Additionally, launch of new models will help in boosting growth.

XPeng is also likely to take on Tesla in other markets. The company already has presence in Norway and is likely to enter into other European markets.

Nio (NIO)

Image of Nio (NIO) logo branded on the exterior of a corporate building.Source: Sundry Photography / Shutterstock.com

Nio is another attractive name among Chinese EV stocks that’s worth considering as a strong competitor of Tesla. Initially, I am focused on Chinese EV stocks as China is likely to remain the biggest EV market in the next decade.

NIO stock has also been subdued for the year with a downside of 21%. In recent news Nio filed to sell $2 billion worth of shares in an at-the-market offering. This might translate into some near-term weakness in the share price, which would be a good buying opportunity.

Nio already has a strong balance sheet with cash and equivalents of $7.5 billion as of Q2 2021. Further proceeds will ensure that the company is full-financed for the next 24 months.

For Q2 2021, Nio reported deliveries of 21,896 vehicles. On a YoY basis, deliveries were 111.9% higher. Vehicle-level margin was also robust at 20.3%.

The company’s premium smart electric sedan is due for launch on 2022. Further, Nio also has plans to make entry into the European market. These factors are likely to ensure that vehicle deliveries remain strong in the coming quarters.

Overall, Nio is positioned to survive the intense competition in the EV industry. With strong financial flexibility, focus on innovation and geographic expansion, the company’s outlook is bright. NIO stock is therefore worth accumulating on declines.

EV Stocks to Buy: Li Auto (LI)

A front view of the Li Xiang One SUV from Li Auto (LI).Source: Carrie Fereday / Shutterstock.com

Li Auto looks like a quiet killer in the Chinese EV market. While Nio and XPeng have grabbed the limelight, Li Auto has delivered steady growth and cash flows.

For most of 2021, LI stock has been sideways. However, this has been the trend for most Chinese EV stocks after a big rally last year. Considering the company’s business developments, a rally seems looming.

It’s worth noting that for Q2 2021, Li reported delivery of 17,575 deliveries. For the prior year comparable period, deliveries edged past 6,600. Clearly, the company is on a robust growth trajectory. An important point to note is that the company currently has just one model in the market. With 97 retail stores in 64 cities, Li has been focused on expanding presence.

Another point worth noting is that for Q2 2021, Li reported free cash flow of $152.1 million. Therefore, the company already has an annualized free cash flow potential of $600 million. As of June 2021, Li Auto also had cash and equivalents of $5.66 billion.

Li Auto is investing in manufacturing expansion and creating a new product line. As new models are introduced, the company is positioned to maintain strong growth. International expansion also seems very likely in the coming years.

Lucid Group (LCID)

A photo of the Lucid Motors Air EV from 2018.Source: ggTravelDiary / Shutterstock.com

After the initial listing euphoria, Lucid Group shares has remained subdued. It however seems that downside is limited from current levels. Once Lucid Motors vehicle deliveries commence in the coming months, LCID stock is likely to trend higher.

The company’s Lucid Air Dream Edition has already been fully reserved with more than 10,000 cars booked. The company has an ambitious line-up of products over the next few years. This includes Lucid Air, Lucid Gravity and other sedans and SUVs.

It’s also worth noting that Lucid is aggressively expanding its team. The company already has employees in North America, Europe and the Middle East. This is an indication of the point that Lucid is likely to expand into multiple geographies relatively soon.

In terms of the differentiating factor, Lucid claims to have battery efficiency that’s better than Tesla Model S.

Lucid expects to clock revenue of $2.2 billion for 2022. The company expects revenue to surge to $13.9 billion by 2025. I would take these projections with a grain of salt.

However, there is no doubt that the company has an attractive product offering that will be supported by industry tailwinds. Furthermore, with EMEA deliveries likely to commence in 2022 followed by China in 2023, the addressable market is huge.

EV Stocks to Buy: Ford Motor (F)

A Ford (F) sign hangs on a glass wall in Kiev, Ukraine.Source: Vitaliy Karimov / Shutterstock.com

F stock is certainly not among the pure-play EV stocks. However, Ford has ambitious transformation plans for the next 10 years.

By 2030, Ford expects 40% of its sales globally to be electric vehicles. To achieve this, the company has planned an investment of $30 billion in the EV segment through 2025.

The company’s plan is already delivering results. For June 2021, Ford’s electric vehicle sales increased by 117% on a YoY basis. Further, in the first half of the year, the company sold 56,570 electric vehicles.

Ford also has ambitious growth plans for China. The company inaugurated 10 direct-to-customer electric vehicle storefronts in Q2 2021. A locally built Mustang Mach-E was also revealed during the quarter. As more EV models are introduced, coupled with robust growth in stores, Ford is positioned for strong growth.

It’s worth noting that as of Q2 2021, Ford reported $25.1 billion in cash and equivalents. Add in the undrawn credit facilities and the company has a total liquidity buffer of $41 billion. Therefore, Ford is well positioned to make big investments for an aggressive portfolio transformation.

F stock has been in an uptrend as market conditions improve. It’s likely that the positive momentum will sustain with strong growth in the EV segment.

Fisker (FSR)

Mobile phone with company logo of US electric vehicle manufacturer Fisker Inc. on screen in front of webpageSource: T. Schneider / Shutterstock.com

At a market capitalization of $4.0 billion, FSR stock is another attractive name among EV stocks. Fisker has yet to deliver an electric vehicle. However, the company seems to be on track to execute an ambitious growth plan.

The company’s first EV model, Fisker Ocean, is due for launch in Q4 2022. The model has already seen more than 62,500 indications of interest from consumers. It’s worth noting that Fisker Ocean will also be available in a flexible leasing model at $379 to $999 per month. This is one factor that can generate strong interest in the coming quarters.

Fisker has plans to launch four models by 2025 and the company is targeting annual sales volume of 200,000 to 250,000 units. This would represent around 1% of the serviceable addressable market.

From a financial perspective, the company reported cash and equivalents of $1.5 billion as of June 2021. This provides the company with ample financial flexibility to invest in additional models and technology.

It’s also worth noting that Fisker is initially pursuing an asset-light business model. The company expects production in the United States to commence only in Q1 2024. Therefore, manufacturing investment is likely to come only after sales gain meaningful traction.

EV Stocks to Buy: Arrival (ARVL)

An electric vehicle charger is seen next to a row of blue electric buses.Source: BigPixel Photo / Shutterstock.com

The commercial electric vehicle segment is another big market opportunity in the coming years. Tesla is already set for a potential launch of Semi in 2022. Arrival is an interesting company in the commercial EV segment.

While Tesla is focused on the Gigafactory approach, Arrival has a unique micro-factory approach. With its lower capital investment, the micro-factory is rapidly scalable.

In the next few years, Arrival is likely to have several micro-factories in the United States, Europe and emerging markets. Currently, the company’s U.S. factory is 80% completed and the U.K. micro-factory is also 75% completed.

It’s worth noting that Arrival already has a non-binding orders and letters of intent for 59,000 vehicles. This creates a revenue and cash flow visibility once the micro-factories are operational. In particular, the company’s order from United Parcel Service (NYSE:UPS) will deliver growth in the foreseeable future.

Overall, Arrival has invested significantly in research and innovation. The company has a strong portfolio lined-up that includes vans and buses. As orders continue to swell and vehicle deliveries begin, ARVL stock is likely to be meaningfully higher from current levels.

On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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Energy & Critical Metals

LEL reckons its Burke graphite deposit suited for lithium battery applications

Special Report: Lithium Energy’s teamed up with CSIRO for optimisation testwork for its Burke graphite project in Queensland. … Read More
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Lithium Energy’s teamed up with CSIRO for optimisation testwork for its Burke graphite project in Queensland.

The research agreement with CSIRO covers further testwork, including attempting spheronisation and purification of the natural graphite particles.

Essentially, the graphite is shaped into ‘potato-like’ structures with the objective of easier processing of Burke natural graphite flakes into electrode materials to reduce capacity losses and enhance cell efficiency.

The idea is to demonstrate to potential graphite purchasers the benefits of the natural flake graphite within the deposit.

The project will be 50% funded by the CSIRO Kick-Start Program and is expected to take four months to complete.

Lithium Energy (ASX:LEL) is confident the deposit presents an opportunity to cater to the growth in demand for graphite in lithium-ion batteries.

Encouraging electrical storage capacity

Burke has a JORC inferred mineral resource of 6.3 million tonnes at 16.0% Total Graphitic Carbon (TGC) for 1,000,000 tonnes of contained graphite – including a high-grade component of 2.3 million tonnes at 20.6% TGC.

Its high grade and low impurities make it particularly attractive for use in lithium-ion batteries.

In previous test work, Burke graphite cells had generally higher levels of capacity compared with control coin cells when repeatedly (50 times) charged and discharged over a 10-hour cycle time.

The company considered this electrical storage capacity highly encouraging and it was the driving force to undertake the further testwork required by battery manufacturers looking to acquire graphite for use in their battery manufacturing operations.

Pic: Total Graphite Content (TGC) comparison of ASX listed company graphite projects

Potential offtake partners

The company is planning to re-engage with Chinese and Japanese parties who have previously expressed a strong interest in the graphite from the Burke Project.

Lithium Energy said that companies in China are increasingly looking outside of the country for stable supplies of high-quality graphite concentrate – due to increasing environmental concerns as well as grades being typically lower in the country.

Once the latest round of testwork is complete, the company will pursue discussions with the aim of forming binding commercial off-take and development agreements.

 


 

 

This article was developed in collaboration with Lithium Energy Limited, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

 

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Energy & Critical Metals

Power Supply Shock Looms: “Global Markets Will Feel The Pinch Very Soon” Of China’s Next Crisis

Power Supply Shock Looms: "Global Markets Will Feel The Pinch Very Soon" Of China’s Next Crisis

Distracted by the ‘grandness’ of the collapse…

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Power Supply Shock Looms: "Global Markets Will Feel The Pinch Very Soon" Of China's Next Crisis

Distracted by the 'grandness' of the collapse of China's property development market, many have missed the fact that China faces a crisis that could directly hit Asia's economy just as hard as a financial collapse - a nationwide power supply shock.

After ramping up its coal-based power production earlier in the year, it appears Beijing has suddenly grown a conscience over its emissions and the 'average joe' could be about to feel the pain of that decision.

As Bloomberg reports, the crackdown on power consumption is being driven by rising demand for electricity and surging coal and gas prices as well as strict targets from Beijing to cut emissions.

It’s coming first to the country’s mammoth manufacturing industries: from aluminum smelters to textiles producers and soybean processing plants, factories are being ordered to curb activity or - in some instances - shut altogether.

"With market attention now laser-focused on Evergrande and Beijing’s unprecedented curbs on the property sector, another major supply-side shock may have been underestimated or even missed,” Nomura Holding Inc. analysts including Ting Lu warned in a note, predicting China’s economy will shrink this quarter.

As a reminder, China pollutes more than the US and all developed countries combined...

More problematic for Greta and her pals, between the years 2000 and 2020, the amount of electricity generated by burning coal increased more than four-fold in China, hitting around 4,600 terrawatt hours in the past year.

Infographic: China’s Energy Demand Sees Coal and Renewables Soar | Statista

You will find more infographics at Statista

As the scene below suggests, this is not the first time China has faced winter power demand surges (which prompted many to turn to diesel generators to plug the shortages of power from the electricity grid).

However, this year is different.

The danger is that, as Zeng Hao, chief expert at consultancy Shanxi Jinzheng Energy, warns: government policies will significantly limit the energy industry’s potential to increase production to meet the demand increase.

2021's worsening power crunch in China reflects three specific factors:

1) Extremely tight energy supply globally (that's already seen chaos engulf markets in Europe);

2) The economic rebound from COVID lockdowns that has boosted demand from households and businesses (as lower investment by miners and drillers constrains production); and

3) President Xi Jinping tries to ensure blue skies at the Winter Olympics in Beijing next February (showing the international community for the first time that he's serious about de-carbonizing the economy).

Simply put, it is the third factor - which is all of its own making - that has raised the risk of a severe shortage of coal and gas - used to heat homes and power factories - this winter; and more ominously, expectations of the need to ration power to those deemed worthy.

“The power curbs will ripple through and impact global markets,” Nomura’s Ting said.

“Very soon the global markets will feel the pinch of a shortage of supply from textiles, toys to machine parts.”

As we noted earlier in the year, China needs to shutter 600 coal plants to meet its emissions goals of net zero greenhouse emissions by 2060.

If Xi's recent actions in the interests of "common prosperity" are really about forestalling social unrest, we suspect his commitment to meeting self-imposed carbon emissions targets may quickly evaporate as the Chinese people are unlikely to stand sustained black-outs for long without upheaval.

Tyler Durden Sun, 09/26/2021 - 20:30
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Energy & Critical Metals

Which uranium producers are ready to pounce when the price is right?

The uranium price is going gangbusters, and the spot price has punched through $50/lb for first time in nine years. … Read More
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The uranium price is going gangbusters, and the spot price has punched through $50/lb for first time in nine years.

The spark for this price rise is the Sprott Physical Uranium Trust, which used a US$300 million at-the-market equity raise to buy up 28.3 million pounds of uranium in recent weeks.

That’s more than the amount of nuclear fuel required to power France for a year.

And it’s aiming to ramp its buying spree up even further, revealing plans to increase its at-the-market offer limit by US$1 billion to US$1.3 billion.


 

When will the price be right for uranium producers to restart?

Lotus Resources (ASX:LOT) managing director Keith Bowes agrees with the general  consensus that aroundUS$60/lb is the magic number that will justify new operations to start – or to dust off operations like the company’s Kayelekera project in Malawi.

“There’s a common theme with most of the developers in the last two years or so – and you’ll see that when you look their reporting, the scoping studies and feasibility studies – that the mid-60s is a realistic number for development to come back online again,” Bowes said.

“There’s obviously a little bit of flexibility around there, depending how you want to go about your contracting.

“If you could get your initial period at maybe $55 or $60 and know that’s going to grow as you go through your production protocol, that may be something that somebody would have a look at – if you can get the pounds into a contract.”

 

Spot price still has plenty of room to grow

The company doesn’t know when it will look to lock in prices just yet, especially since Bowes reckons there’s still some spot price growth to come.

“There’s been a massive rise because of Sprott coming in, but they’ve only effectively used a very small portion of the $1.3 billion available to them – they’ve probably only used $200 million at the moment,” he said.

“So, there’s still a lot of buying power to come from Sprott and I think we can expect to see the spot price increasing more over the coming months.

“And then you’ll see the term price coming up with that as well.”

The prevailing spot price would influence the starting point of discussions, but it’s just an indicator of the term contract market, where most of the action happens between uranium miners and the utilities.


 

Mothballed projects have a better chance of catching the uranium ride

Kayelekera produced 11Mlbs over five years, ceasing operations in 2014 due to sustained low uranium prices.

And projects that can be restarted quickly are better placed to catch the uranium ride at the peak of the cycle.

“If you have a look at the way the cycle is going at the moment, realistically, you’d expect to reach a peak maybe next year or the year after,” Bowes said.

“And the only company that are really in a position to catch the next cycle are those companies that have got assets that are in care and maintenance and can be brought back on relatively quickly.

“Any of the companies that have got greenfield projects, it’s a 5-to-10 year sort of timeline for them to come into production.

“And I don’t know whether they’d make the cycle this time.”

Not to mention, the cost of restarting a mine is much less than developing one – and Lotus is looking at around US$50 million to recommence production at Kayelekera.
 

Focusing on feasibility study in the meantime

While they’re waiting for the price to peak, Bowes said the company is focusing on having its feasibility study in place.

“We want to have the results from our feasibility study available so we can provide assurance to any utilities that we understand what is required to restart the asset back up again,” he said.

“Our feasibility study will be finished the middle of next year and we would expect to start serious negotiations with utilities after that.

“However, we have already started the process with North American utilities – so those in the US and in Canada – to reintroduce the Kayelekera project to them, and to introduce Lotus as a new company.”

He said because Kayelekera product has been previously sold and processed by utilities in the US and Canada, it’s known to the market – which gives the company an advantage over its peers who are starting from scratch.

But the fact remains that most stocks are years away from even thinking about production.

The current market dynamics are conducive to increased term market contracting activity. Pic: Paladin.

 

Which other uranium producers are waiting in the wings to restart?

Here are the companies like Lotus who have been doing the work quietly in the background before the uranium market exploded – and could potentially pull the trigger on production once the price is right.

 

PALADIN ENERGY (ASX:PDN)

Paladin is a former producer at the Langer Heinrich mine in Namibia which has been on care and maintenance, but – following a big $218 million cap raise earlier this year — is ready to relaunch.

Peak production was 5.6 million pounds in 2014 (2,540t) before operations were suspended due to low prices.

The company’s timetable envisages a restart of production with a modest capital outlay of around $80m once contracts with utilities have been signed.

 

VIMY RESOURCES (ASX:VMY)

Advanced uranium explorer, Vimy, wants its shovel-ready Mulga Rock project up and running to take advantage of the uranium price surge.

It raised $18.5 million this year to advance early works at Mulga Rock in WA and to continue exploration at the Alligator River project in the Northern Territory.

In August the Project Management Plan was approved, with just two WA Government departmental approvals remaining.

“Combined with renewed activity in the term uranium market, this approval augurs well for a project Final Investment Decision in the year ahead,” managing director and CEO Mike Young said.

 

BOSS ENERGY (ASX:BOE)

Boss has just appointed the key EPC contractor for the electrical, instrumentation and control system at its 2.25-million-pound Honeymoon project in South Australia.

CEO Duncan Craib said the company was advancing multiple work streams in parallel to minimise the lead time between FID and the start of production.

“We are making project preparations on several fronts to ensure we can capitalise on the rapidly turning uranium market at the moment of our choosing,” Mr Craib said.

“We are already the most advanced of all the non-producing Australian uranium projects, with a production plant and key infrastructure in place.

“By making these preparations now, we are ensuring Boss is on track to be Australia’s next uranium producer.”

In March, Boss raised $60 million to buy 1.25 million pounds of uranium on the spot market at an average price of US$30.15 per pound – which it says will provide greater flexibility for financing and off-take negotiations.

 

DEEP YELLOW (ASX:DYL)

Deep Yellow has three uranium projects in Namibia – Reptile, Nova and Yellow Dune.

A PFS was completed in early 2021 on its 3 million pound per annum Tumas project – within the Reptile tenements — and a DFS commenced March 2021.

The company raised A$42 million in July to advance feasibility studies on the Reptile project and M&A activities.

 

BANNERMAN RESOURCES (ASX:BMN)

Bannerman’s Etango-8 project — also in Namibia — has been ‘reimagined’ as smaller scale mine initially, but with the ability to ramp up production as demand improves.

In February, it raised $12 million to complete the Pre-Feasibility Study (PFS) at the Etango-8 Project, and is busy with a Definitive Feasibility Study (DFS).

The company says the Etango-8 development pathway will enable it to get into production to benefit from the current uranium cycle – whilst having the option of increasing the production rate in the future to take advantage of deepening forecasted deficits in the uranium market.

 

BERKELEY ENERGIA (ASX:BKY)

Project developer Berkeley Energia (ASX:BKY) is battling through the approvals process to build its contentious Salamanca uranium mine in Spain.

 

PENINSULA ENERGY (ASX:PEN)

This US-based company can get back into production within six months – and for just $US6 million — once a final investment decision is made.

The flagship 3 million pound per annum ‘Lance’ project, located in Wyoming, is the only US-based uranium project authorised to use the industry leading, low-cost, low pH ISR process.

In early September, the company completed a sale of 200,000 pounds of U3O8 pursuant to a long-term contract.

The uranium was sourced from the existing portfolio of binding purchase agreements and a net cash margin of US$3.8 million will be generated from the sale.

 

AURA ENERGY (ASX:AEE)

This long-suspended uranium stock has re-joined the ASX with a bang last week and is focused on the advanced ‘Tiris’ project in Mauritania, which the company calls “one of the most compelling uranium development projects in the world today”.

The company says it has executed an offtake agreement for the project, with financing discussions currently advancing.

Highlights of recent DFS include low start-up costs of $US74.8 million and a low All-In Sustaining Cost (AISC) of US$29.81/lb – well below current prices.

Vanadium by-product recovery may lower costs further, Aura says.

 

At Stockhead we tell it like it is. While Lotus Resources is a Stockhead advertiser, it did not sponsor this article.

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