Dipping a Toe into Electric Vehicles

Technology innovators such as battery developers or suppliers of materials needed for advanced car designs are the usual focus of this forum.  The post “Electric Vehicle Manufacturers” published on November 5, 2021, teased the idea of investing in electric vehicle manufacturers as a means to ride the transition from conventional combustion engines.  The post featured Bayerische Motoren Werke, AG (BMW:  DE) for the extent of its electric car in its total product line. 

BMW may not lead the pack in the future as new plants make it possible for other car manufacturers to gain a higher ‘EV Intensity Measure’.  Just looking at plans for new vehicle manufacturing plants in the U.S. electric, other car makers may have the chance to give BMW a run for its electric car charger.

 

NEW BATTERY PLANTS IN NORTH AMERICA
Company	SYMB	PLANT LOCATION	OPENING
Ford Motor Company	F	Tennessee	2025
Ford with SK Innovation	F, 096770.KS	Kentucky	2025
Ford with SK Innovation	F, 096770.KS	Kentucky	2026
General Motors with LG Chem	GM, 951910.KS	Ohio	2022
General Motors with LG Energy Solutions	GM, 373220.KS	Tennessee	2023
General Motors with LG Energy Solutions	GM, 373220.KS	TBD	TBD
General Motors with LG Energy Solutions	GM, 373220.KS	TBD	TBD
SK Innovation	096770.KS	Georgia	2022
SK Innovation	096770.KS	Georgia	2023
Stellantis with LG Energy Solution	STLA, 373220.KS	TBD	2024
Stellantis with Samsun SDI	STLA	TBD	2025
Toyota Motor Corporation	TM	North Carolina	2025
Volkswagen, AG	VOW.DE	Tennessee	TBD
Source:  Crain Communications in Automotive News, “Battery Plants in the Works,” October 25, 2021

 

The trend is clear to set up shop with a battery manufacturer as a partner.  In the early 2000s, car manufacturers tried valiantly to master battery technology, only to find their bureaucratic management style and inadequate technology skills were not enough to turn out a successful battery.  With demand for EVs now mushrooming, car makers now seem content to share some of the largesse with the folks who really know batteries.

Ford, General Motors, SK Innovation and Stellantis need to be added to the list of EV manufacturers.  All four have formed valuable relationships with battery manufacturer, increasing their chances of success with design efficiency and performance.  The revised list of car manufacturers is below.  Of course, those car makers without plans in the U.S. may very well have planned capacity expansion in Europe or Asia.  However, the U.S.-based expansion is intriguing given lower EV penetration in the U.S. market and new found interest among consumers for buying ‘made in the USA’.

 

CAR MAKERS RANKED BY EV INTENSITY
Company	Symbol	EV Intensity Measure*	NoAmer Capacity Addition
Tesla, Inc.	TSLA	100.00%
Bayerische Motoren Werke, AG	BMW:  DE	6.90%
Zhejiang Geely Holding Group	Private	4.14%
Mitshubishi Motors Corp.	MMTOF	3.53%
Daimler AG	DAI:  DE	1.34%
General Motors Corp.	GM	1.25%	√
Honda Motor Company Ltd.	HMC	1.22%
Volkswagen Group	VOW: DE	1.10%	√
Toyota Motor Corporation	TM	1.09%	√
Renault-Nissan-Mitsubishi Alliance	Private	0.99%
Hyundai Motor Group	011760:  KS	0.62%
Stellantis N.V.	STLA	0.42%	√
Ford Motor Company	F	0.37%	√
Tata Motors Ltd.	TTM	0.32%
Mazda Motor Corporation	MAZDA:  NS	0.00%
Subaru Corporation	7270:  T	0.00%
Data from GoodCarBadCar.net
Electric vehicles as percentage of an OEM's sales volume in its primary brands

  

The most interesting of the companies with plans for the U.S. market appears to be Stellantis.  The stock trades at a multiple of 3.57 times forward earnings and offers forward dividend yield of 7.84%.  An operating margin of 10.6% suggests the company has molded an effective operation structure.  In the most recently reported twelve months Stellantis converted 12.5% of each sales dollar to operating cash flow.  Even with ambitious expansion, levered free cash flow remains positive.  

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.