Tag: Electric Vehicles

Lucid CEO Defends $1.75 Billion Capital Raise Amid Stock Decline

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Lucid’s CEO calls the $1.75 billion raise a strategic decision to ensure growth and stability.
– Investors reacted negatively, resulting in an 18% stock drop, the worst since 2021.
– Lucid remains focused on long-term investments, including expanding production and launching new models.

Lucid Group’s CEO, Peter Rawlinson, defended the company’s recent decision to raise $1.75 billion through a public offering after the move triggered an 18% stock drop last week. Rawlinson explained that the capital raise was a timely, strategic decision intended to secure Lucid’s ongoing operations and growth, particularly as the company gears up to expand production and develop new electric vehicle (EV) models.

The capital raise, which included the sale of nearly 262.5 million shares of common stock, came just two months after Lucid received a $1.5 billion cash infusion from Saudi Arabia’s Public Investment Fund (PIF). Despite this, the stock market reacted harshly, with analysts questioning the timing and necessity of the move, especially given Lucid’s reported liquidity of over $5 billion at the end of the third quarter.

Rawlinson, speaking to CNBC from the company’s offices in suburban Detroit, addressed the concerns by stating that the raise was anticipated. He noted that it was necessary to avoid issuing a “going concern” disclosure, which is required by Nasdaq-listed companies within 12 months of a potential financial runway issue.

However, Wall Street analysts, including Morgan Stanley’s Adam Jonas, saw the capital raise as premature, noting it was “slightly larger and earlier than expected.” RBC Capital’s Tom Narayan echoed these concerns, pointing out that the raise followed closely after the PIF investment, leading some investors to question why Lucid needed additional funds at a time when its share price was depressed.

Despite the market’s negative reaction, Rawlinson remained steadfast, emphasizing that the capital raise extends Lucid’s financial stability through 2026. This financial security will allow Lucid to proceed with its long-term investment plans, which include expanding its factory in Arizona, building a new facility in Saudi Arabia, launching the new Gravity SUV, and enhancing its next-generation powertrain technology.

The stock dilution that accompanied the raise also caused concern among individual investors. However, Rawlinson noted that the continued backing of the PIF—Lucid’s largest shareholder—should be seen as a positive signal of confidence in the company’s future. PIF’s affiliate, Ayar Third Investment Co., purchased an additional 374.7 million shares of Lucid common stock as part of a pro-rata agreement to maintain its 59% ownership stake.

“If we didn’t go pro rata, it surely would be a signal that the PIF were losing faith in us,” Rawlinson emphasized.

Lucid has reported record deliveries in 2024 for its flagship all-electric sedan, the Air, and expects to produce 9,000 vehicles this year. The company also plans to begin production of the Gravity SUV by the end of 2024. However, despite these milestones, Lucid has faced challenges scaling its sales and financial performance due to high costs, slower-than-anticipated EV demand, and brand awareness issues.

Rawlinson acknowledged the capital-intensive nature of the company’s current operations but stressed that these investments are crucial for long-term growth.

Chipmaker Wolfspeed Secures $750 Million Grant to Boost Silicon Carbide Manufacturing

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Wolfspeed is set to receive a $750 million grant from the U.S. government, boosting its shares over 30%.
– The chipmaker plans a nearly 30% production capacity increase as part of a $6 billion investment strategy.
– The funding aims to strengthen the U.S. semiconductor industry amid rising demand for energy-efficient technologies.

Wolfspeed, a leading manufacturer of electric vehicle (EV) chips, has announced that it will receive $750 million in government grants to support its new silicon carbide wafer manufacturing plant in North Carolina. This funding is part of the U.S. Commerce Department’s initiative to bolster domestic semiconductor production, a critical sector for the nation’s economy and technological security. Following the announcement, Wolfspeed’s stock price surged by over 30%, reflecting investor optimism about the company’s future prospects.

The Commerce Department emphasized that the preliminary funding agreement requires Wolfspeed to take steps to strengthen its balance sheet to safeguard taxpayer funds. In addition to the government grant, Wolfspeed has secured $750 million in new financing from a consortium of investment funds led by Apollo Global Management, the Baupost Group, Fidelity Management & Research Company, and Capital Group. This dual approach to funding will provide a solid financial foundation for the company’s ambitious expansion plans.

Wolfspeed specializes in producing silicon carbide chips, a more energy-efficient alternative to traditional silicon-based components. These chips are crucial for a variety of applications, including the transmission of power from electric vehicle batteries to motors, making them particularly important in the rapidly growing EV market. The company counts major automotive manufacturers such as General Motors and Mercedes-Benz among its customers, highlighting the increasing demand for advanced semiconductor technologies in the automotive sector.

As part of its strategy to enhance production capabilities, Wolfspeed is also expanding its silicon carbide device manufacturing facility in Marcy, New York, aiming to increase production capacity by nearly 30%. This expansion is a key component of its previously announced $6 billion capacity growth plan, which is designed to position Wolfspeed as a market leader in the semiconductor industry.

The recent funding announcement underscores the strategic significance of Wolfspeed’s technology, especially as the U.S. government intensifies efforts to revitalize its semiconductor industry. The company’s devices are used not only in the automotive sector but also in renewable energy systems and artificial intelligence applications. This diverse application range positions Wolfspeed well to benefit from ongoing investments in clean energy and technological innovation.

In addition to the grant and new financing, Wolfspeed anticipates receiving $1 billion in cash tax refunds from the “48D” advanced manufacturing tax credit under the Chips and Science Act. This further financial incentive underscores the government’s commitment to supporting domestic semiconductor production, especially as competition with global players intensifies.

However, despite these positive developments, Wolfspeed’s stock has faced significant challenges this year, with its value plummeting nearly 75% due to a sharp slowdown in electric vehicle demand. The company’s new 2 million-square-foot silicon carbide wafer factory in Chatham County, North Carolina, which was announced in 2022, is expected to deliver wafers by summer 2025 to meet its own chip manufacturing needs.

As Wolfspeed moves forward with these strategic initiatives, the company is poised to play a critical role in shaping the future of the semiconductor industry in the U.S., driving innovations in electric vehicles and renewable energy technologies.

U.S. to Award $3 Billion to 25 Battery Manufacturing Projects, Boosting Domestic Production

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– U.S. DOE to award $3 billion to 25 battery manufacturing projects.
– Projects will create 12,000 jobs and reduce reliance on China for critical minerals.
– Funding will enhance domestic production, innovation, and recycling of advanced battery technologies.

The U.S. is making another strategic move to bolster its battery manufacturing sector by awarding $3 billion to 25 projects across 14 states. This comes as part of the Biden administration’s larger effort to reduce reliance on China for critical minerals and battery production. The projects, aimed at expanding domestic production of advanced batteries and recycling capabilities, are expected to create 12,000 new jobs and generate $16 billion in total investment.

These awards represent a critical step in strengthening U.S. leadership in the clean energy space, particularly as demand for electric vehicles (EVs) and energy storage systems accelerates. This initiative follows recent changes to U.S. EV tax credits, which are designed to shift battery production and the sourcing of critical minerals away from China.

Albemarle, a key player in lithium production, will receive $67 million for a North Carolina-based project to produce anode material for next-generation lithium-ion batteries. Meanwhile, Honeywell will get $126.6 million to build a large-scale facility in Louisiana, where it will produce a critical electrolyte salt for lithium batteries. These investments demonstrate how U.S. companies are gearing up to meet the future needs of the EV market and beyond.

Other notable projects include a $225 million award to TerraVolta Resources to produce lithium using Direct Lithium Extraction (DLE) technology, and a $150 million investment in Clarios Circular Solutions to recycle lithium-ion battery production scrap in South Carolina. These efforts are crucial as most U.S. production scrap is currently exported to China for processing, a gap the Biden administration is determined to close.

The announcement further highlights the U.S. government’s increasing focus on battery manufacturing as a key area of growth for both the economy and the clean energy transition. Revex Technologies, for example, is set to receive $145 million to turn waste from a U.S. nickel mine into enough domestic nickel production to power at least 462,000 EV batteries annually. Such investments emphasize the U.S.’s commitment to securing a reliable domestic supply of critical materials for clean energy technologies.

“Mineral security is essential for climate security,” said White House climate adviser Ali Zaidi, adding that these projects will position the U.S. to lead in next-generation battery technologies, from solid-state batteries to new chemistries.

In addition to strengthening the EV supply chain, these projects also emphasize the importance of creating sustainable, domestic sources for battery materials. The DOE’s planned $225 million award to SWA Lithium for producing lithium carbonate from brine, using DLE technology, showcases how innovative methods are being supported to minimize environmental impacts while boosting U.S. production.

With growing bipartisan support, the battery manufacturing sector is poised to play a pivotal role in both U.S. energy independence and the country’s green energy goals. These awards further underscore the importance of developing domestic infrastructure to meet the needs of a rapidly changing global energy landscape.

Charging Ahead: How U.S. Tariffs on Chinese EVs Will Impact the Market

Posted on by slightbourne@noblecapitalmarkets.com

The United States government has fired a major salvo in the escalating electric vehicle (EV) battleground with China, slapping heavy tariffs on Chinese EV imports as well as key battery materials and components. While the move aims to protect American jobs and manufacturers, it carries significant implications for automakers, suppliers, and investor portfolios on both sides of the Pacific.

At the center of the new trade barriers is a 100% tariff on Chinese-made EVs entering the U.S. market. The administration has also imposed 25% duties on lithium-ion batteries, battery parts, and critical minerals like graphite, permanent magnets, and cobalt used in EV production.

For American automakers like Tesla, General Motors, and Ford, the tariffs could provide a substantial competitive advantage on home soil. By erecting steep import costs on Chinese EVs, it makes their domestically produced electric models immediately more price competitive versus foreign rivals. This pricing edge could help ramp up EV sales for Detroit’s Big Three as they work to gain traction in this burgeoning market.

The tariffs represent a major headache for Chinese automakers like BYD that have ambitions to crack the lucrative U.S. EV market. BYD and peers like Nio have been counting on American sales to drive their global expansion efforts. The 100% tariff makes their EVs essentially uncompetitive on price compared to domestic alternatives.

However, the calculus could change if Chinese EV makers ramp up battery production and vehicle assembly closer to U.S. shores. BYD has already established a manufacturing footprint in Mexico. If more production is localized in North America, Chinese brands may be able to circumvent the duties while realizing lower logistics costs.

The impacts extend beyond just automakers. Battery material suppliers and lithium producers could face production cuts and lower pricing if Chinese EV demand softens due to fewer exports heading stateside. Major lithium producers like Albemarle and SQM saw shares dip as the tariff news increased global oversupply fears.

But if U.S. electric vehicle adoption accelerates in response to the import barriers, it could create new demand for lithium and other battery materials from domestic sources, analysts note. North American miners and processors may emerge as beneficiaries as automakers look to localize their supply chains.

Of course, trade disputes cut both ways. There are risks that China could retaliate against major U.S. exports or American companies operating in the country. That creates potential headwinds for a wide range of U.S. multinationals like Apple, Boeing, and Starbucks that rely on Chinese production and consumption. Any tit-for-tat actions could ripple across the global economy.

The levies also raise costs across EV supply chains at a vulnerable time. With inflation already depressing consumer demand, pricier batteries and components could curb the pace of electrification both in the U.S. and globally if passed along to car buyers. Conversely, domestic automakers have leeway to absorb higher input expenses to gain market share from Chinese imports.

With EV competition heating up between the world’s two largest economies, investors will need to scrupulously analyze potential winners and losers from the unfolding trade battle across the electric auto ecosystem. In the near-term, the tariffs appear to boost American legacy automakers while putting China’s crop of upstart EV makers on the defensive. Global battery and mineral suppliers face an uncertain shake-up.

Over the longer haul, costs, capital outlays, production geography, and consumer demand dynamics will ultimately determine the fallout’s enduring market impacts. The new levies represent a double-edged sword potentially accelerating the EV transition in the U.S. while fracturing previously integrated cross-border supply lines.

Prudent investors should weigh both the risks and opportunities across the entire EV value chain. While headline-grabbing, tariffs alone won’t determine winners and losers in the seismic shift to electric mobility taking shape globally. Proactively adjusting portfolios to the changing landscape will be crucial for optimizing exposures.

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Tesla Slashes Workforce by Over 10% as Demand Softens

Posted on by slightbourne@noblecapitalmarkets.com

In a move that has sent shockwaves through the electric vehicle industry, Tesla Inc. announced plans to lay off more than 10% of its global workforce. The decision, confirmed by CEO Elon Musk in an internal memo, comes on the heels of a disappointing first-quarter delivery report that missed analyst estimates and left the company with an excess inventory of over 46,000 vehicles.

The layoffs, which are expected to impact at least 14,000 employees out of Tesla’s 140,000-strong workforce, are part of a broader effort to cut costs and increase productivity as the company prepares for its “next phase of growth,” according to Musk’s memo. The move underscores the challenges facing Tesla amid a slowdown in EV demand, both in the United States and globally.

“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Musk wrote in the memo. “As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it must be done.”

The announcement has sent shockwaves through the industry, with analysts offering mixed reactions to the news. Dan Ives, a noted Tesla bull at Wedbush Securities, described the layoffs as an “ominous signal” that speaks to tough times ahead for the company. “Demand has been soft globally, and this is an unfortunately necessary move for Tesla to cut costs with a softer growth outlook,” Ives said, adding that the move signals that Musk is navigating a “Category 5 storm.”

However, not all analysts view the layoffs as a negative development. Garrett Nelson, an analyst at CFRA, sees the move as consistent with actions undertaken by other automakers – and particularly EV pure-plays such as Rivian and Lucid – amid slowing EV growth rates. “We view the announcement as a sign of the times, but the fact Tesla is taking action to reduce costs amid the slowdown should be positive for the bottom line,” Nelson said.

The layoffs come at a critical juncture for Tesla, which has long been hailed as a pioneer in the electric vehicle space. After years of breakneck growth and ambitious expansion plans, the company now finds itself grappling with a rapidly changing market landscape. Rising interest rates and higher overall prices have dampened consumer demand for electric vehicles, while increased competition from legacy automakers and upstart EV manufacturers has intensified pressure on Tesla to maintain its competitive edge.

Musk has repeatedly emphasized the importance of affordability in driving EV adoption, fueling speculation that Tesla was working on a next-generation vehicle that would start at around $25,000. However, recent reports suggesting that the company had canceled the project were met with a swift denial from Musk, who instead teased the debut of a Tesla robotaxi on August 8.

As Tesla prepares to report its first-quarter earnings on April 23, all eyes will be on the company’s ability to weather the current storm and chart a course for long-term growth. The layoffs, while painful, may be a necessary step in ensuring Tesla’s long-term competitiveness in an increasingly crowded and challenging market.

Janet Yellen Signals Potential Tariffs on Chinese Green Energy Exports

Posted on by slightbourne@noblecapitalmarkets.com

U.S. Treasury Secretary Janet Yellen escalated trade tensions with China over its massive subsidies for green industries like electric vehicles, solar panels and batteries. During her recent four-day visit to Beijing, Yellen bluntly warned that the Biden administration “will not accept” American industries being decimated by a flood of cheap Chinese exports – a repeat of the “China shock” that hollowed out U.S. manufacturing in the early 2000s.

At the heart of the dispute are allegations that China has massively overinvested in renewable energy supply chains, building factory capacity far exceeding domestic demand. This excess output is then exported at artificially low prices due to Beijing’s subsidies, undercutting firms in the U.S., Europe and elsewhere.

“Over a decade ago, massive Chinese government support led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States,” Yellen said. “I’ve made it clear that President Biden and I will not accept that reality again.”

While not threatening immediate tariffs or trade actions, the stark warning shows Washington is seriously considering punitive measures if Beijing does not rein in subsidies and overcapacity. Yellen said U.S. concerns are shared by allies like Europe and Japan fearing a glut of unfairly cheap Chinese green tech imports.

For its part, China is pushing back hard. Officials argue the U.S. is unfairly portraying its renewable energy firms as subsidized, understating their innovation. They claim restricting Chinese electric vehicle imports would violate WTO rules and deprive global markets of key climate solutions.

Escalating tensions over green tech subsidies could disrupt trade flows and supply chains for renewable energy developers, electric automakers, battery manufacturers and more across multiple continents. Some key impacts for investors:

Rising Costs: Potential tariffs on Chinese solar panels, wind turbines, EV batteries and other components could increase costs for green energy projects in the U.S. and allied countries, slowing roll-out.

Shifting Competitive Landscape: Non-Chinese exporters of renewable hardware like solar from countries like South Korea, Vietnam or India may benefit from U.S. trade actions against China, increasing overall competition.

Consumer Prices: Green tech price inflation could be passed through to consumers for products like rooftop solar systems, home batteries and EVs if tariffs increase costs.

Strategic Decoupling: If tensions escalate towards a full “decoupling”, it could accelerate efforts by the U.S., Europe and others to secure their supply chains by bringing more critical green industries in-house through domestic investments and subsidies.

Stock Impacts: Depending on how tensions unfold, stocks of firms exposed to U.S.-China green tech trade flows could face volatility and disruptions in both directions. Tariffs would likely create clear winners and losers.

For now, Yellen says new forums for discussions have been created to potentially resolve overcapacity concerns. However, her blunt warnings suggest the U.S. will not hesitate to take tougher actions to protect America’s fledgling renewable energy and electric vehicle industries from alleged unfair Chinese trade practices.

Ford Shifts EV Strategy, Delays Electric SUV and Truck Launches

Posted on by slightbourne@noblecapitalmarkets.com

Ford Motor Company has pumped the brakes on its plans to rapidly electrify its vehicle lineup, announcing delays for two hotly anticipated all-electric models – a three-row SUV and a pickup truck. The automaker cited the need to allow more time for consumer demand and new battery technologies to develop further before committing to these capital-intensive vehicle programs.

The multi-row electric SUV initially targeted for production in 2025 at Ford’s Oakville, Canada plant has been pushed back to at least 2027. And the electric pickup previously slated for late 2025 is now not expected until 2026. This recalibrated roadmap represents a significant detour from Ford’s earlier aggressive EV roadmap, and has notable implications both for Ford and the overall electric vehicle market trajectory.

For Ford, the delays allow the company to be more judicious with its investments at a time when EV adoption has been slower and more costly than many projected. Ford lost $4.7 billion on its electric vehicle efforts in 2023 alone. By taking a more measured approach, Ford can hopefully time these program launches better with consumer readiness and technological advancements that could make the vehicles more compelling and profitable.

However, the setbacks also risk Ford falling behind leaders like Tesla, Hyundai/Kia, and Chinese EV makers BYD and Xiaomi in the fierce electric vehicle battle. Both Tesla and Hyundai/Kia outsold Ford’s EV lineup in the first quarter of 2024, while BYD is gearing up to launch its first electric pickup truck to challenge Ford in that key segment.

For investors, Ford’s pulled-back EV plans could be seen as a prudent way to limit the staggering losses in that part of the business for now. But it also injects more uncertainty around Ford’s long-term EV positioning and market share outlook. Competition is intensifying rapidly with new electric offerings from virtually every major automaker, including emerging players like Xiaomi looking to grab a piece of the EV pie.

Tesla maintains a clear lead, but its growth has slowed as rivals have released more compelling electric models across more vehicle segments. If companies like Hyundai, GM, Volkswagen, BYD and others can continue gaining traction, Ford could find itself scrambling if it is late to market with mainstream electric SUV and truck options that are so pivotal to its product mix.

The EV delays underscore the challenging transitions legacy automakers face in balancing investments for the electric future while still deriving most of their profits from sales of internal combustion engine vehicles today. Stock investors seem to be giving Ford the benefit of the doubt for now, with shares trading close to 52-week highs. But delivering on execution with these postponed electric models has become even more crucial for Ford to remain relevant and profitable over the long haul as new EV competitors emerge.

Why the Mining Sector Looks Poised for a Major Breakout

Posted on by slightbourne@noblecapitalmarkets.com

The mining sector has experienced boom and bust cycles throughout history, but current trends suggest we may be entering a new era of growth and opportunity. With the world transitioning to clean energy and electric vehicles, demand is surging for key minerals like lithium, cobalt, nickel and copper. This creates an attractive investment case for the mining sector.

Historic Trends

Looking back, the mining industry has gone through periods of rapid expansion and painful contraction. During economic expansions and commodity bull markets, mining companies ramp up exploration, development and production to capitalize on high prices. This leads to oversupply and when demand eventually weakens, the cycle turns downward.

We saw this play out in dramatic fashion over the past decade. High prices in the 2000s encouraged massive investment in new mines and supply capacity. But when Chinese growth began to slow around 2012, demand weakened and prices collapsed. The mining sector was forced to drastically cut back on production and capital investment.

Many mining companies barely stayed afloat during this bust period. But this reduction in supply helped set the stage for the next upcycle. Now, after years of underinvestment, mines are depleting reserves faster than they are being replenished. With commodity demand picking up again, conditions are ripe for the next mining boom.

Current Market Trends

Several key trends suggest we are now in the early stages of a new mining upcycle:

  • Electric vehicle revolution – EV adoption is accelerating around the world, dramatically increasing demand for lithium, cobalt, nickel, copper and other key minerals. Total EV sales increased 70% in 2021 and are projected to rise more than 5-fold by 2030. This will require a massive increase in mineral supply.
  • Renewable energy expansion – Solar, wind and other renewables are seeing surging growth as countries aim to cut carbon emissions. This further increases metals demand for batteries, transmission lines, wiring and other components.
  • Supply chain vulnerabilities – The pandemic and geopolitics have exposed risks of relying on a few key countries for critical mineral supply. Governments are now focused on developing domestic mining capacity to ensure supply security.
  • Decarbonization efforts – Reaching net zero emissions will require a staggering volume of minerals for clean energy infrastructure buildout. Models estimate needing 30 times more lithium and 15 times more cobalt by 2040.

These trends all point to a pending boom in mining investment and production. The demand outlook has fundamentally shifted in a more positive direction.

Take a moment to take a look at emerging growth natural resources, metals and mining companies by looking at Noble Capital Markets’ Senior Research Analyst Mark Reichman’s coverage list.

Investment Opportunities

For investors, this macro backdrop presents an opportunity to capitalize on the coming mining supercycle. Some ways to gain exposure include:

  • Lithium mining stocks – Lithium prices have skyrocketed 10-fold in the past two years as demand for electric vehicle batteries has soared. Leading lithium miners like Albemarle, SQM and Livent are seeing their earnings multiply. They are investing heavily to aggressively expand production capacity to ride the lithium boom. Their stocks still may have substantial upside given the tight supply and surging demand forecasts.
  • Nickel and cobalt miners – Clean energy technologies like batteries require vast amounts of nickel and cobalt. Both metals face looming supply deficits. Miners expanding production such as Glencore, Sherritt International and Giga Metals stand to benefit enormously from surging demand and higher prices over the coming decade. These miners offer some of the best leverage to capitalize on the EV battery revolution.
  • Copper miners – Copper is essential for global electrification and will be required by the millions of tons for EV charging networks, power grids, wiring and electronics. Leading copper miners like Freeport McMoRan, Southern Copper and First Quantum Minerals offer direct exposure to higher copper prices. Many are expanding production while also paying healthy dividends.
  • Diversified mining majors – Large diversified miners like BHP, Rio Tinto and Vale mine a broad mix of commodities from copper and iron ore to coal and potash. Their diversification provides stability while still benefiting from the overall minerals boom. These global giants pay some of the highest dividends in the market.
  • Junior mining stocks – Earlier stage mining companies developing new projects provide extreme upside potential leverage but also greater risk. Conduct thorough due diligence on management track record, finances, permitting status and feasibility studies before investing.
  • Physical gold and silver – Precious metals like gold and silver can provide a hedge against market volatility. Buying physical coins and bars or investing in ETFs offers exposure. Just a small allocation of 5-10% can help balance a portfolio.
  • Mining ETFs – Funds like the Global X Lithium ETF (LIT), VanEck Vectors Gold Miners ETF (GDX) and SPDR Metals & Mining ETF (XME) provide diversified exposure to mining stocks and commodities. This simplifies investing in the sector.

With mining poised to boom, investors have many options to position for the coming supercycle. As with any investment, proper due diligence and risk management remain critical. But the macro trends point to a bright future for mining stocks. For investors, now may be the ideal time to position for the coming mining supercycle.

GM Commits $19 Billion Through 2035 to Secure EV Battery Materials From LG Chem

Posted on by slightbourne@noblecapitalmarkets.com

General Motors (GM) announced Wednesday its largest investment yet to lock up critical raw materials needed for its ambitious electric vehicle (EV) production plans. The Detroit automaker said it will spend $19 billion over the next decade to source cathode materials from South Korean supplier LG Chem.

The materials—including nickel, cobalt, manganese and aluminum—are key ingredients for the lithium-ion batteries that power EVs. Under the agreement spanning 2026-2035, LG Chem will ship over 500,000 tons of cathode materials to GM’s joint battery cell plants with LG spinoff Ultium Cells in the United States.

GM stated this is enough supply for approximately 5 million EVs with an estimated range of over 300 miles per charge. The materials will come from an LG Chem plant currently under construction in Tennessee.

For GM, signing a long-term purchase agreement helps mitigate risks around securing sufficient future EV battery supplies amid intensifying competition. As automakers collectively invest billions to shift their lineups to mostly EVs by 2030, critical mineral shortages could constrain production plans.

“This contract builds on GM’s commitment to create a strong, sustainable battery EV supply chain to support our fast-growing EV production needs,” said Jeff Morrison, GM vice president of global purchasing and supply chain.

The LG Chem deal ranks among the largest—if not the largest—EV supply contract inked by GM to date. It highlights an urgency by the company to lock up raw materials as the global auto industry accelerates its electric shift. GM aspires to exclusively sell EVs by 2035.

However, the 14-year LG Chem agreement also implies GM may be adapting its EV strategy to account for adoption happening slower than anticipated. The original pact was scheduled to expire in 2030, but GM extended it another five years.

After initially forecasting aggressive EV sales growth, GM has pulled back on targets amid steeping battery costs and strained consumer budgets. “We’re also being a little bit prudent about the pace at which the transition occurs,” said CEO Mary Barra.

Nonetheless, GM remains laser-focused on its EV future. It recently announced a $650 million investment to expand production of its profitable full-size SUVs—but as electric versions only by 2024. “We have the manufacturing flexibility to build EVs at scale,” said Barra.

For investors, GM’s major bet on EVs represents an opportunity to capitalize on the immense growth projected in the electric vehicle market over the next decade. Research firm IDTechEx forecasts the EV market will balloon from $287 billion in 2021 to over $1.3 trillion by 2031 as adoption accelerates globally. GM’s plan to phase out gas-powered cars and transition to an all-electric lineup positions it as a leading EV player in this booming new automotive era.

Meanwhile, LG Chem said it aims to “bolster cooperation with GM in the North American market” through the expanded cathode materials agreement. The supplier has jockeyed with China’s CATL for the title of world’s top EV battery maker.

For both LG and GM, ensuring cathode supply security with a US-based plant mitigates geopolitical risks. President Biden’s Inflation Reduction Act requires automakers to source critical minerals domestically or from allies to qualify for EV tax credits.

While the road to an all-electric future remains bumpy, GM’s huge bet on sourcing vital battery ingredients shows its commitment to phasing out the internal combustion engine. As Barra stated, “We’re on our way to an all-electric portfolio.”

Take a look Comstock Inc., a company that innovates technologies that contribute to global decarbonization by converting under-utilized natural resources into renewable fuels and electrification products to balance carbon emissions.

Exro-SEA $300M Electric Merger: Creating an EV Propulsion Leader

Posted on by slightbourne@noblecapitalmarkets.com

Electric vehicle technology firm Exro Technologies is acquiring e-mobility drivetrain maker SEA Electric in an all-stock $300 million deal. The strategic merger combines two complementary electric propulsion platforms, setting the stage to disrupt the surging commercial EV space.

For investors, the transaction provides Exro with enhanced scale, revenue, and a clear path to profitability. With SEA’s major OEM customers like Volvo and Toyota, over 1,000 EV system orders are forecast for 2024 generating above $200 million sales.

The consolidated entity targets delivery of complete, next-gen propulsion solutions demanded by fleet operators and manufacturers transitioning to electric. Significant synergies, cross-selling opportunities, and cost savings are expected from the integration of the companies’ technologies.

Massive Addressable Market

Exro’s battery control electronics and SEA’s full electric drive systems together optimize EV power, efficiency, and costs. This unique, end-to-end capability unlocks a share of the enormous global commercial EV market.

Market research firm IDTechEx sees the medium and heavy commercial EV market reaching over $140 billion annually by 2031. With increasingly stringent emissions regulations worldwide, electrifying trucks, buses, construction equipment and beyond offers massive potential.

Exro and SEA aim to be at the forefront of this shift providing the integrated propulsion technologies enabling OEMs to electrify their offerings at scale.

Key Customer Wins

A huge value driver is SEA Electric’s multi-year supply agreements with heavy-duty truck leaders Mack and Hino for thousands of initial EV systems. This provides the merged Exro with committed volumes and Tier 1 auto relationships to leverage.

SEA’s proven proprietary technology underwent extensive validation by the major OEMs. Having signed binding long-term deals, SEA Electric immediately thrusts Exro into a commanding competitive position and cash flow generation.

Clear Path to Profitability

Beyond the technology and growth synergies, the transaction offers investors a profitability catalyst for Exro. Management estimates achieving positive cash flow within 12 months post-close given the ramping order book.

This would mark a key inflection point in Exro’s maturation toward becoming a fully self-sustaining EV enterprise. Profitability could further enhance access to capital to fuel expansion efforts.

The merger is subject to shareholder greenlighting, but the strategic fit and near-term income opportunity make a compelling case. With Polestar and others vying in electric commercial vehicles, Exro seizes pole position through its SEA Electric deal.

Take a look at some Century Lithium Corp., a Canadian based advanced stage lithium Company, focused on the growing electric vehicle and battery storage market.

China’s BYD Overtakes Tesla in EV Sales as Global Competition Heats Up

Posted on by slightbourne@noblecapitalmarkets.com

The electric vehicle (EV) race is heating up on the global stage. Recent data shows Chinese automaker BYD has overtaken Tesla as the top selling EV maker in the fourth quarter of 2023. BYD sold over 525,000 battery electric vehicles from October to December, surpassing Tesla’s nearly 485,000 deliveries.

This shift signals China’s rising prominence as a major force in the EV industry. With enormous growth potential in the world’s largest auto market, Chinese companies like BYD are positioned to reshape the competitive landscape. Their success has wide-ranging implications for investors across the auto and battery supply chains.

BYD’s meteoric growth is fueled by China’s EV-friendly policies. The government has implemented aggressive targets, mandating that new energy vehicles comprise 20% of sales by 2025 and become mainstream by 2035. China is reaching these goals years ahead of schedule thanks to subsidies and infrastructure spending. New energy vehicle sales exceeded 30% of the market in the first 11 months of 2023.

Tesla still led BYD in total global EV sales for full-year 2023, delivering 1.8 million vehicles versus BYD’s 1.57 million. But BYD is closing the gap rapidly, with sales up 73% last year. The company aims to double its international dealer network in 2023 and boost overseas sales five-fold.

To accommodate this growth, BYD plans to construct its first passenger EV plant in Europe. The facility in Hungary will complement BYD’s existing European bus factory. This international expansion mirrors China’s broader effort to increase exports and take on traditional automakers like Volkswagen and Renault in their home markets.

The intense competition has sparked a price war in China, with Tesla and others slashing costs in 2022 to retain market share. While this boosted sales, it eroded industry profit margins. Surging raw material prices also squeezed margins across the supply chain. Battery-grade lithium carbonate rose over 280% last year.

Take a look at some emerging lithium companies by taking a look at Noble Capital Markets’ Senior Research Analyst Mark Reichman’s coverage list.

Sourcing enough lithium and other battery metals remains a concern. According to Benchmark Mineral Intelligence, demand growth for lithium-ion batteries will require global lithium supply to expand eight-fold by 2030. Companies are racing to secure upstream supplies and lithium producers’ stocks have benefited.

But the launch of new mines takes time. Geopolitical factors may also constrain near-term growth in critical mineral supply from key regions like South America. This supply/demand imbalance poses a risk to the pace of EV adoption worldwide.

Investors will closely watch how BYD navigates these headwinds. Vertically integrated automakers like BYD with control over more battery and mineral assets may have an advantage. But no company is immune from margin compression if prices remain elevated.

Regardless, China’s trajectory toward EV supremacy seems clear. The country boasts advantages in scale, cost, and the supply chain that will be difficult for rivals to replicate. Tesla’s position appears secure as the leading global luxury EV brand. But Chinese automakers are poised to dominate the larger mass-market segments.

For investors, this reshuffled landscape demands a reassessment of portfolio positioning. Companies tied to China’s booming EV ecosystem warrant consideration. However, risks around growth assumptions, valuation, and competitive dynamics in a rapidly evolving industry must be weighed. While the road ahead remains challenging, China has signaled plans to set the pace in the global EV race.

GM Launches $10 Billion Buyback to Appease Shareholders

Posted on by slightbourne@noblecapitalmarkets.com

Facing mounting criticism after production setbacks and labor unrest rattled investor confidence this year, automaker General Motors (GM) is opening the corporate coffers to initiate a massive $10 billion share repurchase program. The move aims to regain Wall Street’s trust by returning billions to shareholders.

Accelerating Buybacks to Prop Up GM Stock

GM shares have sputtered in 2023, down 14% year-to-date heading into Wednesday’s announcement. The stock dove nearly 5% in October when contract negotiations with the United Auto Workers (UAW) broke down into nationwide strikes, forcing GM to suspend guidance. With electric vehicle launches also lagging internal targets, GM hopes to stop the bleeding and inject positive sentiment through shareholder payouts.

The accelerated buyback comes after GM already spent $3.3 billion repurchasing shares so far this year. By expanding repurchases to $10 billion, GM moves aggressively to reduce outstanding shares and boost key per-share metrics like earnings-per-share.

How The $10 Billion GM Buyback Will Work

Rather than spacing out buybacks over several years, GM is frontloading the program to have maximum near-term impact. The company will immediately receive $6.8 billion worth of its shares from the banks underwriting the plan – Bank of America, Goldman Sachs, Barclays and Citibank.

These banks will then repurchase GM shares on the open market over the next six months. The final tally of shares bought back depends on GM’s average share price during that period. If shares remain around current levels in the $37 range, the full $10 billion could retire nearly 270 million shares – almost 20% of GM’s float.

Such large buybacks often drive share prices higher by soaking up excess supply. It also means per-share financial metrics like earnings, cash flow and dividends appear larger with fewer shares outstanding. For GM to hit the upper end of its newly reinstated earnings-per-share guidance range this year, solid buyback execution will be key.

GM Shareholders Get More Cash Too

In tandem with turbocharging buybacks, GM also announced a 33% dividend hike from 9 cents to 12 cents per share annually. Together, these moves signal a shareholder-friendly turn for the automaker after delays in its electric and autonomous programs led to executive departures.

Rather than flashy visionary promises, GM looks to deliver tangible returns now in the form of cold hard cash. These initiatives could take center stage heading into 2024 as leadership emphasizes financial consistency through a period of technological transition.

For income-focused investors and funds, juicier dividends make GM appear more attractive relative to other automakers and electric vehicle pure plays. Combined with reduced shares outstanding, GM’s 4.2% dividend yield will rise even higher, bringing in more potential shareholders.

Outlook Still Uncertain Beyond 2023

An open question is whether GM can sustain enhanced shareholder returns in the years ahead while simultaneously investing billions in next-generation manufacturing and technology. Many bears argue spreading cash so liberally now leaves GM vulnerable to economic shocks down the road.

But with UAW deals running into 2028 and strains from this year mostly wiped clean, GM can campaign on hitting its earnings guidance in 2024 and rewarding loyal shareholders along the way. Where GM goes from there, however, remains clouded in uncertainty.

Precision Motion Company Allient Acquires Design Firm Sierramotion

Posted on by slightbourne@noblecapitalmarkets.com

Allient Inc. (Nasdaq: ALNT), a designer and manufacturer of specialty motion control products, has acquired Sierramotion Inc., a private company specializing in precision motion solutions. The deal expands Allient’s capabilities in highly-engineered motion components for robotic, medical, industrial and other applications.

California-based Sierramotion brings decades of experience designing customized electro-mechanical systems. Their expertise spans rotary, linear and arc motion applications. Sierramotion provides rapid prototyping, testing and low volume manufacturing for customers across industries like semiconductor, defense and robotics.

The acquisition aligns with Allient’s strategy of adding new technologies through M&A. Sierramotion’s engineering talent and nimble product development will aid Allient’s push into integrated motion systems. Combined with Allient’s larger scale manufacturing footprint, the deal creates opportunities to commercialize Sierramotion’s innovations.

Allient sees motion control as a high-growth market driven by automation and electrification trends. Their targeted sectors include factory automation, surgical robotics, last-mile delivery, drones and electric vehicles. Allient aims to leverage acquisitions to expand capabilities across this diverse customer base.

The addition of Sierramotion also boosts Allient’s new product development capacity, speeding time-to-market. Quick turn prototyping and close customer collaboration helps Sierramotion rapidly refine motion components. Integrating these strengths with Allient’s global manufacturing creates a competitive advantage.

Founded in 2019, Sierramotion has worked previously with Allient to co-develop motion solutions. The existing relationship and complementary capabilities make for a seamless integration of the two companies per management. Expect the deal to be immediately accretive.

Allient continues executing on a well-defined acquisition strategy aimed at shareholder value creation. The company looks for targets that expand its motion technology portfolio and bring specialized engineering talent. Disciplined capital deployment and operating excellence remain priorities for the Buffalo, NY-based firm.

Sierramotion also offers entry into growing West Coast technology hubs. The acquisition provides a footprint near potential customers across tech sectors. Overall, the deal enhances Allient’s competitive positioning within precision motion control, a key focus area for the company.

Keep an eye out for new motion control products as Allient leverages Sierramotion’s unique capabilities. The merger kicks Allient’s acquisition-driven expansion into higher gear as management vows to seize opportunities and lead innovation.