LCID - 4 Stocks with Exposure to the Growing Asian and Middle Eastern EV Markets
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There’s been a lotof recent news about automakers cutting back on or delaying productionof electric vehicles (EVs) due to slowing consumer demand. One of themain culprits responsible for the weakening demand is high interestrates, which have made consumers hesitant to finance big-ticketpurchases like electric cars.
Luckily, a rebound could be on the horizon as theFed’s interest rate hiking cycle appears to be at an end, whichmeans once rates start falling, EV sales should pick back up. As amatter of fact, a recent report from Fortune Business Insightsprojects that the global EV market will grow from $500.48 billion in2023 to $1.5 trillion in 2030, representing a CAGR of 17.8%, whichreaffirms the industry’s solid growth prospects.
Even as the US marketslows, EV adoption in other regions like Asia, the Middle East, andAfrica has been rapidly increasing. In Asia, analysts expect EV salesto grow at least 22% annually until 2028, while the Middle East marketwill almost triple to be worth about $7.65 billion by the same time,according to Deloitte. These economies are already growing at ahealthy clip, and now, thanks to increasing government incentives, EVadoption is driving massive demand. This means that EV companies withan early foothold in these regions could reap substantial gains asthis trend continues to play out. Due to this fact, we have identifiedfour EV stocks with a presence in these regions that we believe shouldbe on your radar.
VivoPower International PLC (NASDAQ:VVPR) provides acomprehensive suite of sustainable energy solutions (SES), includingelectric vehicles, solar systems, battery technology, microgrids, andcritical power services, through its subsidiaries.
For some background,VivoPower started out by providing solar energy for clients in thecommercial, industrial, and government sectors but went public afterArowana Inc., a spac acquisition, acquired it in a transaction worth$162 million.
InOctober 2020, VivoPower acquired a majority shareholding in Temboe-LV, marking its entry into the highly profitable electric vehiclemarket as illustrated by the double-digit revenue growth rates of topOEMs. For instance, BYD, Tesla, and NIO increased FY2023 revenues by42%, 19%, and 10%, respectively, while Li Auto (LI) experienced animpressive 160% growth.
But unlike those companies, VivoPower’s Tembo takes adifferent approach to solving the EV problem, which we believe couldbe even more profitable. Instead of people getting rid of theircurrent cars to buy new EVs, which inadvertently leads to moreemissions, Tembo supplies conversion kits containing all the partsneeded to convert a vehicle from an internal combustion engine (ICE)to an electric (EV). These parts include the batteries, an e-motor, areduction box, a charger, software, and many other components thatmake the converted vehicle work safely and seamlessly.
The EV specialistoffers conversion and integration capabilities and IP for ruggedizedand customized off- and on-road light utility vehicle applications(for both new and second-hand vehicles) that could be used to servicea diverse range of sectors, from mining, infrastructure, and utilitiesto government services, game safaris, and humanitarian aid.
According to the iea,there should be around 350 million EVs on the road by 2030 if we areto stay the course to reach net zero carbon emissions by 2050. Theonly problem is that, as of 2022, there were just over 26 million EVson the road. It's unlikely that OEMs will fill all this demand andthis is where VivoPower International PLC (NASDAQ:VVPR) comesin.
Thecompany’s conversion kits are already resonating well with the EVmarket, and we believe that the company’s business model andapproach have been validated based on a number of key corporatemilestones achieved so far.
For starters, VivoPower International PLC(NASDAQ:VVPR) significantly expanded its distribution networkafter securing a commitment of 5000+ kits and an order pipeline of10,000+ in the first half of 2023. Those included an MOU in Jordan for1,000 kits, opening a path to the Middle East, which is the largestLandcruiser market, and a definitive agreement in Kenya for 4,000kits, providing entry into second-hand vehicle segments, which expandsthe addressable market considerably.
More recently, Tembo signed a definitive jointventure agreement with Francisco Motor Corporation in September 2023to develop and supply electric utility vehicle (“EUV”)electrification kits for a new generation of electric jeepneys(e-jeepneys) in the Philippines, which could be a major growth driverfor VivoPower.
That is because the Electric Vehicle Association of thePhilippines (EVAP) estimates that the cumulative sales of e-vehiclesin the country will reach 6.6 million units by 2030, driven byfavorable government policies. In fact, e-vehicles got an exemptionfrom excise tax, and a recent Executive Order scrapped the tariffrates of completely built-up imported e-vehicles for five years tohelp them become more cost-competitive in the country.
VivoPowerInternational PLC (NASDAQ:VVPR) also signed a joint venture withGeminum Pty Ltd in October 2023 to design, test, and implement digitaltwins of Tembo’s EUVs and ancillary Vivopower sustainable energysolutions (SES).
In essence, this means that VivoPower offers EV investorsexposure to the fastest-growing economies in Southeast Asia, theMiddle East, and Africa, which is why the company has seen strongfinancial support, illustrating investor interest andconfidence.
Lastyear, in December, Vivo received a direct investment of $5 millioninto Tembo at a pre-money valuation of $120 million from a privateinvestment office based by a member of the ruling Al Maktoum family ofDubai. At the moment, VVPR has a market cap of about $4.5 million,which implies that its valuation has significant upside potential evenwithout taking into account its other subsidiaries.
Moreover, VivoPowerInternational PLC (NASDAQ:VVPR) announced that it will spin offthe majority of its Caret business unit’s portfolio, representing upto ten solar projects totaling 586 MW-DC at varying stages ofdevelopment, which should further unlock shareholder value.
It’s also importantto note that in February, Vivo started the delivery of itsnext-generation Electric Utility Vehicle (EUV) powertrain conversionkits to Access Industrial Mining Inc, Tembo’s exclusive distributorin Canada. The Tembo EUV conversion kits will transform new andsecond-hand diesel-powered 4×4 LandCruiser and Hilux vehicles intoruggedized EUVs that are fit for purpose for mining and otherindustrial applications.
VinFast Auto Ltd. (NASDAQ:VFS) is a Vietnamese EV makerwhich went public following the completion of its merger with theU.S.-listed spac company Black Spade Acquisition in a transactionvalued at approximately $23 billion, according to a June filing withthe U.S. SEC. Soon after listing, shares of the EV maker had a massiverally, topping out at an all-time high of $93 before retracing back toslightly below its listing price as demand for EVs cooled.
VFS recently reportedfourth-quarter earnings, revealing it delivered a record number of13,513 EVs globally in the period, up 35% quarter-on-quarter, withtotal EV deliveries for the full year coming in at 34,855,representing a 374% increase from 2022.
Going forward, the company has set its sightsfirmly on South Asia as its next growth frontier, which is why, at theBangkok International Motor Show, VFS announced plans to sell itselectric vehicles in Thailand, indicating it had already madearrangements with auto dealers to open showrooms in the country. Thiscould be a huge opportunity for the company considering that Thailandhas an ambitious goal to convert 30% of the 2.5 million vehicles itmakes annually into EVs by 2030.
In addition to that, VFS marked its launch inIndonesia during the Indonesia International Motor Show 2024 bysigning preliminary agreements with five dealers. The company alsosigned an MOU with three Indonesian companies for our fleet of thefirst 600 EVs for taxi purposes in Indonesia.
Unsurprisingly, ChardanResearch has reiterated its bullish view on VinFast Auto, with analystBriand Dobson noting the company’s Q4 results showed thecompany's ability to drive production growth despite supply chainheadwinds. Dobson and team believe shares of VFS are undervalued atbelow $6 and boosted their price to $13, which implies about 133%upside from the current price.
NWTN (NASDAQ:NWTN), based in the United ArabEmirates, is a pioneering green energy company that develops newenergy vehicles and is dedicated to providing passenger-focused,premium electric vehicle products and green energy solutions tocustomers. The company’s electric vehicles include a Supersportcoupe and smart passenger vehicles, such as MUSE and ADA.
NWTN also went publicvia a SPAC with East Stone Acquisition back in November 2022, in atransaction that resulted in NWTN receiving gross proceeds of $400million in PIPE investment from institutional investors and strategicpartners.
According to its most recent earnings filings, the companygenerated just $0.6 million in revenues over the six months endingJune 30, 2023, and lost $70 million in operations over the sameperiod.
Duringthe period, NWTN delivered ten vehicles to one customer from itselectric vehicle assembly facility in Khalifa Economic Zones Abu Dhabi("KEZAD"), which got its sales licenses from Abu Dhabi Emiratein early 2023. The company has been strengthening its distributionnetworks and recently established a ground-breaking collaboration withAutostrad Car Rental Company for the purchase of two hundred RabdanOne vehicles for their fleet, which would initially support theprestigious COP 28 event. According to NWTN, the partnership marks ahistoric moment in the evolution of sustainable transportation in theUAE as the Rabdan One is introduced into Autostrad’s prestigiousfleet.
AhmedAbood Al Yafei, Group CEO of Autostrad, highlighted the group'scommitment to sustainability: "The acquisition of the Rabdanelectric fleet aligns with our strategic vision for sustainablemobility. "
The company has been attracting significant investor attention,with a number of hedge funds such as Renaissance Technologies, JaneStreet Group, and Mint Tower Capital Management B.V. and otherinstitutional investors having recently increased their stakes inNWTN.
LucidGroup, Inc. (NASDAQ:LCID) is an American EV company withheadquarters in California and a manufacturing plant in Arizona.
During the company’srecent earnings call, it was revealed that it produced 2,391 EVs forQ4 and a total of 8,428 electric vehicles in FY 2023, showing 17%year-over-year growth. Lucid's actual production results came inat the top end of Lucid's revised guidance for FY 2023(8,000–8,500 EVs). The company reported revenue of $157.2 million,which was about 39% lower than Q4 2022, and the company'squarterly net loss was $653.8 million.
Despite that loss, things could be gearing upfor a turnaround. One of the highlights of the call was that themanagement team said that the Gravity, an SUV model scheduled tolaunch in late 2024, would "expand [the] total addressable marketfrom 2023 by more than 6x," while the "more affordable,high-volume midsize car," scheduled to launch in late 2026,"will expand [the] market opportunity from 2023 to nearly20x."
Thatcould perhaps explain why Saudi Arabia has invested immense politicaland economic capital for Lucid to succeed. Just recently, LCIDannounced that it had entered into an agreement with its majoritystockholder, Ayar Third Investment Company, an affiliate of the SaudiPublic Investment Fund ("PIF"), to purchase $1.0 billion of anewly created series of convertible preferred stock via privateplacement.
"We are extremely pleased to receive this strong, continuedsupport from the PIF as we work to solidify our place as theworld's leading EV technology company," said Peter Rawlinson,CEO and CTO, Lucid Group. "We continue to invest for the long termin both our technology and our vertically integrated manufacturingcapabilities, with PIF's support as a keydifferentiator.”
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