How the world's fastest growing car producer is shaking up the commodities market

by , 21 September 2017
How the world's fastest growing car producer is shaking up the commodities market
The revolution in electric vehicles set to upturn industries from energy to infrastructure is also creating winners and losers within the world's biggest commodities markets.

When Tesla first passed Ford's market cap, it was a big deal.

The bigger news came later, when the electric automaker passed General Motors.

Now Tesla's technological revolution in electric cars has paid off again.

The company is now larger than BMW, making it the fourth largest car manufacturer in the world (based on market value).

What's more, Tesla produced 84,000 sports and utility cars in 2016. By end 2018, it plans to have produced 500,000 for the year, and by 2020 a million cars per year.

That's 1,090% production growth between 2016 and 2020!

While some of the largest diversified miners such as Glencore PLC argue fossil fuels such as coal and oil still play a crucial role supplying energy needs, they'll also benefit the most from a move to electric cars, requiring more cobalt, lithium, copper, aluminium and nickel. All of these metals stand to benefit significantly as demand for electric cars grow…

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Electric cars are taking over the world – much faster than anticipated
 
A 2012 study by oil producing companies put electric cars at 1.2% of the global vehicle fleet in 2035.
 
By 2015, these same companies revised their forecast upward to 6%. That means they were wrong by a factor of FIVE TIMES in a mere three year period. I believe these figures are still a bit conservative…
 
According to Morgan Stanley’s “Global Autos and Shared Mobility” team of analysts, electric cars will take over the world.
 
A recent article by the MIT Technology Review states that “Electric vehicles will become a more economical option than internal combustion cars in most countries in the next decade.”
 
And according to Bloomberg New Energy Finance around one in three cars in the world will be electric by 2040. Currently there are roughly a million electric cars in the world, compared to 1.2 billion cars in total.
 
That means, for electric cars to reach the one in three mark they will grow from the current million to 400 million.
 
That is 400 times growth!
 
Simply put, the electric car market is at the precipice of truly MASSIVE growth.
 
And there’s a way to take advantage of it right now. Let me explain…
 
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These metals, and tiny SA based companies, are set to boom thanks to electric cars…
  • Copper demand will increase: Electric cars contain about three times more copper than a regular vehicle. That means rising electric-vehicle sales lend support to copper prices. In the past year, the copper price is already up 34%. My choice investment on the JSE is investing in a tiny copper recycler called Insimbi (JSE: ISB). The company is on a PE of 10.58, with the potential of 50% profit growth coming through in the next twelve months as its copper recycling operations take-off…
     
  • Aluminium components for electric cars is a major opportunity: As cars are required to become lighter for efficiency, more aluminium than steel needs to be used. And thanks to its properties of having a high melting point, high strength levels and low weight, aluminium is a great, safe metal to use in electric cars. My choice investment in this segment is Hulamin (JSE:HLM).In a recent trading statement Hulamin announced it expected profits to grow between 13 and 21% for the first six months of its financial year.

    That’s around 54c to 58c in earnings per share. On an annualised figure we’re looking at 116cps, putting the company on a PE of 5.58. Hulamin actually has a contract with Tesla to provide the company with a crucial part that holds its electric car batteries in place.
No matter how you look at it, electric cars (or hybrids) are fast becoming the norm in first world countries. The growth rates for this sector are potentially huge, and it is simply too big an opportunity to ignore…
 
Here’s to unleashing real value
Francois Joubert
 

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