Electro-mobility: The dawn of a revolutionary boom*
- Bertrandt: Already in great demand as service provider for electro-mobility
- Hella: Paving the way for electro-mobility with battery control systems
- RWE: The utility set to profit the most from rising power prices
As the drive technology of the future, e-mobility had long been considered a "theoretical theme" – debated by specialists, on environmental forums or at universities. The sector generally agreed that it would take many years for this technology to achieve mass mobility status. "But this has rapidly changed", says Jürgen Pieper, sector analyst at Metzler Capital Markets. "The theme of electro-mobility has become part of our daily lives." While electric and hybrid vehicles currently account for only around 1% of the market share worldwide, the market can now be expected to accelerate strongly. Pieper sees three reasons for this: First "Dieselgate", that greatly highlighted the degree to which combustion engines pollute the environment. Second, the relatively swift success of Tesla that even took the occasional sector expert by surprise. And third, the purchasing incentives and other privileges that are being granted by politics in key regions of the world and boosting demand for electro-mobility.
However, there are still considerable disadvantages to electric cars compared with traditional petrol and diesel vehicles. For Pieper, the selling prices still lie significantly above comparable prices for traditional vehicles – depending on the model, by between 25% and 100%. Electric vehicles can only reach around one quarter of the distances that can be driven by conventional cars. And finally the recharging infrastructure: The network is still too thinly spread and the charging times are relatively long. However, Pieper expects all three hurdles to be at least greatly reduced in the medium term. For example, the enormous expansion of production capacities for rechargable batteries and the attainable scale effects will bring the price of electric cars down noticeably. "We expect price parity in all relevant markets in approximately six years", Pieper continues. Furthermore, the costs of running an electric car are also far lower than those of a conventionally-powered vehicle. However, intensive research is still necessary to upgrade a battery's energy density and thereby lengthen the distances that can be driven. Bosch, for example, is currently working on this with its acquired start-up Seeo. Optimizing the recharging infrastructure will be the simplest and quickest thing to achieve. A demand being made by the EU initiative "Clean Energy for Transport" is that one charging point should exist for every ten electric cars by 2020. The major German carmakers are also interested in a denser network: Recently they announced their intention to join forces and establish a high-speed recharging network in Germany in the years ahead.
For Pieper, there is no doubt that electro-mobility will be the drive of the future: He estimates that the market for purely electric-powered vehicles and plug-in hybrids will grow annually by 25% until and including 2020 and then by around 20% in the years after. "This estimate is on the cautious side, with surprise potential certainly on the cards", Pieper claims.
Among the companies covered by Metzler, the analyst considers the autosupplier Hella and the service company Bertrandt to be those likely to profit the most in the next four years from the expected boom in electro-mobility. Guido Hoymann, sector specialist for the companies from the utility sector, expects RWE to be one of the winners.
Bertrandt: Already in great demand as service provider for electro-mobility
Bertrandt is involved in a large number of electro-mobility projects that have been commissioned by the OEMs. Of the companies analyzed by Metzler Capital Markets, Bertrandt is the only one today already able to generate a significant share of its revenue of an estimated 7.5% – and presumably also of its profits – from electro-mobility developments. Pieper expects this share to rise by as much as one quarter by 2020. With customers increasingly seeking solutions from one source, Bertrandt should profit from being one of the few suppliers able to offer a very broad range of engineering and development services in the automobile business. Given the major technological challenges in the years ahead – with driverless cars worth mentioning in this context alongside electro-mobility – Pieper expects further brisk demand for the engineering services of Bertrandt in coming years. He estimates the price target for shares in Bertrandt to lie at EUR 110 per share.
Hella: Paving the way for electro-mobility with battery control systems
When electro-mobility starts taking off, the electronics division in particular – the second mainstay of Hella alongside lighting technology – can be expected to grow strongly. In this division, Hella offers battery control systems that are used, for example, for monitoring a car battery's charging level. Pieper expects demand for these systems to rise strongly. Last fiscal year, Hella generated around 3% of revenues from battery control systems and other technical solutions for electro-mobility. This share is likely to rise to nearly 10% until and including 2020 based on the assumption of 25% annual growth in electric vehicles and a continuation of the disproportionately high growth typical of Hella compared with the automobile sector. Moreover, given the company's good positioning in a segment with a promising future, the valuation of the shares in Hella is low. Pieper sees the fair value for shares in Hella at EUR 50.
RWE: The utility set to profit the most from rising power prices
A breakthrough in electro-mobility would lead to a surge in demand for power: If all cars were electrically driven in Germany, power consumption would rise by some 22% compared with current consumption levels according to the estimates of Metzler Capital Markets. According to sector analyst Guido Hoymann, electricity prices are likely to rise in Germany in the years ahead even without this scenario, due to the supply shortage in connection with the country's withdrawal from nuclear energy and the German government's plans to significantly reduce power generation from coal power stations. Both – the higher demand for power and the higher power prices – would be to the benefit above all of RWE. Among the utilities, RWE in particular generates a considerable share of consolidated profit from conventional energy generation, and Hoymann believes that this business should profit the most from the possible surge in power prices in Germany. An increase in the electricity price of 10% would boost the operating profit from the conventional power generation activities by 30%. Hoymann sees the shares in RWE fairly priced at EUR 16 per share.
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