The group adapts its supply to the electric vehicle

Carlos Tavares, Chief Operating Officer of Peugeot SA and then Stellantis, at the Consumer Electronics Show (CES) in Las Vegas last week. stellants

Lithium, manganese, nickel and cobalt: electrification of vehicles requires “new” raw materials for the automotive industry. But cost management is still strict.

Stellantis continues to prepare for the “electrification” of mobility by securing its access to essential raw materials. This morning a “Binding Supply Agreement” for five years with the Australian mining company Element 25 that will supply it, starting in 2026, with 45,000 tons per year of pure manganese sulfate monohydrate, a material used in the manufacture of car batteries.

Listed on the ASX, Element 25, which has a capitalization of A$1.1 per share, or the equivalent of about €130 million, will provide this raw material through its Butcherbird website. The agreement also stipulates that Stellantis will participate in the Element 25 round table, even if no financial component was disclosed.

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“Our commitment to carbon neutrality includes creating a virtuous supply chain so that we can meet our customers’ expectations of electric vehicles.” commented the general manager of the automaker, Carlos Tavares.

Securing the supply of raw materials

The tie-in to Element 25 is far from the first of its kind. At the end of 2021, the group entered into the first similar agreement with another Australian “miner”, Vulcan Energy Resources, regarding the delivery of lithium hydroxide – also from 2026. Then, at the beginning of the summer, Stellantis invested 50 million euros in Vulcan Energy , where it acquired an 8% stake. The value of this “minor” is now estimated on the stock market at more than 650 million euros.

In October, Stellantis and third Australian mining company, GME Resources, agreed a memorandum of understanding for the supply of nickel and cobalt sulfate. battery grade. GME Resources is a “start-up” company with a capitalization of less than 40 million euros.

A lot of announcements that are part of Stellantis’ strategy: by 2030, the group intends to have battery electric vehicles (BEV, according to the English acronym) account for 100% of its passenger car sales in Europe, 50% (for private vehicles) and pickups) than those made in the United States.

Cost control, motto of Carlos Tavares

Last week at the CES technology show in Las Vegas, Stellantis notably introduced an electric version of the Picks Dodge’s massive Ram 1500, as well as the “concept car” Peugeot Inception.

Sometimes, Carlos Tavares fell back on what was necessary “Improving the cost structure”, mantra since he assumed the position of President of Peugeot SA. Because if the production of the electric car turns out to be much more expensive than the conventional car, the car market will shrink, and the load factor in the factories will decrease, especially if the competition is fierce, and “Some unpopular decisions will have to be made.” This indicates that the site may be closed.

Our advice on STELLANTIS: KEEP

Stellantis deals with the issue of electrification head-on by ensuring the availability, in the medium term, of the necessary raw materials, which differ significantly from traditional metals such as steel and aluminium. This “new raw material” is not so much present in the West, it is also valued by competitors from all over the world, especially from Asia, which complicates the task. But the group’s approach seems disciplined and full of fundraising: Stellantis thus provides part of the necessary financial means to its partners, also linked to their future success. Thanks to the careful management of Carlos Tavares, the group has a positive net cash and therefore has the necessary funds on its own, an asset in the context of tight interest rates. Finally, the group chairman recalls that strict cost management is always on the agenda, which is reassuring in a capital-intensive sector such as automobile manufacturing, especially in an increasingly difficult economic situation. While it has gained Stellantis’ share in recent months, it remains undervalued on its fundamentals, with the 2023 PER still less than 6 times. Having taken, on our advice, the first position under 13 euros, at the end of September we will keep it.

Price as of date of painting: 14.53 euros
Lesson objective: 17 euros either a possibility + 17%
Investor profile: The Informed Saver, PEA
Investment prospects: 12 months

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