Global electric vehicle sales ramping up, led by China
The nascent electric vehicle industry dominated headlines once again in August. Global electric vehicle sales rose by 77% year on year during the second quarter, powered by surging sales in China which now accounts for more than 50% of global demand. However, the headlines were stolen by Elon Musk’s claim via twitter that Tesla may be taken private. To date all this has tangibly produced is another investigation of Tesla by regulators, this time at the U.S. Securities Exchange Commission. Another prominent EV start-up, China-based NIO, moved to finalise its IPO in the US, with first pricing expected in mid-September and a market valuation currently estimated around $7 billion. NIO, which has only sold several hundred vehicles to date, has an enviable list of prominent shareholders including Tencent and Baidu.
The broader impact of growth in electric vehicles was highlighted in BHP Billiton’s announcement of plans to boost cobalt production from its Nickel West operation in Western Australia, as well as accelerating plans to raise nickel sulphate production for the EV market. The operation, which had previously been identified as “non-core”, is aiming to sell 90% of its production to the battery sector by the end of next year. At the same time the challenges of battery production were highlighted by Nissan’s announcement of the divestment of its AESC battery business to Chinese company Envision Group. AESC, a JV with NEC, initially produced batteries for Nissan’s Leaf EV and was at one point the second largest EV battery supplier globally. The auto manufacturer has sought to source batteries externally.
Solar manufacturers responding to challenges
The solar sector has been recently challenged by many manufacturers following China’s significant reduction in subsidies announced on June 1st 2018. Chinese company GCL-Poly, a leading manufacturer of polysilicon as well as polysilicon wafers (from which solar cells are made), saw a $1.9 billion asset sale negotiation collapse early in the month. The company restated debt reduction as its top priority towards month end. Sunpower, which is based in the US but majority-owned by French oil giant Total, announced a second asset sale in just three months. Following the sale of its inverter assets to Enphase in June, it announced it will dispose of most of its utility scale project pipeline, 4.7GW in total, to an infrastructure group. Meanwhile, leading Chinese solar module manufacturer Canadian Solar (don’t be confused by the name), announced it would reduce its capacity expansion plan, deferring the development of 800MW of cell capacity.
Manufacturers are responding to the challenges brought by falling prices across the solar value chain in recent months. India announced the imposition of import tariffs on solar modules during the month. The industry has experienced similar cycles before, the most recent in 2012 following a widespread reduction of subsidies in Europe; at that time Europe was the key global market – in the way that China is now. The industry emerged from that cycle with more disciplined capacity additions accompanied by accelerated demand incentivised by lower pricing. This lead to a decent recovery for the leading manufacturers.
Wind turbine manufacturers see surging demand
The wind sector saw falling subsidies and plunging prices in 2017 and this has been followed by surging demand. Manufacturers are currently reporting record orders and price stabilisation so far in 2018. Related to this, Bloomberg New Energy Finance’s industry research team raised its mid-term global wind turbine demand estimate by 40%. The Nanuk New World Fund holds a position in Vestas, the world’s leading wind turbine manufacturer, one of a number of companies which make up the Fund’s 20% exposure to clean energy.
Eric Siegloff
CEO
Nanuk Asset Management
Tel: 02 9258 1600
Mob: 0481 751 615
eric.siegloff@nanukasset.com
www.nanukasset.com