EV battle update, pain in freight rates, European optimism EV battle update, pain in freight rates, European optimism EV battle update, pain in freight rates, European optimism

EV battle update, pain in freight rates, European optimism

Equities 8 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Equities are pushing higher with Tesla leading the gains in the US among mega caps due to much better than expected Q4 deliveries hitting 308,600. European equities are also hitting new all-time highs as better news flow on Omicron is causing a repricing due to a quicker normalisation and higher growth. In today's equity update we also take a look at Maersk and freight rates, and how logistics and supply constraints will continue to make it difficult to predict inflation.

Will Tesla become the world’s largest carmaker?

Tesla stunned the market yesterday announcing 308,600 deliveries in Q4 taking total deliveries in 2021 to 935,600 with a trajectory to hit 1.5-1.6mn deliveries this year. The delivery figures were way ahead of estimates and investors rewarded the carmaker by sending its shares up 14%, an inch from its all-time high.

Our chart on battery electric vehicles (BEV) show that Tesla is accelerating relative to the competition from already a leading market position which should make the industry nervous. Volkswagen is playing catch up, but there is a risk that the company’s Q4 figures will be distorted like Q4 2020 due to EU rules on emission related costs creating an incentive to overproduce and delivery before year-end (last year Volkswagen did that and many BEVs to their own subsidiaries). We will not know the full picture of the Volkswagen vs Tesla battle before Q1 ends.

The reason why we do not have figures for many of the big brands is that many of them are still not providing the necessary information on BEV sales. Ford has big plans but little to show yet, with some estimates putting BEV deliveries at 150,000 in 2022 which in that case would be a tenth of Tesla.

Source: Saxo Group

In our recent research note on the global car industry, we said that things are not adding up any longer with the combined market value of the largest carmakers having increased multiple times over the past five years despite falling new car registrations suggesting the market has saturated and consumers are postponing their purchase to get an EV. The only way the combined market value makes sense is if the combined industry will become more profitable in the future producing EVs instead of gasoline and diesel cars. That could be the case but the jury is still out on this. If we assume the market is mostly efficient then it is pricing that Tesla will become the biggest carmaker in the world when the industry has transitioned to being fully electric. For now the growth trajectory is supporting this view, but if it turns out to be right are many of the traditional carmakers grossly overvalued. These are complex questions and evolve predicting technology and the industry over the next 10 years which is a task with a great error attached to it.

Tesla is estimated to deliver revenue of $73.7bn in 2022 with EBITDA of $16.2bn as analysts expect operating margins to expand further to become the industry’s best by far. With a valuation of $1.2trn the market is implying the carmaker will be industry leading and will significantly increase profitability from current levels. We will let investors decide for themselves on this matter, but do not underestimate disruptive change as we have seen several industries in the past decade undergoing significant change by new entrants.

Source: Bloomberg

Maersk signals inflationary pressures will be difficult to forecast

Maersk shares were up 3% yesterday as investors are betting container freight rates to remain elevated for the foreseeable future. The leading freight indices ended at all-time highs last year driven by excess demand for goods in the developed world and a shortages of truck drivers and container ships, in addition to China’s zero-case policy on Covid-19 adding to constraints around ports. The pandemic will continue to have a negative impact and especially China’s stance on how to mitigate Covid-19 will have important implications for inflation. The reason why inflation forecasting has been rather simple in the past three decades is that inflation has mostly been driven from the demand side, but the pandemic has caused the supply side dynamics to play a bigger role. Underinvestment in our logistics and mining activities are causing short-term price pressures and longer term the green transformation and urbanization will continue to put upward pressure, and the biggest unknown is to what extent companies will reconfigure their global supply chains with potential higher production costs as a consequence.

Source: Saxo Group

European optimism over Omicron pushes STOXX 600 to new all-time high

Europe is currently facing a massive increase in Covid-19 cases with Omicron being the dominant variant. Luckily the new variant is found to be less severe with hospitalization risk half that of the Delta variant and the clear divergence between new cases and hospitalizations seen across Europe means that there is light at the end of the tunnel. Mobility, travel and leisure activities will normalize much faster and as a result European equities are getting repriced higher. If the commodity boom continues and we see interest rates go higher this year, it should benefit European equity indices as they are more procyclical and have a higher weight on financials. The biggest risk to the positive sentiment is the ongoing energy crisis in Europe which in the short-term has improved somewhat due to milder weather and LNG shipments from the US, but things can quickly change in Europe.

Source: Bloomberg

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.