Will BMW’s hydrogen cars challenge Tesla’s electric vehicles?
A a change in the German political regime could tip the scales when it comes to building an ecosystem for cars powered by a hydrogen fuel cell. Local automakers are hedging bets on both technologies, and investors are rewarding companies like BMW [BMW.DE] for that.
BMW’s share price has gained around 20% through 2021, unlike the share price of electric vehicle maker Tesla which has only risen by 10%.
Germany offered to invest € 8 billion in hydrogen technology in May, Reuters reported. Fitch Solutions analyst Joshua Cobb has estimated that the EU intends to increase its hydrogen fuel infrastructure, but it may be two to three years before legislation supporting this takes shape. . However, the German Green Party joining the country’s coalition has the potential to accelerate this timeline.
Audi owned by BMW and Volkswagen [VWAGY] have turned to hydrogen fuel, which he believes could be a viable alternative to electric vehicles.
The future is hydrogen … or EV
As technologies evolve, hydrogen may be more environmentally friendly than electric vehicles, as electric vehicles depend on electricity produced and transmitted by centralized power plants that sometimes use coal or fossil fuels. On the other hand, a hydrogen fuel cell is like a mini generator. Since hydrogen easily combines with other elements like oxygen to produce water, the vehicle’s carbon emissions are very low.
Improving prospects for investment in hydrogen appear to be pushing BMW’s share price higher. The company is currently trading above its 50 and 200 day moving averages, creating a strong buy signal. A Relative Strength Index value of 57.583 reinforces a strong set of technical indicators.
Yet, given aggressive lithium mining and the popularity and standardization, it is currently much cheaper to electrify transportation.
BMW, Toyota [TM] and Daimler [DAI.DE] lead a group of 13 companies investing $ 10 billion in hydrogen technology and infrastructure around the world over the next 10 years. Ineos, a chemicals company owned by one of the UK’s richest people, Sir Jim Ratcliffe, is set to invest £ 25million in HydrogenOne Capital Growth, a hydrogen fund that intends to raise £ 250million and float on the LSE later this year. Perhaps this will speed up the standards and manufacture of hydrogen-based energy sources.
For now, however, investment in hydrogen fuel cells remains on a small scale compared to that in electric vehicles.
How much Ford will spend on EV technology by 2025
At least $ 28 billion was reportedly invested in electric vehicle companies in 2020 alone, according to data from CB Insights and Dow Jones Market Data Group. Ford [F] recently announced that its own spending on EV technology will more than double to $ 29 billion by 2025. Reuters reported in 2019, ahead of industry headwinds such as the coronavirus pandemic and the election of Joe Biden as President of the United States, that global automakers would invest $ 300 billion in electric vehicle technology over the next 10 years.
Tesla founder Elon Musk scorned the threat hydrogen poses to the electric vehicle market, calling the technology “dumb cells” in 2020.
While the debate between hydrogen and electric vehicles has traditionally been presented as a competition, it may not be a zero-sum game. Both technologies are already widely used, with hydrogen already being used to power ships, planes, trucks, cars, and trains, as well as the NASA mission that sent Neil Armstrong to the moon in 1969. Randeep Somel of M&G Investments estimated that “about 35% of global emissions cannot be electrified”, so hydrogen may well play a role in greening industries such as steel, aviation and cement production. .
BMW shares: a good call
Such applications underpin research from Market Research Future which estimated that the hydrogen energy market could grow at a compound annual growth rate of 68.52% to $ 46.89 billion by 2028.
Deutsche Bank analyst Tim Rokossa gave BMW a “buy catalyst: buy” rating on September 15 as a short-term investment idea. In a note to customers, he maintained a “buy” rating and a target of € 115 for the BMW stock price and said the stock was “just too cheap” given the consistency of its cash flow.
Consensus among analysts surveyed by CNN Money is to own the stock, with 10 out of 22 respondents giving this rating. Eight recommended “buy” and three “outperform”, while only one analyst rated the stock as “sell”.
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