Umicore Faces Challenges Amid Battery Division Struggles
Concerns surrounding its battery division have significantly impacted Umicore, causing the company to lose three-quarters of its stock market value since 2021. The question remains whether the stock can recover and what this means for other green car players like Melexis.
In the spring of 2021, Umicore was thriving, benefiting from high platinum prices, a partnership with BASF, and growth in electric mobility. Mathias Miedreich, an automotive sector specialist, was appointed as CEO to navigate the company through its investments in catalytic converters and battery materials.
However, the scenario has shifted drastically. Umicore's share price has fallen from a high of 60 euros to less than 15 euros. The company announced a surprise CEO change in May, appointing Bart Sap, who began his tenure with an earnings warning. Umicore lowered its annual forecasts in June, citing a slowdown in electric vehicle (EV) growth, faster-than-expected expiration of historic contracts, delays in new contracts in Europe, and underperformance in planned volumes for a Chinese battery manufacturer.
The deceleration in the EV market is evident, with global sales stagnating in February before modest recovery. In Europe, all-electric car sales grew by just 2.1% in the first five months of the year. A significant challenge for Umicore is the rise of LFP (lithium-iron-phosphate) batteries, which are 20% cheaper than the NMC (nickel-manganese-cobalt) batteries Umicore specializes in. The market share of electric cars with LFP batteries has surged from 6% in 2020 to over 30% in 2022, driven by Chinese automakers and Tesla.
Despite the challenges, Umicore remains committed to NMC technology, arguing that its superior performance will secure its position, especially in the premium segment. However, competition is fierce, with advancements in solid-state batteries offering higher energy densities. A strategic review, expected in July, may provide further direction for Umicore.
The British group Johnson Matthey, Umicore's main competitor in catalytic converters, exited the battery market at the end of 2021, citing limited profitability prospects. This decision underscores the pressure on margins and the significant investment required in the sector. Johnson Matthey has shifted focus to hydrogen and chemical decarbonization, though with mixed success.
Umicore's situation reflects broader industry trends. The transition to electric vehicles continues, albeit at a slower pace, with electrified cars making up more than one in six global sales. The IEA forecasts a 45% share of electrified cars in China this year. By 2040, BloombergNEF predicts worldwide sales of electric cars will reach 73 million.
Among Belgian companies, Melexis stands out. Specializing in semiconductors for the automotive industry, Melexis benefits from the increasing number of chips in electric vehicles. Despite a market slowdown, analysts expect Melexis to maintain strong performance and return to growth next year.
Globally, Tesla remains a key player, although its stock is highly valued compared to traditional automakers like Volkswagen. Chinese competitor BYD faces challenges due to trade tensions but is expanding local production to mitigate tariff impacts. Other startups, such as Rivian and Xpeng, are navigating a competitive market with limited margins.
Suppliers like ON Semiconductor (Onsemi) and Autoliv present niche opportunities. Onsemi is well-positioned for growth with a new $2 billion project in the Czech Republic, while Autoliv, specializing in automotive safety equipment, benefits from the ongoing electrification trend.
