Electric vehicle battery stocks jump, Chinese market ripe for consolidation

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Inflation news was better than expected in the U.S., a development that helped spur investor optimism. While there were a number of companies that made big gains on Tuesday thanks to (or in spite) of this, the one sector that stood out the most was the electric vehicle industry. In particular, electric vehicle battery stocks shot up thanks to a couple of different announcements.

The first of which came from FuelCell Energy (NASDAQ: FCEL). The battery maker became one of the best-performing stocks on Tuesday after the company reported its Q3 results. FuelCell’s revenues had grown 43% compared to last year, hitting $26.8 million for the third quarter. Gross profit came in at $1.1 million, although the company’s net loss is still sitting at $12.8 million. That’s better than the $16.1 million net loss reported a year ago but still better than expected.

The news was enough to send shares of FuelCell surging over 16.8%. Other battery makers in the industry also shot up on the news as well. This included Romeo Power (NASDAQ: RMO) and Plug Power (NASDAQ: PLUG), both of which were up around 5.0% by the end of Tuesday.

Besides that, one major EV analyst said that the Chinese market, easily the largest EV market in the world, is ripe for consolidation. Considering almost every electric vehicle manufacturer is trying to seize the Chinese market, it’s likely we’re going to see a frenzy of acquisitions and buyouts overseas.

I would say that consolidation is an inevitable trend in this industry. Historically, we have seen invisible hands like the market and also visible trends, regulations, navigated the industry through the consolidation trend continuously,” said Bain analyst Helen Liu according to CNBC. “I believe that it might be a little bit too early to tell which brand or which name will win at the end.”

She added that this consolidation trend is inevitable for a few reasons. The most noticeable of which would be from the Chinese government itself. The CCP has said there are already too many EV manufacturers in the country and that it prefers to work with a smaller number of larger companies.

We’ve already seen the Chinese government aggressively crackdown on U.S.-listed stocks, as well as online tutoring companies. However, investors are wondering whether the CCP will truly go after a booming, lucrative market like the EV sector, or at least wait until the current growth momentum fizzles out.

Traditionally, mergers and consolidations happen when a market transitions from being a young, fast-growing sector to a more mature industry. While companies like Tesla have ballooned in value, EV adoption still is a far cry from where most analysts predict it will be in a decade or two.

FuelCell Energy Company Profile

FuelCell Energy Inc is a fuel-cell power company. FuelCell designs manufactures, sells, installs, operates, and services fuel cell products, which efficiently convert chemical energy in fuels into electricity through a series of chemical reactions. It serves various industries such as Industrial, Wastewater treatment, Commercial and Hospitality, Data centers and Communications, Education and Healthcare, and others. Geographically, the company generates a majority of its revenue from the United States followed by South Korea. – Warrior Trading News

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