In September, the Chinese government announced that it would set a deadline to end the use of fossil-fuel powered vehicles in the country. The announcement sent shockwaves through the electric vehicle industry, opening enormous opportunities for overseas manufactures. The move is also designed to give a boost to Chinese electric vehicle production.
The ban could come later than 2040, which gives car and oil companies plenty of time to prepare for the shifting demand. Still, for those with a long time horizon, it is worth noting which Canadian companies could be winners and losers from this development.
Winner: Magna International Inc.
Magna International Inc. (TSX: MG)(NYSE: MGA) shot up to 2017 highs after news that it was expanding its Kamtek facility in Birmingham, Alabama. The facilities specialize in high-pressure aluminum casting, which enables manufacturers to lower vehicle weight and improve fuel economy. Magna also manufactures driver-assistance systems that could be used in autonomous vehicles in the future.
Magna stock has climbed 9.1% in 2017 and 21% year over year as of close on September 18. The stock offers a dividend of $0.35 per share, representing a dividend yield of 2.2% at offering. Magna has the potential for big long-term growth and provides solid income for any portfolio.
Loser: TransCanada Corporation
TransCanada Corporation (TSX: TRP)(NYSE: TRP) stock is up 2.7% in 2017 and has gone through a volatile few months. On March 24, TransCanada benefited from President Trump signing a permit that would allow for the construction of the Keystone XL pipeline. Canadian oil companies have hoped for quite some time that China would provide sufficient demand for oil as developed nations moved away from fossil fuels. Although China moving away from fossil-fuel powered vehicles is likely decades away, the prospect should still alarm those banking on growth in oil sales from China.
The company reported impressive second-quarter results that saw revenue grow to $3.22 billion from $2.75 billion in Q2 2016. The company also reported a much-improved profit of $881 million compared to $365 million the previous year. In spite of long-term concerns, the stock still offers a strong dividend of $0.62 per share, representing a dividend yield of 4%.
Winner: BlackBerry Ltd.
BlackBerry Ltd. (TSX: BB)(NASDAQ:BBRY) stock has climbed 23% in 2017, but it has fallen 18% over a three-month period after investors have lost some faith in the comeback story. At the International Consumer Electronics Show in January, BlackBerry announced an advanced software platform for autonomous vehicles. Autonomous systems have the potential to reduce oil consumption and greenhouse gas emissions 2-4% over the next 10 years, according to the Intelligent Transportation Society of America.
Many electric cars that are scheduled for production or set to be released to the market include semi-autonomous technology, demonstrating the potential growth for BlackBerry in the electric vehicle industry. Though investors may have soured on the story, I still love what this company is doing. The explosion in the electric vehicle industry should provide ample opportunity for BlackBerry to flaunt its revolutionary software.
