Cenntro can carve out a place in the electric vehicle market, but faces competition
Center (NASDAQ:NNEC), after its reverse merger with meme favorite Naked Brands, is struggling to find its footing. The electric vehicle market has been flooded with many companies, some of which have already succeeded in their business models. On the other hand, the CENN stock is interesting, but it is not a thoroughbred EV game.
Cenntro’s main market is Europe, with its growing demand for renewable energy and electric vehicles, but keep in mind that there will also be trade-offs. In particular, the Russian invasion of Ukraine has been going on for a few months and is currently weighing on the European economy. There is no immediate solution, and this market instability is beyond the control of any single country.
In this environment, nickel prices become very volatile. Electric vehicle batteries need nickel as one of their metallic components and have therefore been hit hard on the production side.
At the same time, green industries continue to grow in popularity. Earlier this year, oil prices soared, leading more people to buy electric cars, which is positive for Cenntro.
The company also takes a proactive approach. It recently acquired a distributor and assembler of light electric vehicles called Tropos Motors Europe and its network of 50 dealerships in Germany and 13 importers in countries including France, Portugal and Spain.
So let’s look at the bullish and bearish cases for CENN stocks. But to avoid the question, I personally think it’s too risky to invest in this one until the dust has settled.
The Bull case for CENN shares
Even though the company doesn’t have a huge presence in the industry, it has patented over 238 different ideas. Technology rules the world and Cenntro Electric stands to enjoy big dividends for its hard work.
In addition, it acquired a factory in the city of Huzhou, China, to increase its production capacities. The 474,000 square foot facility will begin trial production in the third quarter. It will allow the company to produce 50,000 vehicles in one year. The plant cost about $19.5 million.
The acquisition of a factory in China is great news for Cenntro. It is the largest electric vehicle market in the world and has become extremely popular with automakers.
In addition, the Metro, a light commercial vehicle from Cenntro Automotive, received authorization to operate in the Kei Car category. This is the first time that this approval has been done for an imported vehicle.
Japan has focused on the future of electric cars to reduce carbon emissions. It’s not just about focusing on long-term clean energy; it will also increase the popularity of electric vehicles. Japan doesn’t have a huge market compared to China and the United States, but it still has a significant number of EV customers, which makes the approval big news.
There’s also a global push to reduce the carbon footprint, and electric vehicles are a big part of the plan. In 2021, around 9% of all cars sold were battery electric! Cenntro’s presence on the continent is already significant and will likely increase significantly over the next few years.
The Bear case for CENN Stock
Cenntro has produced more than 3,600 electric vehicles. That’s ahead of some other companies that are still in the early stages of bringing their technology to market.
However, Cenntro’s first offering, the Metro, is primarily aimed at campuses. It has a top speed of 85 km/h and a maximum payload capacity of 1,200 pounds, so it can only carry light loads. If you look at any of the major electric vehicle companies, like You’re here (NASDAQ:TSLA), Nio (NYSE:NIO) and Lucid Engines (NASDAQ:LCID), they have many offers that sell well. Having a more balanced portfolio will be necessary for Cenntro to move forward.
In addition, CENN stock has received little interest from institutional investors, although it is popular with retailers. This makes the stock prone to wild swings, which are uncomfortable for investors in the face of soaring inflation, rising interest rates and geopolitical tensions.
Is CENN stock a buy or a sell?
Electric vehicles are on the rise. There are many reasons for this, including better technology, growing awareness of environmental issues, and government incentives.
The popularity of electric vehicles is expected to grow with more countries implementing policies that favor them and more people realizing their benefits.
Cenntro deserves credit for being aggressive in today’s market. It also benefits from the broader trend towards electric vehicle adoption. However, in the near future, Cenntro will need to resolve outstanding issues before it can be considered a long-term investment in the EV industry.
At the date of publication, Faizan Farooque did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.