[Special Stock] Ecocap's Unique Electric Vehicle Vascular Technology Boosts Mexico Plant... Subsidies Only for North American Assembled Electric Cars

[Asia Economy Reporter Hyungsoo Park] Ecocap is showing strong performance. It appears that the U.S. government's decision to tighten subsidy eligibility criteria for electric vehicles has influenced the stock price. Ecocap recently raised funds for expanding its overseas subsidiaries through a capital increase. In particular, the proactive preparation for increased orders of electric vehicle parts from the U.S. is acting as a catalyst for improved earnings expectations.

As of 9:43 a.m. on the 10th, Ecocap is trading at 8,290 KRW, up 7.66% from the previous day.

The U.S. Senate has passed the 'Inflation Reduction Act (IRA),' which was promoted with the intention of excluding Chinese supply chains through a large-scale eco-friendly support bill by the Biden administration. The bill still requires approval from the House of Representatives and President Joe Biden's signature. Since the House is controlled by the Democratic Party, to which President Biden belongs, it is expected that all procedures will be completed within this week. Once the bill is enacted, starting next year, a tax credit subsidy of $7,500 per vehicle will be provided only for electric vehicles produced in North America or those equipped with batteries made in North America.

Electric vehicle production plants are expected to increase in North America, including the U.S. Hyundai Motor and Kia may also hasten the establishment of electric vehicle production plants.

Ecocap, established in 2007, is a specialized manufacturer of cables and automotive electronic components. It produces automotive wires such as high-voltage cables dedicated to electric vehicles, secondary battery components like busbars, wiring harnesses (hereafter W/H), bulb sockets, LED modules, and supplies them to global original equipment manufacturers (OEMs).

The cables and wiring produced by Ecocap are core automotive components responsible for power transmission as well as hundreds of signal transmissions, thus requiring high-end specifications. Especially, special cables have high entry barriers due to stringent technical requirements such as thermal resistance to high temperatures, high conductivity, durability, flexibility, and lightweight design.

Among electric vehicle parts, EV-dedicated high-voltage cables have high product stability and are directly exported to main production bases of global top-tier OEMs.

The main products, W/H and cables, function like the human body's blood vessels. They transmit signals and power to various parts of the vehicle. They are applied to all vehicle types, including internal combustion engine vehicles and electric vehicles, with about 2,000 meters of cables and wiring used per vehicle.

Ecocap is expanding its overseas subsidiaries to meet increasing order volumes. The main products, automotive cables and wiring harnesses, are used more than 50% more in electric vehicles than in internal combustion engine vehicles. As the electric vehicle market grows, demand is naturally expected to increase.

Ecocap established a manufacturing plant in Mexico in 2018. It began operations in 2019 and sells through its U.S. subsidiary. As orders from first-tier suppliers to U.S. OEMs increased through the U.S. subsidiary, the need to expand the Mexican subsidiary grew.

Through the capital increase funds, Ecocap plans to add ▲ LED module surface mount technology (SMT) equipment ▲ lamp component equipment ▲ power disconnect unit (BDU) SMT equipment ▲ BDU assembly equipment ▲ BDU functional inspection equipment ▲ ICS selective equipment. By establishing BDU production facilities, it will supply parts to first-tier suppliers of U.S. OEMs. BDU equipment is one of the power control components for eco-friendly vehicles such as electric and hybrid cars. It is installed between the battery and the load to connect or disconnect power.

On the 8th, Ecocap announced that it signed a parts supply contract with LS E-Mobility Solutions to respond to a Ford project.

Ecocap plans to supply parts from its Mexico plant to LS E-Mobility Solutions' Mexico plant starting at the end of 2024. The total order volume is expected to be approximately 187.5 billion KRW.

Ecocap signed a memorandum of understanding with LS E-Mobility Solutions on December 8, 2021, regarding cooperation in the electric vehicle parts business. On June 27 of this year, it conducted a third-party allotment capital increase investment of 5 billion KRW from LS E-Mobility Solutions. The company explained that this order was received as an extension of the business.

Besides this project, Ecocap plans to increase the operating rate of its Mexico production subsidiary by securing additional electric vehicle BDU projects through collaboration with LS E-Mobility Solutions for GM, Stellantis, etc., and separately securing orders for high-voltage wiring for electric vehicles from VIA, Stellantis, and others.

In May, Ecocap discussed investment related to supplying automotive electronic cable assemblies with VIA Motors. VIA Motors is headquartered in Orem, Utah, USA. Supported by its parent company Ideanomics, it produces electric commercial vehicles such as cargo trucks, trucks, and buses. A company official explained, "We had the opportunity to develop new customers and secure a market expansion advantage for supplying parts in the commercial electric vehicle sector in the Americas through the local Mexico plant."