Electric vehicle stocks are in danger of a medium-term selloff. On September 30, federal EV tax credits of up to $7,500 will expire. Those incentives drove the rise in EV stocks like Rivian (RIVN), Tesla (TSLA), and Lucid Motors (LCID).
More recently, Tesla shares recovered from their lows. Rivian is range-bound, while Lucid reverse-splits its shares. Bears have a big bet against LCID stock, holding a 31.06% short float position.
Tesla has the most to lose. Consumers bought more Tesla vehicles in the second quarter. Unit sales grew to 384,122 in Q2, compared to 336,681, as consumers locked in the credit ahead of its expiration.
EV sales fell off a cliff in Germany. In Germany and Britain, Tesla sales fell by over 55%. Conversely, China’s BYD sales rose by nearly 400%, to 3,184 units. U.S.-based EV firms will need to brace for Chinese EV companies taking global market share. Nio (NIO) and XPeng (XPEV) also continue their global rollout.
Innovation Slowdown
To compete effectively, American EV makers need to continue their innovation for low-priced vehicles. Unfortunately for Tesla, the firm bet on Cyber trucks at a $100,000 price tag to increase its profit margins.
The flood of Chinese EVs in global markets will shrink Tesla’s market share. Investors should be wary of holding the stock.
