Last week, Rivian (RIVN), a manufacturer of electric vehicle trucks, lost ~ 18%. Lucid Group (LCID), a supplier of luxury EVs, fell nearly as much. The sell-off in Tesla (TSLA) is part of the reason for the slump.
Now what? What happened to the promised growth in EV stocks?
Just as gas-powered vehicle stocks will under-perform in a recession, so too will EV stocks. Investors dumped Ford (F) and General Motors (GM) abruptly. Ford raised the price of the F-150 Lightning. It cited higher raw material costs to justify the move.
The increased costs of electricity will hurt the competitiveness of EV makers. In addition, potential customers may have lost their jobs recently. They will cancel their Rivian and Lucid reservations.
Markets are betting that EV reservations will fall. EV investors will need to slash the revenue potential from their holdings.
At their current market cap, investors will realize the price-to-sales ratio is too high. The stock offers a minimal margin of safety if any. The global recession is in its early phases. High electricity costs continue to hurt manufacturing activity.
Inflation increases supply costs and costs for customers. LCID and RIVN investors will need to brace for revenue failing to meet expectations.
