After enduring severe market and company-specific challenges, electric vehicle (EV) manufacturer Lordstown Motors (NASDAQ:RIDE) finally provided a glimmer of optimism for badly bruised shareholders. The company received regulatory approval in the U.S. to sell EVs. This has sent RIDE stock up around 8% in early Tuesday afternoon trading. Still, the upstart remains deeply embattled amid several critical headwinds.
Earlier today, Lordstown announced that its Endurance full-size battery-electric pickup truck achieved “full homologation.” Per Barron’s, homologation represents a rather esoteric industry term to describe a range of tests to determine roadworthiness. These include a 100,000-mile road test along with crash and safety assessments. Per Lordstown’s press release, the company received homologation from the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB).
As a result of successfully passing certification requirements, Lordstown owns the green light to ship its initial batch of 500 vehicles from its Foxconn EV Ohio plant to customers. “I am very proud of the Lordstown Motors and Foxconn EV Ohio team for their hard work, grit, and tenacity in achieving this milestone. We are very excited to start delivering vehicles to our commercial fleet customers,” said Edward Hightower, Lordstown CEO and President.
Though RIDE stock popped substantially higher, the overall investment profile remains deeply troubled. On a year-to-date basis, shares trade around 62% below parity, reflecting severe sector-specific pressures.
Massive Headwinds Await RIDE Stock
While taking nothing away from the encouraging report, the bigger picture surrounding RIDE stock imposes a bearish slant. Last year, the New York Times published an unflattering expose of Lordstown, which also called into question the viability of special purpose acquisition companies (SPACs), the financial vehicle by which RIDE became public.
Internal rumblings aside, this year started inauspiciously for RIDE stock and the broader EV space. Due to geopolitical flashpoints, skyrocketing inflation and global supply chain disruptions, very few if any sector players emerged unharmed. Further, with so much competition in the arena, it’s not clear which brands will rise above the muck.
As well, Lordstown’s focus on commercial fleet EVs presents both opportunities and obstacles. On the optimistic front, the bipartisan infrastructure bill augurs well for RIDE stock. However, certain details such as the flatlining of construction spending since July of this year may pressure investor sentiment.
Finally, the fate of RIDE stock in the intermediate term may hinge on the Federal Reserve. With the central bank committed to shrinking the money supply to combat soaring inflation, the subsequent rise in borrowing costs will likely disincentivize expansionary initiatives. While this impacts all consumption behaviors, it could be particularly problematic for fleet operators.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.