EV stocks have had a rough couple of months. Many of these doomed EV stocks hit multi-month lows due to falling demand for vehicles overall, given the challenging macroeconomic environment. Rising geopolitical conflicts, like in Israel and Ukraine are also causing investors to flee to “safe” assets, which is hurting high-growth, riskier EV stocks
Moreover, the EV production capacity is increasing, and price cuts across the EV industry are now a regular thing. Other factors include production delays due to a semiconductor shortage and the spread of the delta variant, concerns relating to overvaluation of EV stocks, and accidents involving self-driving features.
Another reason that is hiring the EV space is investor doubt about long-term demand for EVs in the light of Tesla’s soft fourth-quarter earnings report. The EV market leader failed to meet Wall Street’s estimates and also warned of production troubles in 2024, signaling that the current issues may persist for longer than initially anticipated.
Let’s take a look at some doomed EV stocks that investors should consider removing from their portfolios.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) shares tumbled around 9% recently after Q4 earnings fell short of expectations, alongside a cautionary forecast for 2024. One of the most popular EV stocks has been in trouble for some time, with the negative sentiment around Tesla increasing after the car giant reported that its vehicle volume growth for the upcoming year “may be notably lower” compared to the growth rate achieved last year.
For investors, this is a sign of a potential slowdown in Tesla’s rapid expansion pace. Tesla revealed that its revenue and earnings for Q4 did not meet market forecasts. A key focus for investors, Tesla’s automotive revenue, reached $21.6 billion for the quarter, marking a modest increase of 1% year-on-year. This subdued growth highlights the challenges Tesla is facing in scaling its operations while maintaining revenue growth.
The primary concern for investors and market observers is Tesla’s outlook for 2024. The company has indicated that the expected vehicle volume growth could significantly decelerate as it prepares to launch its “next-generation vehicle” in Texas.
Tesla described its current situation as being “currently between two major growth waves,” suggesting a transitional period that might impact its short-term growth trajectory. Tesla delivered 1.8 million cars in 2023.
However, the company has initiated price cuts across key markets in Europe and China in response to intensifying competition from Chinese manufacturers like BYD (OTCMKTS:BYDDF) and established automakers venturing into the EV space.
These price adjustments, while potentially boosting sales volumes, have adversely affected Tesla’s profit margins, ultimately hurting this EV stock. Given recent comments on the analyst call, it is likely that Tesla stock will remain under pressure for some time.
Rivian (RIVN)
Rivian (NASDAQ:RIVN) had a terrible month of January, making it one of those doomed EV stocks to dump before it dives even further. The company’s market cap shrinked by a third after the EV maker opened the new year with soft 2023 delivery figures. The numbers, which fell short of market expectations, prompted a selloff in this popular EV stock.
The California-based manufacturer reported that it produced 17,541 EVs in the fourth quarter at its Normal, Illinois, facility and managed to deliver 13,972 vehicles during the same period. This production and delivery volume represents a significant increase from the previous year, where Rivian produced 10,020 vehicles and delivered 8,054 in the fourth quarter.
Despite the year-over-year growth, Rivian’s performance for the full year of 2023 did not meet analyst predictions. The company announced that it delivered a total of 50,122 vehicles in 2023, which marks an impressive 146.5% increase from the previous year.
However, this figure was slightly below the consensus estimate of 51,000 deliveries. Rivian’s shortfall in meeting delivery expectations has raised concerns among investors and contributed to the decline in its stock price in recent weeks. Hence, investors looking for high-growth stocks are better off looking elsewhere until the underlying EV demand improves.
Lucid Motors (LCID)
The drop in Lucid Motors (NASDAQ:LCID) stock is a result of the two main reasons: Low production volumes, and demand for EVs in general. As a result, this popular EV stock is down as much as 21% year-to-date.
Lucid is currently producing EVs at volumes much lower than its capacity, driving its costs higher and causing it to burn through cash. Some analysts mentioned that the long wait times for vehicles are discouraging potential new customers.
Moreover, Lucid’s stock is also affected by the overall EV market trends. The EV industry is feeling major headwinds because of oversupply and lagging demand. Lucid recently announced a restructuring plan intended to reduce its operating expenses
These issues have outweighed certain positives in the case of Lucid, such as a significant financial boost with an investment from the Public Investment Fund of Saudi Arabia (PIF). Saudi Arabia’s sovereign wealth fund acquired a 60% ownership stake in Lucid Motors.
However, the journey following Lucid Motors’ public listing presented a challenging financial landscape. Initially, Bloomberg reported that the value of the PIF’s stake in Lucid Motors soared to more than $55 billion, reflecting optimism and high expectations for the company’s growth and market impact.
According to recent media reports, the value of the PIF’s stake in Lucid Motors experienced a drop of as much as 90%, bringing it down to approximately $5.4 billion. Until there is more clarity about the sustainability of Lucid’s business models, investors are advised to stay on the sidelines.
On the date of publication, Shane Neagle did not hold (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.
