EV Exodus: 3 Electric Car Stocks to Ditch Before the Crash


  • Investors would be better off selling these three EV stocks as market conditions deteriorate.
  • Tesla (TSLA): The March delivery disappointment foreshadows what could be ahead for the acclaimed EV maker. 
  • Nio (NIO): Despite surprise March delivery figures, a slowing EV market will have a great impact on smaller players like Nio. 
  • EVgo Services (EVGO): The stock has fallen 35% and could slump further as equities continue to plummet.
EV Stocks to Sell - EV Exodus: 3 Electric Car Stocks to Ditch Before the Crash

Source: shutterstock.com/Dmytro_Yushchenko

U.S. equities have continued to trend downward as investors and market analysts reassess the prospects of a market crash. As of last Friday, the S&P 500 has increased by 9.11% on a year-to-date (YTD) basis, while the Nasdaq has risen 6.91%. These figures are well below where the indices had risen after Q1 wrapped: both had risen above 10% for the year.

The burgeoning electric vehicle (EV) market has also seen better days. Slower sales growth and price wars have impacted many EV stocks to buy. The Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV), which holds around 84 EV and autonomous vehicles stocks, has been flat YTD, underscoring the fact many EV stocks have struggled to perform against the general market.

Interest rates remain elevated, and the Federal Reserve does not want to be hasty about cutting them either. These conditions will make it harder for consumers to buy new vehicles, including EVs. In this market, investors need to know which EV stocks to sell. Below are three EV stocks to sell before a broader market crash.

Tesla (TSLA)

Tesla (TSLA) on stock market. Tesla financial success and profit.
Source: Rokas Tenys / Shutterstock.com

Tesla (NASDAQ:TSLA) is undoubtedly one of the largest and most prominent players in the global EV market. Unfortunately, the U.S. EV manufacturer has been struggling. TSLA shares have dipped nearly 34% since the start of 2024. For some folks, Tesla’s stock may be approaching “buy territory,” but investors should not rush into it, as the EV maker’s shares are not out of the woods yet. In March, Tesla’s vehicle deliveries dropped 8.5% year-over-year (YoY), falling quite short of Wall Street’s estimates.

Let’s recall that in 2023, to mitigate the ever-prescient EV slump, Tesla pursued a controversial but largely successful price-cut strategy the automaker began to pursue that increased quarterly deliveries while also placing pressure on gross margins. Fast forward to now, the grim guidance Tesla gave at the beginning of 2024 appears to be coming to fruition.

The EV maker’s valuation multiple still remains high despite having dropped significantly over the past few months. In particular, TSLA shares are trading around 54.6x forward earnings. Given that equities can fall even further, Tesla is probably a stock people should dump for now, especially as the company’s valuation continues to be high.

Nio (NIO)

A mobile with NIO at horizontal composition.
Source: Freer / Shutterstock.com

The electric vehicle (EV) market slump continues to overwhelm EV producers worldwide. Nio (NYSE:NIO) stock is one of the up-and-coming China-based EV startups that has been gravely affected by weaker demand in the burgeoning car market. Nio’s share price has fallen nearly 51% YTD. As the company continues to falter, investors still holding the stock should really reconsider their judgment.

The Chinese EV maker has also experienced sluggish delivery growth respective to its competitors. EV deliveries in 2023 came in at 160,038, up only 30% YoY. BYD (OTCMKTS:BYDDY), NIO’s key competitor in China, saw a 62% surge in full-year EV deliveries.

In January, Nio delivered 10,055 vehicles, a 44% decrease from December. Similarly, in February, the EV maker delivered 8,132 vehicles, down 19% from January. Fortunately, March has been a slight reprieve for the Chinese EV maker. EV deliveries were up 14% Y0Y, a sharp contrast to Tesla.

Still, the overall EV market does not have good prospects. Increased competition in China could eventually stifle Nio’s growth in the long term despite having a good month in March.

EVgo Services (EVGO)

EVgo fast charging station
Source: Sundry Photography / Shutterstock.com

The final EV stock investors should sell is an EV charging stock: EVgo Services (NASDAQ:EVGO). EVgo is currently facing a profitability and cash-burn issue. The company’s net loss expanded from Q2’23 to Q3’23. Moreover, in its Q3 earnings press release, the company announced it was selected to add 32 fast charging stations in Colorado and Pennsylvania. Though this may seem like a win, the company is playing in a shrinking market, more and more dominated by Tesla.

EVgo’s Q4 earnings report also seemed positive at first. The company beat both Wall Street’s revenue and EPS estimates, but taking into account the overall health of the EV market makes it difficult to recommend holding this name. EVGO shares are down 35% YTD, and more losses in the future are par for the course as the EV market slows in 2024.

On the date of publication, Tyrik Torres 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.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/ev-exodus-3-electric-car-stocks-to-ditch-before-the-crash/.

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