Electric vehicles (EV) aren’t going away but they aren’t the growth industry they once were. Year-over-year sales are dramatically slowing with first-quarter sales rising just 2.6% from 2023. EVs accounted for 7.3% of all new-vehicle sales in the period, down from the fourth quarter, according to Kelley Blue Book. It was the first quarter-to-quarter decline since the pandemic.
To put it in perspective, first-quarter 2023 sales had soared 46% from the prior year, which itself had been over 81% higher than in 2021. What it indicates is the market has reached a plateau.
All the early adopters of the technology have purchased a car. The task now is to convince the vast remaining mass market they should also buy one. It won’t be easy. Although prices have trended lower, EV costs remain elevated over alternatives.
The average price of a new gas-powered vehicle in May costs $48,389, down 1.2% from last year. For EVs, the average cost was $56,648 an increase of 2.6% from the month before. Even factoring in potential tax credits, EVs cost more.
While the EV industry is quickly resolving the range problem of batteries, buyers are still wary of the lack of infrastructure to support charging a vehicle. Drivers need to carefully map their route and allow sufficient time to top up their battery bank, which isn’t a consideration with gas vehicles. It’s one of the reasons hybrid cars are becoming the EV vehicle of choice. You can go partially green without worrying about getting stranded.
That suggests a shakeout in EVs is coming. Some manufacturers like hyper luxury EV maker Faraday Future Intelligent Electric (NASDAQ:FFIE) seem destined for bankruptcy. Others will just limp along. Buyouts don’t seem likely as everyone’s technology is proprietary and not easily integrated into a competitor’s platform.
Investors would be best-served avoiding most EV stocks. The three companies below are EV stocks to sell now before they crash and burn.
Rivian Automotive (RIVN)
Electric SUV maker Rivian Automotive (NASDAQ:RIVN) has been the beneficiary of positive analyst chatter and speculation it might partner with Apple (NASDAQ:AAPL). Neither is enough to sustain Rivian stock because they don’t pertain to its core business of selling cars. Wall Street thinks it might be able to sell its software to others and the Apple rumor is just that, rumor. It might not amount to anything more than Rivian’s EVs getting Apple CarPlay.
The EV maker’s car-selling business is a shambles. It reportedly loses $38,000 on each vehicle made. Even though revenue doubled to $1.2 billion, losses widened from the year-ago period. Yet because Rivian has $6.8 billion in cash, equivalents and short-term investments, I wouldn’t short the stock. The SUV maker is not going out of business tomorrow. But its long-term growth is doubtful amid a dramatically slowing market.
When Ford (NYSE:F) announced it was cutting the price on its Lightning F-150 electric pickup, Rivian shares tumbled because it will pressure sales and margins. Despite management maintaining it will achieve gross profits in the fourth quarter that does not improve the overall weakness in its business.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) is an example of what is wrong in the EV industry. It is selling luxury EVs that by definition greatly narrows its potential car-buying market. With its EVs starting at just under $70,000 Lucid is going to be hard-pressed to move many off dealer lots.
There is already a massive backlog of unsold inventory that needs to be moved before dealers can or will accept new models. It previously had to cut prices to see just a modest bump in sales last quarter but still has thousands more to go.
That means Lucid will continue reporting massive losses from operations. It reported over $680 million in first-quarter losses last month. That might have been slightly better than the $780 million it recorded a year ago but still means it is on track to lose billions of dollars this year.
Yet Lucid Group is another EV stock to sell, not short. It has a pipeline of cash from the Saudi Arabian government that keeps it afloat. While the Public Investment Fund shoveling billions of dollars into Rivian means the EV maker won’t go under, it is not enough to prop up the stock as the underlying operations deteriorate.
LiveWire Group (LVWR)
LiveWire Group (NYSE:LVWR) is the third EV stock to sell. The electric motorcycle maker is arguably the most successful of the three stocks but EV two-wheelers are even more of a niche market than luxury EVs.
The Harley-Davidson (NYSE:HOG) spinoff saw sales plummet 36% in the first quarter to $5 million while operating losses widened 22% to $30 million. That was despite an 86% increase in the number of units sold, which rose to 117 from 63. Its youth-oriented STACYC business saw a 41% drop in revenue to $3.7 million.
Management maintains it will sell 1,000 to 1,500 electric motorcycles this year. It is a far cry from the 101,000 bikes it said it would sell by 2030 just two years ago. But these motorcycles are primarily good only for city driving. Their batteries have a claimed range of 146 miles city and 95 miles highway. You’re not going to be doing the kind of cruising you might enjoy when riding your Hog.
The LiveWire One also starts at under $23,000. That’s more competitive than it used to be, as you can easily find a Harley for twice that amount, but Harley also sells cruisers beginning at $17,000 and adventure touring bikes beginning at $20,000. So even though we’re in prime motorcycle sales season, there won’t be many EV bikes moving. It makes LiveWire an EV stock to sell now.
On the date of publication, Rich Duprey 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.
