Premium electric vehicle (EV) manufacturer Faraday Future (NASDAQ:FFIE) — which sells electric-powered SUVs at prices rivaling homes in certain under-the-radar markets — saw its shares dip despite recent positive news. Faraday will start resuming deliveries after a four-month hiatus. However, the end result only articulates the severe challenges ahead for FFIE stock.
According to industry publication EV, Faraday announced at the start of the business week that it will “deliver the first second-generation FF 91 to a retail investor on Wednesday, June 12.” The delivery will take place at the company’s Los Angeles headquarters, marking the resumption of the firm’s Start of Delivery Second Phase (SOD2), which initially materialized last year.
Faraday’s global CEO Matthias Aydt remarked, “[w]e are excited to welcome another user into the FF family to experience the FF 91 2.0. It is a wonderful moment that marks our resuming deliveries in 2024.”
However, as InvestorPlace reporter Samuel O’Brient emphasized, the “deliveries” only involve a release to one prominent investor. That alone doesn’t overcome the myriad problems impacting FFIE stock amid a highly competitive market.
The One-Unit Delivery Emphasizes the Core Challenge of FFIE Stock
Fundamentally, a delivery is better than no delivery, so the news is certainly not insignificant. Further, Faraday’s tweets indicate that the trim that was acquired is an FF 91 2.0 Futurist Alliance. According to the company’s website, this particular model features a base price of $309,000. That’s a hefty sum.
However, the fact that Faraday has only made one delivery in the past four months serves as a massive warning. Simply, the EV market does not appear to support the concept of a car that is priced more than the average home in South Dakota.
In fairness, Grand View Research points out that the global luxury EV market size reached a valuation of $158.8 billion in 2022. Further, the sector is projected to hit $726.9 billion by 2030. If so, that would represent a compound annual growth rate (CAGR) of 17.7%.
However, the problem for FFIE stock is that the market research firm indicates that pricing pressures against combustion-powered vehicles — particularly rising fuel prices — have incentivized consumers to move toward electrification. In other words, drivers are mainly looking for cost savings, not cost increases.
Most tellingly, the move to offer EVs at over $300,000 goes completely against the industry trend, which is to lower prices. Such contrarianism is bold but it risks sinking the troubled manufacturer.
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.
