The electric vehicle (EV) market is turning a new corner, entering a phase in which Tesla (NASDAQ:TSLA) will no longer be the dominant player. Indeed, the company that helped usher in the EV revolution has been struggling for weeks and recently reported disappointing second-quarter earnings, dragging down many EV stocks in the process. After missing analyst estimates on both revenue and EPS, TSLA stock is falling hard today.
This isn’t the first bad news for the former EV leader. When Tesla reported Q2 deliveries this year, the results showed a 4.76% decline from Q2 2023. That marked the second consecutive quarter of the firm putting fewer vehicles on the road.
This shouldn’t be seen as a commentary on the poor state of the EV market, however. On the contrary, several automakers have reported impressive delivery beats of late, indicating that the market is roaring back. But even if this recovery continues, Tesla’s days as the sector leader appear to be behind it.
Some EV Stocks Are Better Bets Than Tesla
Financial markets tend to be a zero sum game and this is no different. Tesla’s market share has been shrinking steadily while its competitors have seen there market shares increase. As The New York Times reported in April 2024, Tesla began 2023 at 62% market share, but that figure fell to 51% as of Q1 2024. Meanwhile, Ford’s (NYSE:F) market share increased from 4.2% to 7.4%. This trend bodes well for EV stocks that aren’t Tesla.
Tesla’s past two quarterly delivery reports have also been disappointing while several of the firm’s most prominent rivals have reported excellent progress for Q2. Both Rivian (NASDAQ:RIVN) and General Motors (NYSE:GM) saw deliveries increase in Q2, with the latter reporting a 34% increase from Q1. EV startup Lucid (NASDAQ:LCID) also set a new quarterly delivery record in Q2 by getting 2,394 EVs on the road. Finally, Chinese automaker Nio (NYSE:NIO) reported significant progress recently, coming in above guidance for EV deliveries and setting a record of its own.
This chain of progress from many other EV producers shows that more consumers in both the U.S. and China want to buy electric vehicles — and have options beyond Tesla models. This trend might suggest that the market is shifting toward lower-cost EVs. However, Lucid’s delivery record also shows that people are still buying high-end, luxury non-Tesla EVs.
With all that said, the future is looking bright for many EV stocks, but not necessarily the firm that brought this technology to the mainstream.
Why It Matters
It’s impossible to ignore the fact that Tesla is facing a difficult economic landscape. As competition continues to rise and its market share falls, investors will continue to seek out other EV stocks. Since all of Tesla’s peers trade at much lower levels, they are also already more appealing than TSLA stock, which isn’t likely to change.
InvestorPlace contributor Tyrik Torres recently laid out the reasons why investors should avoid Tesla. Torres acknowledged that the company managed to beat analyst estimates for both Q2 production and deliveries, but noted that both metrics are down from where they were in 2023:
“There’s more bad news. Tesla’s automotive revenue of $19.8 billion in the second quarter was down 7% from a year ago, and the company posted overall revenue growth of only 2%. And because Tesla offered discounts and incentives in the U.S. and China to stave off competition and increase demand, income from operations was down 33% while operating expenses grew 39%.”
All this suggests that the road ahead looks better for Tesla’s rivals. Granted, companies such as Rivian and Lucid have not reported Q2 earnings yet. But their impressive delivery statistics suggest that investors don’t have much to be worried about. Likewise, General Motors recently reported earnings and beat revenue and EPS estimates. Other EV producers with high delivery figures are likely to do the same while Tesla continues to trend downward.
On the date of publication, Samuel O’Brient 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
