As the market shakes out, it’s time to consider which EV stocks to avoid. It’s no secret that 2023 was an incredibly tough year for the electric vehicle industry. The industry is going through growing pains that have caused material demand issues that continue to reverberate throughout.
That truth is reflected perhaps nowhere better than in prices for battery grade lithium carbonate. In 2023 the price for a ton of such lithium fell to approximately $41,000. In 2023, that same ton of battery-grade lithium carbonate costs more than $68,000.
Yet, all is not lost. Overall growth continues. However, the rate of growth has slowed substantially. That suggests that while the future for EVs continues to be bright, it is also time for investors to adjust appropriately by considering which EV stocks to avoid.
Canoo (GOEV)
Canoo (NASDAQ:GOEV) Is a remnant of a SPAC-fueled frenzy that resulted in a glut of EV upstarts that continue to fall by the wayside. The company became publicly traded back in late 2020 amid a frenzy of upstart activity in the industry.
Canoo started out as what many investors saw as a promising company. The company believed it had the technology to not only manufacture its own vehicles but also to license out that technology within its industry.
My colleague Ian Bezek recently noted a very interesting fact about Canoo: Since going public in 2020 the company has generated a grand total of $1 million in revenues. The flip side of those low sales numbers is continued and substantial losses. In the first nine months of 2023 alone, Canoo generated a net loss of $273.6 million.
The company also reported a mere $8.3 million in cash on hand at that time. It should be no small wonder that GOEV shares trade for $0.16: The risk of bankruptcy is high maikng this one of the EV stocks to avoid at all costs.
ChargePoint (CHPT)
ChargePoint (NYSE:CHPT) is not in as bad a position as Canoo with its cash position but it is headed in the wrong direction nevertheless. Fundamentals are a great place to start in discussing the EV charging infrastructure stock.
Charge points liquidity was slightly under $400 million at the end of 2023. It isn’t in any immediate danger of bankruptcy, but at the same time, the company also reported a net loss of $158.2 million in Q4.
Sales fell by 12% during the period and the negative metrics go on and on. Perhaps none is more indicative of the company’s problems than the fact that gross margins fell to negative 22%. It is very difficult position to be in when every sale results in losses.
While it’s easy to empathize with businesses such as ChargePoint in that regard, it doesn’t make them investment worthy. 2024 has begun with an unannounced reorganization at the company. 12% of people working at ChargePoint will lose their jobs.
Sometimes that’s a good thing but in this case it’s more an indication of a company that has been continuously operated inefficiently.
Ford (F)
Ford’s (NYSE:F) continued difficulty in producing electric vehicles is well known at this point. The company reported a 1.3 billion dollar loss attributable to its EV unit back in October.
Like so many other manufacturers, Ford reported weakening market dynamics and consumers who balked at premium pricing for EVs.
The troubles are continuing for Ford early in 2024. The company just announced that it is Reducing production of its F-150 Lightning EV truck. That news led Stellantis (NYSE:STLA) CEO Carlos Tavares to warn that those EV losses will reverberate throughout the automotive industry.
Forward worded the cuts as an effort to match F-150 Lightning production with demand. That thinly veiled corporate doublespeak simply means consumers don’t want EV trucks.
A lot has been said in that regard and will be continually repeated. indications are that EV trucks Simply cannot fulfill the real world demands that many truck drivers place on the vehicles. While there are certainly unsubstantiated biases against EV trucks in many cases, real world utility cannot be ignored wholesale.
General Motors (GM)
General Motors (NYSE:GM) is in the same boat as with Ford in relation to electric vehicle sales. Investors in the stock of both firms are well aware that each legacy company is primarily an internal combustion engine firm.
However, each is also dealing with a shift toward EV production that poses both benefits but obvious and serious risks.
It looks like those risks are winning out currently.
One need only do a simple Google search for the term GM EVs in order to find a spate of bad news about the company’s electric vehicles. GM’s Chevy Blazer EV recently lost Federal subsidy eligibility that substantially reduced prices.
That’s not to say that consumers were particularly happy with the Blazer EV to begin with. In fact, a few weeks ago GM stopped selling the Blazer EV in order to deal with software issues. Speaking anecdotally, I drove through the GM’s Spring Hill Tennessee plant and campus weeks ago.
While there, I spoke to a security guard whose job is watching over one of many vehicle lots. He mentioned that the Cadillac lyric EVs were piling up in the lots.
Investors should note that the Cadillac Lyric is the upscale version of the Blazer EV.
Fisker (FSR)
Fisker (NYSE:FSR) continues to face mounting problems with its introductory vehicle, the Ocean.
I have to eat crow here: I applauded Fisker over and over for their choice to use Magna International (NYSE:MGA) to manufacture the Ocean.
The latter’s long history of OEM production for dozens of top vehicle manufacturers suggested that the Ocean would have less problems overall. However, Fisker is now facing a probe from the National Traffic Highway Safety Administration (NHTSA) over reported breaking issues with the Ocean.
It would seem that Fisker’s choice to leverage Magna International has not resulted in a high quality vehicle. Potential issues with the braking system appear to be serious given how vital that system is to the operation of the vehicle.
The company continues to deal with substantial struggles. At the beginning of December it had to ratchet back its production goals. Since then, FSR shares have continued to slide downward making it one of the EV stocks to avoid.
Mullen Automotive (MULN)
Mullen Automotive’s (NASDAQ:MULN) losses are staggering. If there is a single EV stock to avoid at all costs, Mullen Automotive is that stock.
In 2023, every single share of Mullen Automotive stock produced what equated to $1,574.14 in losses. That was actually an increase over 2023 levels, which exceeded $63,000. Though that seems counterintuitive, the company increased its shares outstanding substantially.
That’s often a sign of distress and one that should be heeded with Mullen Automotive. To dissuade investors away from the company, consider also that the company lost more than $1 billion in 2023.
Much of those losses were reported as non-cash expenses which generally fall on shareholders.
The company is very clearly distressed and substantially at risk of bankruptcy. Its Altman Z score, which measures that risk, stands at negative 13.75, indicative of real bankruptcy risk within two years.
Faraday Future (FFIE)
Faraday Future (NASDAQ:FFIE) Is the stock that is essentially going through its death throes. The company has long struggled to keep its shares compliant with Nasdaq listing regulations but has failed to stay above $1.
The company received a notice of its failure to comply with NASDAQ listing requirements at the end of December. That was not the first such instance as the company has been dealing with this issue for several years.
This time, Faraday future has until June 25 to maintain price levels above a dollar for 10 consecutive days. It’s almost certainly not going to happen. The company enacted a reverse stock split A few months ago which is always a sign of trouble.
Though reverse stock splits are intended to make the value of an individual’s share greater by reducing the number thereof, markets always perceive them negatively.
Reverse stock splits almost always imply greater difficulty ahead which has indeed been the case for Faraday Future. FFIE shares’ current utility is trading alone but as a long-term investment they are a no-go.
On the date of publication, Alex Sirois 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.
