The electric vehicle industry is in turmoil. On the one hand, EV sales are booming with volumes expected to rise 21% this year. Still, the rate of growth is declining. Fewer new car buyers are electing to choose EVs when purchasing a vehicle. 

Pricing is certainly still an issue facing EV stocks but it is really a lack of trust in EVs themselves that is hurting sales. Not for safety reasons but rather it is a lack of charging infrastructure. Because battery range is still a concern, consumers are choosing the reliability and availability of gas-powered vehicles. It is why hybrid EV sales are taking off.

Toyota (NYSE:TM) saw massive growth in its hybrid cars; it sold some 3.4 million last year, and now other manufacturers, notably Ford (NYSE:F) and General Motors (NYSE:GM) are hedging their all-in bets on battery electric vehicles. They are scaling back full-electric production and bringing forward more hybrid cars.

That poses a problem for a number of EV manufacturers who only came to market relatively recently and are trying to gain traction. With rising capital costs, lack of profitability and a slowing sales environment, the three EV stocks below could crash and burn very quickly. Let’s see which one might run off the road first.

Rivian Automotive (RIVN)

EV maker Rivian Automotive (NASDAQ:RIVN) was just thrown a lifeline. Volkswagen (OTCMKTS:VWAGY) is investing $2 billion into a joint venture with Rivian in the form of cash and loans. It is establishing a $1 billion equity stake in the EV maker now, and will invest an additional $2 billion into Rivian stock over the next two years.

It is a significant monetary influx at a time when Rivian is losing money on every car it sells. By some estimates, that is as much as $38,000 per vehicle. While the EV maker’s sales rose to $1.2 billion in the first quarter, its losses rose as well.

I wrote last month that Rivian stock was not one to short because it already had a substantial $6.8 billion cash windfall sitting in its bank account. I also said it might do better selling its software and that seems to be the case. The deal with Volkswagen is to create next generation software-defined vehicle (SDV) platforms to be used by both company’s EVs. However, “while that could produce a nice revenue stream for Rivian, it is unrelated to its primary business of making cars itself.”

Rivian Automotive did update the market that it produced 9,612 vehicles in the quarter and delivered 13,790. The stock rose 7% on the news. However, at what price point it is moving these vehicles was left unsaid. The point remains that while the company is not going out of business, being a software company is also not what investors signed on for. RIVN is an EV stock that should still be avoided.

Lucid Group (LCID)

In an even more precarious spot is luxury EV maker Lucid Group (NASDAQ:LCID). It sold less than 2,000 high-end EVs in the first quarter, which was a nice bump year-over-year and sequentially. Its problem is that it still has a huge backlog of unsold inventory it needs to move before it can put more cars on dealer lots.

With its EVs starting just under $70,000, Lucid has an added problem that EV buyers want cheaper cars. Yes, it is a luxury vehicle but even Mercedes-Benz (OTCMKTS:MBGYY) couldn’t move many and it has put its EV efforts on the back burner. With the resale value of used EVs plummeting 47%, buyers are going to be even more reticent of shelling out big bucks for one.

Lucid had to resort to steep price cuts to move the few vehicles it did sell and that is only going to exacerbate its attempt to achieve profitability. 

Like Rivian, Lucid stock has been propped up by cash infusions. The Saudi Arabian government continues to inject billions into the EV maker as it attempts to build an auto industry from the ground up. Using Lucid as a proxy, it is vested in keeping the luxury EV maker going. It’s another EV stock you shouldn’t short even as you should avoid buying its shares.

Mullen Automotive (MULN)

As sorry as Rivian and Lucid are as investments, Mullen Automotive (NASDAQ:MULN) is worse. It is likely to be the first of the three EV stocks to crash and burn. It made all of $366,000 in sales last year. Yes, that’s right, sales in the thousands not millions. 

But unlike its peers who build EVs for the consumer market, Mullen is building commercial vehicles, primarily Class 1 EV vans and Class 3 EV trucks. And to be fair, Mullen only started production last August, so there were only a few months of sales to record, but it hasn’t improved. Year-to-date Mullen only sold $33,000 worth of vehicles, all of them in the second quarter.

Mullen Automotive obviously faces serious financial constraints. Last year losses widened to over $1 billion and through the first six months of fiscal 2024 has notched over $235 million in losses. To its credit, that is less than half of what it reported a year ago.

But what this indicates is that Mullen Automotive is not a growth business. Unless it starts producing serious sales soon, which seems doubtful, MULN looks like it will be the EV stock to run off the road.

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.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.