2024-01-05 06:38:53 ET
Electric vehicle stocks are off to a bad start in 2024. After a fairly strong year, Tesla (NASDAQ: TSLA) stock price has plunged by 4.2% while Rivian is down by over 7.5% this year. Other EV stocks like Polestar, Nikola, Lucid Motors, and Nio have done worse and there is a risk that the trend could continue.
Lucid vs Polestar vs Faraday Future vs Nikola stocks
UK EVs are not selling as fast
EV stock will likely be on edge after a report showed that Brits are no longer buying EVs as they did before. According to the Society of Motor Manufacturers and Traders the share of EVs sold in the UK dropped to 16.5% in 2023 from 16.6% in the previous year. It was the first annual retreat since records started.
The report added that only 1 in 11 private consumers selected an EV during the year. While the total number of EVs sold in the UK rose in 2023, demand for Internal Combustion Engine (ICE) vehicles rose at a faster pace.
This is a big issue since the UK has high ambitions for the EV industry. The government has set an ambitious target to phase out EVs. In a statement in 2023, after sensing reality, Rishi Sunak delayed a ban for the sale of ICE vehicles from 2030 to 2035. I believe that these government-led goals will ultimately fail.
Besides, EVs are typically more expensive than ICE vehicles. As a result, EV manufacturers in the US and UK are only seeing robust sales because of generous handouts. In the US, the government pays about $7,500 for new EVs that meet certain criteria.
And in the UK, people buying EVs through business or a company car gets generous tax benefits. Manufacturers are now calling for the government to scrap or reduce the 20% VAT levied for EVs.
EV challenges remain
Government mandates for EVs are likely to fail because of the general limits that are out of its control. For example, the charging infrastructure in the UK and US still has major limits. Charging companies like EVGo, ChargePoint, and Blink Charging often have to deal with outages.
Further, while the charging speed has increased, it is still a major challenge. Data shows that the average time it takes to charge an EV is between 15 minutes and 12 hours. 30 minutes is a long time considering that it only takes a few minutes to fill a gas tank.
This challenge will likely be solved by better battery and charging technologies. However, better battery technologies like solid state from Toyota and QuantumScape will become available to the masses at least by 2027.
Most importantly, EVs are not ideal for long trips because of the charging issue. Remember, power outages are getting common in some American states and in some European countries. As such, some people who can afford are buying EVs for short commutes and still owning ICE vehicles for longer ones.
EVs, especially from manufacturers like GM, Ford, and Stellantis are not selling as fast. As I noted a while ago , many dealers are staying with EVs for over 100 days. ICE vehicles are going at a faster rate. GM and Ford have had to lower their EV investments.
Watch here: https://www.youtube.com/embed/X_TlXpy-37o?feature=oembedCash running out
The other big challenge for many EV companies is that their cash is running out. Companies like Faraday Future, Canoo , Mullen Automotive, Fisker, and Lucid Motors is that their cash burn is continuing.
Therefore, these companies will be forced to either raise additional capital this year or even file for bankruptcy. A company like Farady Future that is building a $300k EV has little chances of survival.
These companies will struggle to raise both equity and debt financing. In the debt side, because of their risks, potential lenders will likely demand over 15% in interest. In terms of equity, many of them have almost exhausted their options after continually diluting their investors for long.
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