A sea of red continues to sweep through the EV listed companies this year despite almost 14 million new electric cars being registered in 2023 globally.
EV sales are expected to continue to grow every year globally as more car markers produce a fleet of hybrid or fully electric vehicles, but you wouldn’t guess that by looking at stock prices. In a year when the Nasdaq has risen more than 15 per cent, EV stocks have had a very tough time as many subsidies have been removed and interest rates have slowed demand.
Just in the last year, we have seen investors lose some patience with Amazon-backed Rivian down 43 per cent, Swedish Polestar is down 70 per cent, boutique maker Faraday is down 99 per cent, Lucid Motors down 39 per cent and China’s Nio has slid 64 per cent, raising questions about whether there’s any way back up for these companies.
These numbers offer a staggering glimpse at the scale of the money that has been squeezed out of a sector that has been buoyed by the promise of rapid growth. Investors time and again often overhype themes in the market with similar price movements seen in the 2021 legalise cannabis sector boom in the United Sates, Canada and to a lesser extent here.
Local retail investors who poured money into some of these hype stocks will almost certainly be staring at some losses in the current market and hoping for a recovery in the sector.
Tesla, the poster child of electric cool, is still dominant and boosts a huge $670 billion market cap, producing 11% of global sales, but has seen its shares drop 14 per cent in the last year and flat over two years. This is despite the Tesla Y Model becoming the first electric vehicle to top global new car sales in 2023. Constant price cuts to spur more demand has seen growth rates reduce and the company is now also contending with increased competition out of China.
China’s BYD, which dominates the Chinese market, has fared far better than its competitors and leads the global market with 21% of global sales of EVs. China market is well positioned with four of the top five electric car manufacturers by revenue trailing just Tesla.
In 2023, one in five new cars sold in New Zealand was an electric vehicle but the latest data shows pure EVs make up only around 5 per cent of new car sales but more promising in 2023 fully electric and plug-in hybrid cars hit 27 per cent market share according to EV Database that monitors local registrations
Australia fares slightly better at around 8 per cent, but no matter where you look you’re given a stark reminder that the EV market growth rates might have been artificially propped up with purchase and fuel subsidy incentives from numerous governments.
Much of this decline is being attributed to a drop in many of these government subsidies, slow growth in sales and high borrowing costs. The cost-of-living crisis has also seen an increase in demand for second-hand vehicles, of which the EVs make up a very small contingent.
On top of this, you have budget-conscious consumers who are anxious about the distance EVs can travel (not helped by a lack of charging stations) and the cost of replacing batteries in the event of degradation.
These factors are now being reflected in automakers pushing back their EV targets, and diverting funds to more affordable hybrid vehicles rather than pure electric models.
Ford, Mercedes Benz and Bentley are just some of the manufacturers that have drastically changed their EV plans.
After announcing plans for an all-electric lineup of SUVs, Ford has backtracked and replaced them with hybrid models – a strategic shift that will cost the company upwards of US$1.5 billion. The company also said that only 30 per cent of its annual capital expenditure will be spent on electric vehicles, down significantly from the 40 per cent previously indicated.
By focusing on hybrid tech, companies like Ford are looking to meet customers where they are now rather than where they might be in the future. All evidence suggests that EVs will still dominate the industry eventually, but getting there will take a little longer than everyone expected at first – and the players who were hyped before might not hang around long enough to enjoy those future benefits.
Much of this will also depend on the policies that Governments roll out around the world. Locally, we’ve seen EV adoption hit hard off the back of the removal of Government subsidies like the Clean Car discount, but our small consumer base isn’t quite enough to move international markets.
This is why EV manufacturers and investors will be watching the upcoming US Election debate closely.
There are very few topics on which Democratic nominee Kamala Harris and Republican nominee Donald Trump differ more markedly than policies to do with energy.
Until now, both candidates have been cautious in terms of releasing any definitive policy positions but the upcoming debates – particularly the first one – will present a preview of what the United States could look like under Harris or Trump.
Harris has thus far suggested that she will continue pushing the green energy agenda, which saw massive investment from US President Joe Biden off the back of the Covid pandemic. The corporate world has also responded by investing significantly in green energy, but at least some of this could be lost if the Republicans took power.
Trump on the other hand indicated that he would roll back environmental regulation and boost oil and gas drilling to extract maximum value from these fossil fuels. This, of course, does not bode well for EV companies – and it does cast a slightly different light on why Tesla founder Elon Musk has cosied up to Trump in recent months.
That said, Trump has also upped his rhetoric against China, which could work in Tesla’s favour should we see a return of the trade war tensions brimming between Beijing and Washington.
The point here is that any investors or companies with interests in the EV sector will be watching closely to find any hints of what surprises the next US administration might have in store.
While it did look likely for a while that Trump would easily win the next election, the rapid rise of Harris has upped the uncertainty and the stock market – particularly among companies caught in the policy divide – could be facing some volatility in the coming months.
For those EV stocks that have been hammered over the last year and a half, the rough ride looks far from over. Competition among the top EV brands is expected to intensify in the rest of 2024 and that’s good for consumers.
Market data and information in this article is accurate as of 5th September 2024.
