EV stocks: Tesla, Ford and Rivian struggle amid strong sales growth

The electric vehicle market seems ripe for growth, with manufacturers like Rivian, Ford and Tesla all seeing an increase in delivery numbers. However, EV stocks have struggled amid supply chain squeezes and fears of rising inflation. 

Electric vehicles (EVs) are playing an increasingly important role as countries strive to meet decarbonisation goals. Tesla [TSLA], Ford [F] and Rivian [RIVN] are three manufacturers that stand to benefit from the shift towards EVs. However, while sales continue to rise, supply chain issues remain a concern, and EV stocks have slumped due to rising inflation and the wider shift from growth to value.

At the end of 2021, EVs accounted for 8.6% of the global car market share, more than double the 4.1% share it had at the end of 2020, according to data from the International Energy Agency. The UK is expecting EVs to make up half of all new vehicles on the roads by 2028, while President Biden has set the same goal for the US by 2030. But these targets could be overly optimistic.

Though demand for EVs is clearly set to accelerate, this will place increased pressure on battery supply chains. A number of automotive bosses have already warned that the industry could be squeezed by a battery shortage, especially if the material supply chain isn’t addressed.

Tesla is in the driving seat

The poster boy of the EV industry, Elon Musk’s company shifted 310,048 vehicles in the first three months of 2022, up 68% from the same quarter of 2021. It also dominated the domestic EV market in the US, accounting for three-quarters of all sales in the country.

At the end of last year, the company switched to lithium-iron-phosphate (LFP) in its standard-range cars, the Model 3 and Model Y. Though the downside of the battery chemistry is that they’re less energy-dense, they are cheaper than the nickel-heavy batteries that would otherwise be used.

Where it does use nickel batteries for models with longer ranges, the car maker has put itself in a position to avoid any material impact if sanctions on Russia were to hit the global supply of the metal. In May, Tesla disclosed a long-term deal with Canadian mining giant Vale, the world’s largest producer of nickel.

Worries about rising lithium prices even got Musk tweeting that Tesla might have to consider getting into mining and refining directly. “There is no shortage of the element itself, as lithium is almost everywhere on earth, but pace of extraction [and] refinement is slow,” he wrote on 8 April.

Despite the generally positive outlook for the business, the Tesla share price is down 30.1% year-to-date to $734 at the close on 11 May. The stock has struggled amid fears that Musk’s recent plans to buy Twitter [TWTR] will shift the CEO’s focus away from the electric vehicle business.

Ford to accelerate its electric ambitions

Meanwhile, sales of Ford’s EVs are picking up speed. In April 2022, the car manufacturer delivered 16,779 electrified units in the US. Although this accounted for less than 10% of the total 176,965 vehicles sold in the country, the number was up 139% from April 2021.

Under an $11.4bn plan announced towards the end of last year, Ford will build its biggest ever factory in Tennessee, as well as two battery parks in Kentucky in partnership with South Korean battery maker and supplier SK Innovation [096770.KS]. The hope is that this investment will pave the way for greater EV adoption in the US.

Ford also wants to help Europe on the road to net zero by launching three passenger EVs and four commercial EVs on the continent by 2024. The target is for EV sales in the region to have exceeded 600,000 by 2026.

Like Tesla, the Ford share price has struggled to buck the wider downward trend in the markets and has fallen 37.5% since the start of the year to $12.83 at the close on 11 May. The stock is 50.4% below its 52-week high of $25.87 set on 13 January.

Rivian to ramp up production

Rivian made a misstep back in March. The company announced it would be raising the prices of R1T SUVs and pick-up trucks, even for customers that had pre-ordered them. This sparked a backlash and just a couple of days later, CEO RJ Scaringe wrote an open letter apologising and rolling back the decision for those who had pre-ordered.

The Californian carmaker produced 2,553 vehicles at its Illinois manufacturing facility in the first quarter of 2022 and delivered 1,227. Though these numbers pale in comparison to Tesla and Ford’s, the company has stated that these totals were in line with expectations. Production is expected to ramp up, with the company targeting an annual capacity of 150,000 by 2023. This should eventually rise to 200,000 units.

The Rivian share price has seen the biggest decline compared to its peers Tesla and Ford, falling 73.6% since it debuted on the Nasdaq on 10 November last year. The IPO was priced at $78 per share, but the stock closed on 11 May at $20.60.

According to its Q4 2021 shareholder letter, the company plans to follow Tesla in switching to LFP chemistries for standard battery packs and also has plans to start producing battery cells in-house.

Scaringe has a word of warning, though, telling the Wall Street Journal that battery scarcity could become an industry-wide problem. The chip crunch, he said, is a “small appetiser to what we are about to feel on battery cells over the next two decades”.