What’s wrong
Shares of electric vehicle (EV) makers plunged on Thursday.early stage companies like Rivian Automotive (RIVN -6.04%), lucid group (LCID -3.21%)When canoe (GOEV -6.05%) It had some of the biggest hits and lost about 5% to 8% at the morning low.
As of 1pm ET, the three stocks are down 6.1%, 3.4% and 6.9% respectively. The drop in sessions has each brought them to or near all-time lows.
So what
As Q4 EV delivery data began to trickle in this week, investors are becoming increasingly concerned about the pace of growth expected in the industry. This is especially true for startups like this. One of the main drivers of the EV sector valuation is expectations for overall demand growth. Investors are lowering their valuation levels for the industry’s shares after Rivian fell short in production and shipment reports this week and more data arrived on Thursday.
Image Source: Rivian Automotive.
So
Rivian said this week it missed production forecasts that management reconfirmed two months ago. EV reader Tesla It also reported that 2022 production will fall short compared to both its own estimates and analyst expectations. On Thursday, it was reported that Tesla’s December output fell sharply month-over-month at its largest manufacturing plant in Shanghai, China.
Rivian and Lucid struggled to ramp up production in their first year of operation, but the market still assigns ratings based on their growth potential. Even at such low stock levels, Rivian and Lucid have market caps of around $15 billion and $10 billion, respectively. This is despite Rivian production in 2022 being less than 25,000 units. Lucid has yet to announce an update for the fourth quarter, but plans to announce that in 2022 he will make no more than 7,000 luxury cars.
Investor expectations for growth were supported by data showing global EV sales to double in 2021 and set a strong pace of growth in 2022.
But the latest sales and production reports leave onlookers to lower growth expectations for the industry, at least in the short term. Investors are therefore selling stocks, with more speculative names seeing the biggest declines. Canoo, for example, has not started production yet and is trading only on hope and the expectation that it will be able to process its backlog once production starts.
Currently, many investors are taking a wait-and-see approach to the EV space. That led to a plunge in these stocks. Even before Thursday’s sell-off, the shares of these start-ups were down between 20% and 47% last month. Investors shouldn’t expect the momentum to reverse until EV sales start growing at higher-than-expected levels.
Howard Smith has held positions at Lucid Group and Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool’s U.S. headquarters has a disclosure policy.
