Except for Tesla EV stock The 2023 performance was disappointing.
Rivian, for example, is down 21% year-to-date and is down nearly 64% since April last year. Proterra performed even worse, down 67% YTD, down almost 82% from this time last year.
US electric car makers aren’t the only ones struggling. The S&P Kensho Electric Vehicles Index, which measures the top leaders in the global EV market, is also down about 5% this year and 37% from April last year.
As an overview, many traditional automakers such as Ford and General Motors are poised to post slightly positive earnings in 2023. The S&P 500 is up about 7% YTD.
Some might think this is a bad year for EV makers. After all, interest rates are high, consumers are reluctant to take out auto loans, and the constrained supply of battery metal makes EV production costs prohibitive.
But these issues are not unique to 2023. In fact, high borrowing costs only exacerbated a painful truth about EV companies, he said, from the start. Electric vehicles, even EVs, are still too expensive for consumers to buy in bulk. Enterprises step up production. Worse, it’s too expensive for many EV companies to build.
Let’s look at these issues individually.
Electric vehicle production outstrips sales
This is as clear as Tesla.
On April 2nd, Tesla reported that it shipped 422,875 units in the first quarter. That means 422,875 consumers ordered a Tesla and didn’t cancel their order before the car arrived. During the same period, Tesla also produced 440,808 cars. This means that the company produced about 17,933 more vehicles than it could sell.
This is not a new trend. Since mid-2022, demand for Tesla models has dropped significantly as measured by the size of the backlog. The number of raw Teslas sold is increasing each year. According to data obtained by Troy Teslike, an independent analyst on Tesla production and delivery estimates, he said Tesla’s backlog has fallen by 77% since March 2022.
Tesla’s competitors are also struggling to sell cars. For example, EV sedan maker Lucid Group delivered only 4,369 of the 7,180 cars it produced in 2022. Also, EV truck maker Rivian delivered 20,332 while he produced 24,337 trucks.
Part of the problem is that all-EV companies are starting to cede market share to traditional automakers like Ford and Chevy. In 2022, Ford is the second-largest EV manufacturer with 61,575 sold, and Chevy sold 38,120 of his Volts. Ford sold 15,617 of his F-150 Lightning, a direct competitor to Rivian’s trucks.
Another issue is the price. In a high interest rate environment, auto loans will become more expensive and car shoppers may not be able to buy an EV at current rates. For example, Rivian’s most affordable truck, his R1T, costs $69,300, while Ford’s F-150 Lightning costs his $59,974. By contrast, the petrol-powered Ford Maverick XLT is $22,595, 67% cheaper than the Rivian truck.
Tesla has already cut prices five times since January, and may cut more later this year. This may be good news for his EV buyers, but bad news for investors. Falling prices mean that EV companies make less money on every car they sell, narrowing margins that for some don’t even exist yet.
This leads to the second problem with EV stocks.
Most EV Companies Are Not Profitable
Tesla Beating Nearly All EV Competitors: The Company Actually making money. Everyone else is bleeding cash.
For example, Rivian reportedly lost $6.8 billion in 2022 and is estimated to lose another $4.3 billion in 2023. In its most recent quarterly report, the company made about $1.7 billion in revenue, but spent about $4.8 billion producing 24,337 trucks.
How much did Rivian lose per truck? $1.7 billion translates to about $84,000 in revenue per truck (if 20,332 were sold). However, he spent $4.8 billion to produce 24,337 vehicles, which makes about $197,000 per truck. So Rivian lost about $113,000 per run. Sale.
Other EV makers aren’t doing as well. In 2022, Lucid Group lost about $2.6 billion on his $608 million in earnings. Even Ford reports losing about $2.1 billion on EV sales last year.
One of the reasons these companies are losing cash is the cost of battery materials. EV companies need critical metals such as lithium, cobalt, nickel and copper to manufacture lithium-ion batteries.These metals are in high demand not only by EV companies, but also by other industries. Solar panel makers, wind turbine companies, chip makers, data centers, battery storage facilities and 5G network providers all need critical metals.
The United States has a deposit of lithium in Nevada, but there is currently not enough mining work to mine it in large quantities. This means that EV companies rely on foreign mining companies for metal extraction and processing. Considering the fact that US EV makers also rely on China to fabricate these metals into batteries, it’s not hard to see why production costs are so high. Even Tesla, which has invested heavily in manufacturing capacity, still relies on Chinese mining company Ganfeng for some of its lithium.
Should You Invest in EV Stocks in 2023?
It’s a hard truth to accept, but some EV startups won’t be 10-15 years from now.
If you decide to invest in EV stocks in 2023, take a closer look at the fundamentals of EV companies (revenue, cost, potential to achieve profitability). While some EV stocks look cheap this year, they may not be a smart investment without long-term potential.
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