Which EV Startups are Fading in Relevance?

Investors in electric vehicle (EV) startup companies have recently become more discerning.  They want to see signs of progress in a company before committing capital to a particular stock.  Shares of Rivian Automotive (RIVN) and Lucid Group (LCID) are beating the gains in the S&P 500 Index this year, while one-hyped EV startups like Faraday Future Intelligent Electric (FFIE), Workhorse Group (WKHS), Nikola (NKLA), and Canoo (GOEV) have seen double-digit declines.

Rivian Automotive rallied to a 7-month high Monday on signs the company has turned the corner after it reported it produced 13,992 vehicles in Q2, above the consensus of 12,562.  Rivian also said it had started shipping hundreds of the electric vans it makes for Amazon.com, its largest customer, to Europe for the first shipments outside of the U.S.  However, the company has a long way to go to challenge the EV leaders.  Tesla (TSLA) has built 34 vehicles for every one vehicle that Rivian assembled in Q2.  Rivian CEO Scaringe said the company has sorted through supply-chain issues and will benefit from the U.S. Inflation Reduction Act.

Lucid Group climbed to a 3-month high on Tuesday on signs it may soon be profitable.  Lucid signed a deal late last month to supply EV parts to British carmaker Aston Martin Lagonda Global Holdings Plc.  That prompted Citigroup to resume coverage of Lucid with a neutral recommendation, noting the company’s technology position had been validated by its agreement with Aston Martin Lagonda.  Lucid Group took a hit today after it reported Q2 vehicle deliveries of 1,404, well below the consensus of 1,873.

Other EV makers seeing headwinds to profitability have lost relevance.  Lordstown Motors (RIDEQ), which had an equity value of $5 billion in early 2021, filed for bankruptcy last month after a deal with Foxconn Technology Group collapsed.  Also, Workhorse scrapped plans for an electric delivery van after a recall last year after CEO Dauch cited a “costly misstep.”  In addition, Nikola, whose market capitalization once exceeded that of Ford Motor, has struggled to keep its stock price above the Nasdaq’s minimum requirement to stay listed.

Investors are lured to EV makers as the auto industry worldwide is in for big changes. According to Bloomberg News Energy Finance estimates, EVs will represent 75% of all global passenger car sales by 2040, up from 14% in 2022.  Zacks Investment Management said, “We are likely to see execution and profitability become the more dominant factors in EV production going forward.  The new players in this market will need to demonstrate a clear path to profitability, and job number one will be to ramp up a consistent level of units produced and sold.”

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.