Electric vehicle (EV) stocks have made a remarkable resurgence this week, bouncing back from a lackluster start in July. The market’s upward trajectory and declining interest rates have rekindled optimism among investors.
According to data from S&P Global Market Intelligence, the stock price of Rivian (NASDAQ: RIVN) soared by 22.1%, Nikola (NASDAQ: NKLA) by 12.6%, and Blink Charging (NASDAQ: BLNK) by 10.6% at their peak this week. By noon EDT on Friday, these stocks had gained 21.6%, 12%, and 18.5%, respectively.
Recent Developments in Deliveries
Last week, delivery updates within the industry failed to impress, particularly with Fisker declaring bankruptcy. Production concerns at Rivian’s plant have hindered output this year, while Tesla (NASDAQ: TSLA) experienced a 5% drop in deliveries compared to the previous year.
However, this week offered a ray of hope, notably from Lucid, reporting production of 2,110 vehicles and 2,394 deliveries in the second quarter. This marked a substantial improvement from the 2,173 vehicles produced and 1,404 delivered in the same period last year.
Despite worries about waning demand for EVs, particularly in the high-end market, there seems to be some consumer interest. Yet, profitability remains elusive for companies selling vehicles priced above $70,000.
Influence of Interest Rates
Another significant factor in the upsurge of EV stocks has been the movement in interest rates. This week’s Consumer Price Index (CPI) inflation data revealed a 0.1% decline between June and May 2024, with a modest 3% year-over-year increase. Anticipation of interest rate reductions by the Federal Reserve has already led to a 13 basis point drop in ten-year U.S. government bond yields.
Lower interest rates are expected to facilitate easier financing for auto companies, enabling them to provide loans to customers at reduced rates, potentially bolstering sales in 2024.
Tesla’s Cautious Move
Despite the favorable developments in most EV stocks, the week concluded on a slightly sour note as Tesla postponed a robotaxi event scheduled for Aug. 8, 2024, to October. This delay, reportedly due to the need for additional time to develop robotaxi prototypes, dampened the high expectations surrounding Tesla’s recent market influence.
Challenges Ahead for EV Stocks
While lower interest rates may provide a significant uplift to EV stocks by easing business financing and reducing installation costs for charging infrastructure, the fundamental issue of profitability remains unaddressed for Rivian, Nikola, and Blink Charging.
Until these companies demonstrate a capacity to generate operational profits, prudence suggests maintaining a cautious stance towards EV investments.
BLNK Free Cash Flow data by YCharts.
Reflecting on the recent market trends, it is apparent that without a demonstrated path to profitability, the allure of EV stocks may be short-lived.
Final Thoughts on Rivian Automotive Investment
Before considering an investment in Rivian Automotive, it is crucial to weigh the following perspectives:
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