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Why Electric-Vehicle Stocks Are Getting Clobbered Today

By John Rosevear - Sep 3, 2020 at 3:15PM

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As is so often the case, the story starts with Tesla.

What happened

Shares of electric-vehicle and related companies were selling off on Thursday afternoon, a day after an investment-management company that has been a prominent investor in Tesla (TSLA 4.67%) said that it had reduced its stake in the Silicon Valley electric-vehicle (EV) maker.

Here's where things stood for the group as of 1:15 p.m. EDT on Thursday, relative to their closing prices on Wednesday.

  • Graf Industrial (GRAF), the special-purpose acquisition company (SPAC) set to merge with lidar maker Velodyne Lidar, was down 8.4%.
  • Hennessy Capital Acquisition IV (HCAC.U), the special purpose acquisition company (SPAC) planning to merge with California EV start-up Canoo, was down 2.5%.
  • Li Auto (LI -0.67%), the newly-public maker of electric SUVs in China, was down 6.1%.
  • Nikola (NKLA 2.09%), the Arizona-based electric-semi start-up, was down 7.1%.
  • NIO (NIO 1.39%), the Chinese EV maker, was down 5.5%.
  • Spartan Energy Acquisition (SPAQ), the SPAC planning to merge with U.S. EV start-up Fisker, was down 6%.
  • Tortoise Acquisition (SHLL), the SPAC that will soon merge with hybrid-truck drivetrain maker Hyliion, was down 10.7%
  • Workhorse Group (WKHS 10.69%), the Ohio-based maker of electric delivery vans, was down 5.9%.
  • Xpeng (XPEV -0.81%), the most recent Chinese EV maker to go public in the U.S., was down 3.7%.

Tesla was down 7.6% at that hour as well. 

DiamondPeak Holdings (DPHC), the SPAC planning to merge with Ohio electric-pickup start-up Lordstown Motors, was the outlier in the group: Its shares were down just 0.8% at 1:15 p.m. EDT today.

A Tesla logo on a vehicle charger.

A post-split sell-off of Tesla put other EV stocks under pressure on Thursday. Image source: The Motley Fool.

So what

The story here is simple. These stocks, and many others, were caught in a broad-based sell-off of technology stocks on Thursday. 

A seasoned investor might argue that we were overdue for a day like this, given the spectacular gains posted in 2020 by Tesla, NIO, and Workhorse, the three stocks in this group that were public at the beginning of the year.

NIO Chart

NIO data by YCharts.

All of the stocks in the group have benefited from the huge rally that began with Tesla late last year. In fact, it's fair to say that the newly public members of the group went public in part to take advantage of auto investors' intense interest in stocks related to EVs.

(Side note: Technically speaking, Graf Industrial, which will soon merge with Velodyne Lidar, isn't an electric-vehicle stock. But Velodyne's lidar sensors are used by just about every company and group working to develop self-driving technology, a market segment closely intertwined with EV development. Given that, it's not surprising that Graf's shares tend to move with this group more often than not.) 

Two NIO vehicles parked in front of one of the company's buildings.

NIO just completed a $1.7 billion raise and had a great sales result in August, but its shares were down on Thursday anyway. Image source: NIO.

Now what

Investors who are concerned about today's sell-off should note that some of these companies' stocks were falling on Thursday even though they had reported bullish news this week. 

And last but not least, Tesla announced a $5 billion stock sale to pad its balance sheet — a move that makes the Tesla-bankruptcy thesis favored by short-sellers highly unlikely to happen anytime soon.

Long story short: EV stocks have had a tremendous run, and a correction shouldn't come as a surprise. But auto investors should keep in mind that nothing about the fundamentals of any of these companies has changed for the worse in the last few days. If you bought to hold for the long term, this market storm is no reason to sell. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$900.09 (4.67%) $40.20
Nio Inc. Stock Quote
Nio Inc.
$21.11 (1.39%) $0.29
Workhorse Group Inc. Stock Quote
Workhorse Group Inc.
$4.35 (10.69%) $0.42
Nikola Corporation Stock Quote
Nikola Corporation
$6.83 (2.09%) $0.14
Tortoise Acquisition Corp. Stock Quote
Tortoise Acquisition Corp.
Graf Industrial Corp. Stock Quote
Graf Industrial Corp.
Spartan Energy Acquisition Corp. Stock Quote
Spartan Energy Acquisition Corp.
DiamondPeak Holdings Corp. Stock Quote
DiamondPeak Holdings Corp.
Li Auto Inc. Stock Quote
Li Auto Inc.
$32.49 (-0.67%) $0.22
XPeng Inc. Stock Quote
XPeng Inc.
$24.41 (-0.81%) $0.20
Hennessy Capital Acquisition Corp. IV Stock Quote
Hennessy Capital Acquisition Corp. IV
Hennessy Capital Acquisition Corp. IV Stock Quote
Hennessy Capital Acquisition Corp. IV

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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