What happened
A couple of different news items were putting pressure on Tesla (TSLA -1.11%) shares Monday. But other electric vehicle (EV) manufacturers were also losing ground, among them Rivian Automotive (RIVN 6.10%) and Lucid Group (LCID 0.41%). As of 12:10 p.m. ET, Tesla was down by 6.2%, while Rivian and Lucid were off by 6.4% and 6.1%, respectively.
So what
These EV stocks were dropping as the technology-laden Nasdaq Composite index was leading overall markets lower. At that point in the session, it was down nearly 2%. It's not surprising to see these names experiencing sharper moves than the index, as they are all counting on future growth to justify their current valuations. The environment for tech and growth stocks is unsettled as it remains unclear how the economy will fare amid the Federal Reserve's moves to quell inflation.
Tesla faces its own company-specific challenges, however. One headwind that could directly impact its business is China's fight to prevent another surge of COVID-19 infections. Tesla's second-quarter production and delivery numbers, which were released last week, showed how much production was lost from its Shanghai plant due to that city being locked down in April and May. The plant came back strong in June with its highest vehicle production month ever. But on Monday, China announced a new shutdown in Macao -- the casino hub is closing its businesses for a week. Other Chinese cities have also implemented new restrictions to combat a rise in new cases. And Shanghai will conduct another round of mass testing after a person there was found to have a new, highly transmissible omicron subvariant.
The other factor hitting Tesla shares Monday is the ongoing dispute between CEO Elon Musk and the board of Twitter. Musk is trying to back out of his agreement to buy the social media company, and Twitter is suing to force him to follow through. Musk had put up Tesla stock as collateral for the loans to finance the purchase. While there is no way of knowing how that legal fight will play out, it is a distraction for Tesla's CEO, at the very least. Since Musk first disclosed his initial stake in Twitter in early April, Tesla shares have declined in value by about 35%.
Now what
That decline wasn't just due to Musk's quest to buy Twitter, of course. And investors' fears of an economic downturn and potential recession continue to hit the shares of other EV makers. Rivian actually pleased investors with its second-quarter production results last week. It is showing a notable acceleration in production and management seems confident it can achieve its previously lowered 2022 goals. Rivian's latest news drew a price target increase from an analyst who sees the stock as having more than 30% upside from recent levels.
On Monday, however, investors were selling EV names and opting instead for more stable investments. That could mean an opportunity for long-term investors, but as Tesla stock has shown, there could be plenty more volatility to come.
