What happened 

Shares of electric vehicle (EV) original equipment manufacturers (OEMs) Lordstown Motors (RIDE -3.57%) and Nikola (NKLA -5.43%), as well as battery manufacturer QuantumScape (QS 2.48%), each fell hard today, down 7.5%, 7.8%, and 5.6%, as of 12:30 p.m. ET.

There wasn't much in the way of news today in these stocks; however, these electric-vehicle-related companies had two things going against them today: a comedown after the enthusiasm following the passage of the Inflation Reduction Act, as well as anxiety over the path of inflation and interest rates ahead of this week's meeting of Federal Reserve officials in Jackson Hole, Wyoming.

So what

Since these three growth stocks are minting hefty losses on their bottom lines, with their profits well out into the future, they are highly sensitive to upward moves in interest rates. Unfortunately, after coming down from its June highs, the yield on the 10-year Treasury bond is going back up again, up about 20 basis points in the past week, and rising again to top 3% for the first time in over a month.

When long-term interest rates rise, that decreases the intrinsic value of earnings that are far out into the future, thus lowering valuations.

Furthermore, in the case of these three companies, each may have to raise more money on a continuous basis to fuel their growth. In fact, these companies have continued to raise money this year, even as the cost of capital rose and their stock prices plunged, diluting shareholders further.

At the end of the second quarter, Lordstown had $236 million of cash on hand, and this was even after selling its in-house manufacturing plant to Foxconn, as well as selling some stock. Meanwhile, the company burned through $56 million in the second quarter alone. The company should begin generating revenue later this year, as production of the Endurance pickup truck is expected in the third quarter, with commercial deliveries beginning in the fourth quarter. However, the company will probably still be inking losses at that point, and management has said it will have to raise another $50 million to $75 million in the second half of the year.

Nikola is in a similar boat, although it did begin commercial deliveries of its Tre battery electric vehicle (BEV) truck in the second quarter, and began recognizing revenue, to the tune of $18.1 million on 48 deliveries. The company plans to deliver between 300 and 500 BEVs this year. That would be much better news, except it will also likely take cash to ramp up production. In the second quarter, Nikola's operating losses actually widened to $172 million, up from $139 million in the year-ago quarter. Like Lordstown, Nikola also raised money in the second quarter, in the form of $200 million in convertible notes.

Meanwhile, QuantumScape is a pre-revenue company still working to commercialize its solid-state battery technology. It burned through $51 million in operating cash usage last quarter, with another $31 million spent on stock-based compensation. While the company had a hefty $1.25 billion in cash and marketable securities, management plans to spend between $225 million and $275 million on operating expenses this year, and another $175 million to $225 million in capital expenditures, with an uncertain timeline to generate meaningful revenue.

Now what

On the bright side, there wasn't any bad fundamental news sending these stocks down today, and it appears as though the EV industry will grow over time as technology improves and the Inflation Reduction Act's climate incentives kick in.

However, owners of these stocks should be prepared for extreme volatility, as their ultimate future economics, as well as the timeline to revenue and profitability, remain big question marks. If things get really bad in the global economy, they may have trouble raising the funds needed to grow their businesses.

Therefore, in the near term, they remain victims of market sentiment, for good or ill. Unfortunately, after a very strong month and a half, it appears as though sentiment is going back toward a risk-off mentality, hurting these three start-ups in the EV space.