What happened
Several popular names in the electric vehicle (EV) sector saw their stocks hit new all-time lows this morning. Rivian Automotive (RIVN -1.25%) and Lucid Group (LCID 0.95%) dropped about 7%, while shares of ChargePoint Holdings (CHPT 0.36%) were down by 5.5% at its lows.
That brought all three stocks to record low levels. Over the past year, investors had driven shares of these stocks to lofty valuations based on just potential. Now it seems opinions -- and risk tolerances -- are changing.
As of 11:48 a.m. ET, Rivian shares were still trading down 5.9%. Lucid and ChargePoint bounced off the lows, but were still down 4.4% and 2.6%, respectively.
Image source: Rivian Automotive.
So what
Many investors had bought shares in these names, hoping to find the next Tesla. Now it seems they are afraid that they may just have found it, as Tesla has also been on a steady decline to two-year lows. Several factors have analysts and investors paring back expectations for EV sales in the near term. That has led to lower projections for the rate at which consumers will transition to fully electric passenger vehicles globally. The question for investors is whether these lower stock valuations make it a good time to buy these names now.
Now what
There's no question the valuations of EV stocks got ahead of themselves. That was led by Tesla's wildly successful sales growth and future prospects. The sector leader now has four manufacturing plants operating globally, but sales prospects have shrunk. Tesla has offered price discounts, and some have reported growing inventories of unsold vehicles. When it next reports its quarterly earnings, investors will find out if that is due to slowing demand or simply timing and logistical shipping issues.
But concerns for Tesla are cascading to the unprofitable companies like Rivian and Lucid that only have a single production plant and still need to invest billions in additional capital to grow. Lucid just announced it was raising another $1.5 billion to have enough cash to get its operations into 2024.
Rivian has scaled back capital spending plans to conserve cash as well. It just put plans on hold for a joint venture to build electric vans in Europe. ChargePoint has also been losing money as it invests in growing its charging network. Its success depends on widespread adoption of electric vehicles in North America and Europe. So struggles for early-stage companies like Rivian and Lucid likely means struggles for ChargePoint.
It's impossible to say when the current slide in these stocks might reverse, if at all. But even if EV adoption grows at a slower pace, these companies will succeed if they have enough capital. While not all start-ups are in that position, these names are for now. A good approach for those wanting some exposure to the sector might be to start buying in small amounts now that these stocks are at or near record lows.
