What happened 

The last 24 hours have brought two less-than-bullish earnings reports for the electric vehicle industry and it's pulling the entire segment lower in trading on Wednesday. Rivian (RIVN 6.69%) started the trend when it released earnings after the market closed on Tuesday, but Workhorse Group's (WKHS 2.92%) report this morning didn't help. 

Shares of Workhorse are down 12.6% at 2 p.m. ET, Lucid Group (LCID 2.81%) has fallen 6.7%, Canoo (GOEV -9.57%) is down 2.7%, and battery supplier QuantumScape (QS 0.61%) has dropped 6.8%. Let's dig into why the market is suddenly bearish on EVs. 

So what 

Workhorse's net sales for the quarter were $3.4 million, operating loss was $39.7 million, and net loss was $38.7 million, or $0.24 per share. Analysts were expecting earnings of $0.18 per share. 

Over at Rivian, the company continues to increase production but not as quickly as investors expected. Management said the company will produce about 50,000 vehicles in 2023 while expectations were for over 60,000 units. But demand may be an even bigger problem. 

After consistently releasing preorder numbers in quarterly letters to shareholders, the company stopped giving that data. In November 2022, the company said it had over 114,000 preorders but only said it had "a net preorder backlog that extends into 2024." That implied over 50,000 preorders, but investors don't know how many people have canceled orders in the last few months. 

Lucid is one data point investors have and orders fell from over 34,000 at the end of September 2022 to over 28,000 at the end of December 2022. It's reasonable to think Rivian's order book is also dropping. 

The electric vehicle story has long been about growth, but now investors have to start worrying about demand. If demand doesn't match the rapid increase in the supply of electric vehicles then the industry will be in financial trouble. Based on today's stock movements, investors think that will be a reality sooner than later. 

Now what 

The electric vehicle industry is starting to see some major cracks just as companies ramp up production. And for QuantumScape, this end market weakness couldn't have come at a worse time. 

This has always been a high-risk segment of the market, but it appears to be even higher-risk now. While companies aren't seeing inventory pile up, they are seeing cash burn increase and they are going to be in an unsustainable position eventually if they can't sell vehicles profitably. 

Every auto company in the world, new or legacy, has been building electric vehicle supply over the last five years and now there may be lower demand for vehicles overall and lower-than-expected demand for electric vehicles. Investors should tread very carefully in EV stocks and it's not a bad idea to just watch from the sidelines until the true winners emerge.