What happened 

The start of Monday's trading session was one of the strangest we've had in a long time. Obviously, Silicon Valley Bank's collapse happened on Friday, and crypto-focused Signature Bank was taken over by the Federal Deposit Insurance Corp. on Sunday -- events that sent the world of banking into a tailspin. But there was some resolution on Sunday evening as the Federal Reserve, Treasury Department, and FDIC came together to guarantee that the depositors of those two institutions won't lose money.  

The full impacts from the last week of panic, failure, and government intervention haven't been felt yet, but investors are reacting, and those responses are not restricted to the financial sector. Early in Monday's session, shares of electric vehicle start-up Canoo (GOEV 5.88%) plunged 5.2%, NIO (NIO 4.06%) was off 5.6%, and Lucid Group (LCID 25.00%) was off 6.9%. But by 12:15 p.m. ET, their shares were up 1.7%, up 0.7%, and down 0.9%, respectively. But why did those shares take such a roller-coaster ride?

So what 

Let's start with the declines that many EV stocks suffered in early trading Monday. Many risky stocks, including many bank stocks, were falling at that point, despite the federal government stepping in to backstop the deposits at the failing banks. The fear was still that contagion would spread and other banks would go under. 

For EV companies, one likely outcome of these bank failures is that banks will pull back on loans to buyers either in the form of lower loan-to-value ratios or higher interest rates. Another possible outcome is that this banking crisis helps push the economy into a recession as banks get more conservative, which would also hurt EV companies. 

But then the market saw what was happening with interest rates. After rising for more than a year, the 10-year Treasury bond rate dropped 19 basis points Monday to 3.5%. Lower long-term debt rates will make it cheaper to buy vehicles and may help boost the economy. 

This helps explain the wild swings the market experienced in just a few hours. Investors are trying to decipher whether the banking news of the last week will be good or bad for EV demand, and there's no easy answer. 

Now what 

In reality, nothing has really changed about the EV business. There are still questions about how much demand there will be for the vehicles NIO, Lucid, and Canoo will manufacture, and capital markets aren't exactly thrilled about financing growth indefinitely, as their falling stock prices have shown. 

I don't think last week's bank run will necessarily prove negative for EV companies, but it definitely wasn't bullish news for them. Bank failures and conditions under which the Federal Reserve will need to prop up banking and the broader economy are definitely bad news. And those conditions could lead to more inflation and rising input costs for vehicles. 

Caution is the right approach for investors to take with the shares of smaller EV companies right now. There's no guarantee they'll all survive, and they're all burning cash in their efforts to grow. Sometimes the right action is to do nothing, and that's what I'm doing with EV stocks Monday.