What happened
All eyes are on the stock market this morning after an eventful weekend related to the collapse of two major banks. While financial sector names are under the most pressure, they are not the only stocks falling.
But there are also company-specific reasons that the stocks of electric vehicle (EV) makers Tesla (TSLA 1.85%), Ford (F 0.47%), and Rivian Automotive (RIVN 2.84%) dropped as much as 5.5% to 7% early today. As of 11 a.m. ET, Tesla remained lower by 2.3%, Ford by 1.6%, and Rivian was still down 2.6%.
So what
There is a logical connection between fears of a financial crisis and direct impacts to the stocks and businesses of these automakers. Job losses and economic disruption could very well keep consumers from making vehicle purchases. That's especially true on the higher end of prices, where these EV products reside.
It was partly because of those macroeconomic concerns that Tesla stock was downgraded today by Wolfe Research analyst Rod Lache. Barron's reported that Lache cut his firm's rating from a buy to a hold partly due to rising auto-loan delinquencies.
Lache didn't adjust his previous price target of $185 per share, which was still about 7% above Friday's closing price. That was the second recent downgrade of Tesla shares. Meanwhile, Ford announced a recall of its F-150 Lightning EV and Rivian received disappointing news from its electric van customer Amazon.
Image source: Tesla.
Now what
Today's Tesla downgrade follows one last week from Berenberg analyst Adrian Yanoshik. That was also a drop to a hold recommendation from a previous buy rating. Investors today are more likely tying the EV maker's near-term expectations to the uncertainty the financial sector is now creating, though.
The fall of Silicon Valley Bank -- a part of SVB Financial Group -- could be particularly tied to Tesla in some investors' eyes. The tech entrepreneurs affected directly by that bank seizure seem also to be likely Tesla customers. But general turmoil in the banking sector is enough to shift investor sentiment more toward safety as well.
Ford and Rivian are battling that sentiment on top of bad news from their EV businesses today, too. Ford had announced a suspension in production of its important F-150 Lightning recently due to battery fire risk. The company said at the time that no customers were affected.
But on Friday the company recalled 18 of the vehicles that had already been shipped to fix the battery cell defect. The company now risks losing customers who have already been waiting extended periods for deliveries of the popular electric pickup truck.
The news from Rivian is that it is in talks with Amazon to end the exclusivity portion of its 2019 agreement to sell the online retailer its electric delivery vans. That would allow Rivian to add new customers. But that potentially good news comes for a bad reason. Amazon's order for 10,000 vehicles for 2023 came in at the low end of what it had told Rivian to expect, according to a Wall Street Journal report.
The market might react differently if Rivian is able to change the terms of that agreement and sees additional sales for new customers on the horizon. But today, the market is avoiding higher-risk equities, and the lower-that-expected order volume from Amazon is being viewed as bad news. Investors should probably prepare for the fallout from the banking sector turmoil to continue to affect these stocks in the near term.
