What happened

Wednesday is looking like a losing day for investors in electric vehicle stocks, as shares of everyone from luxury EV-makers Lucid Group (LCID 0.41%) and Fisker (FSRN -12.70%) to boxy EV van- and SUV-maker Canoo (GOEV 2.59%) see their share prices drop in afternoon trading. As of 2 p.m. ET, Lucid stock is off 3.5% and Fisker is down twice that -- 7% -- while Canoo suffers a 5% loss.

And you can probably blame Tesla for all of this.

So what

More precisely, you can blame British investment banker Barclays for downgrading Tesla stock today, and spooking investors in the process.

In a note that seems to have inspired a sell-off across the electric vehicles sector, Barclays analyst Dan Levy removed his overweight rating from Tesla stock and cut his rating to equal weight (i.e., hold), warning of troubling trends both in Tesla's stock price and its business.

On the stock price front, Levy warned that Tesla's remarkable run higher -- shares up nearly 130% since the start of the year -- seems a bit too far, too fast, and that it's "prudent to move to the sidelines" on the stock. On the one hand, Levy says it's Barclays' position that Tesla will be "the long-term winner among OEMs in the race to an EV world" -- which kind of implies that everyone else, including Lucid, Fisker, and Canoo, will be losers to Tesla in the long run. In particular, Levy believes that Tesla's upcoming budget-priced Model 2 EV will create a low-cost offering that beats a lot of the competition.

In the shorter term, however, inventory appears to be building at Tesla, even in the face of Tesla's steep discounting of prices on its EVs, as Levy warns in a note covered on StreetInsider today. And reviewing the same note, The Fly highlights the analyst's concern about "margins and demand elasticity" in the EV market.  

Now what

Now what does all this mean for Tesla -- and for its competitors Lucid, Fisker, and Canoo?

In a nutshell, the worry is this: Tesla is the EV leader. Everyone else is a follower -- which is bad enough already. But if the leader in EVs is cutting prices in an effort to stoke demand and this effort is failing (as evidence by the buildup of unsold inventory at Tesla), this implies that demand for EVs in general may be rather inelastic, such that simply cutting prices won't be enough to help EV makers sell a lot more EVs.

If Barclays is correct about this, it would be bad news for Tesla, but potentially even worse news for EV companies that have to compete with Tesla. Newer entrants to the market, after all, such as Lucid, Fisker, and Canoo, are later to the game and haven't had as much time to ramp up production and grab market share as Tesla has. (In illustration of which, Levy predicts that Tesla will sell 455,000 EVs in Q2 alone!) And now Barclays is seeing signs that demand for EVs may not be as large as once thought.

If this is correct, there may not be enough room for these companies to grow their scale of production to satisfy demand -- at least not when forced to compete with Tesla for scarce sales. And if that's the case, then predictions that Fisker will grow large enough to start earning profits by 2025, Canoo by 2026, and Lucid by 2027 may turn out to be overoptimistic.

This explains why a downgrade for Tesla today is turning into bad news for everyone else, too.