Shares of some companies in the electric vehicle (EV) sector have been plunging this week. As of early Friday morning, the stocks of charging network companies ChargePoint (CHPT +7.00%) and EVgo (EVGO +2.59%) were down by about 17% and 13%, respectively, according to data provided by S&P Global Market Intelligence. At the same time, shares of early-stage EV maker Polestar (PSNY +0.56%) had declined by 10.2% from last Friday's closing price.
The EV leader is flexing its muscles
Investors have had growing concerns about EV sales growth in general as sector bellwether Tesla has been lowering vehicle prices. Tesla wants to retain its leading market share as new entrants come to market. Its strategy for doing so is hurting its profit margin, but it is impacting the unprofitable EV companies far more.
But that's not the only thing Tesla is doing to beat its competitors. ChargePoint and EVgo support the EV industry with their charging network offerings. Many EV manufacturers, however, are also moving to offer customers access to Tesla's Supercharger network. ChargePoint itself announced last week that it was increasing production of Tesla-compatible chargers. That's the right approach if Tesla's North American Charging Standard (NACS) becomes the overall standard.
NYSE: CHPT
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But there's another side to it as well that could further hurt ChargePoint and EVgo. This week, Tesla began selling its charging hardware to third parties for the first time, directly taking on the existing charging station suppliers.
Tesla will sell $100 million worth of its charging units to BP for installation by the energy company's EV charging business, BP Pulse. Locations where the Tesla hardware will be deployed include TravelCenters of America, a chain of truck stops that BP acquired earlier this year. That move by Tesla will take potential market share from companies like ChargePoint and EVgo.
NASDAQ: EVGO
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The road to profitability
Tesla had already been hurting early-stage EV makers by lowering its prices and exacerbating those companies' losses. Polestar is one such company. Polestar has an advantage over true start-ups because it is jointly owned by Volvo and that automaker's Chinese parent company, Geely. As such, Polestar can save capital by using Volvo-owned manufacturing facilities. Yet it still reported a net loss of more than $300 million in the first six months of this year.
Polestar delivered more than 40,000 EVs through the first nine months of 2023. Its deliveries grew 50% year over year in the third quarter. Investors will hear how that translates to its bottom line when Polestar reports its full third-quarter financial results on Nov. 8. EVgo will also release its quarterly results that day.
NASDAQ: PSNY
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ChargePoint, too, is struggling on its road to profitability. The company reorganized earlier this year, and cut 10% of its global workforce. It also recently announced that it had raised more than $230 million in fresh capital to help it reach a profitable level of business. It should provide its next quarterly update in early December, and that's when investors should hear more about its path to profitability. Until then, the stock will have no real catalysts that could produce a recovery from this week's drop.
