Electric vehicle (EV) stocks fell today after Tesla (TSLA 15.31%) and Rivian (RIVN 3.76%) both reported disappointing first-quarter delivery numbers.
It was the latest sign that demand for EVs continues to fade and that the sector's stocks look broadly overvalued. Tesla is seen as a bellwether in the EV market as well, and other EV stocks tend to respond to Tesla-specific news.
Tesla and Rivian closed down around 5%; Lucid (LCID 1.63%) dropped 3.5%.
Image source: Tesla.
EV stocks hit the skids
The first quarter was one to forget for the EV industry based on Tesla's numbers.
The industry leader said it produced 433,371 vehicles in the first quarter and delivered 386,810, meaning deliveries were down 8.5% from the quarter a year ago, which was its first year-over-year decline since 2020 and a clear sign of demand challenges. The gap between production and deliveries also shows that Tesla struggled to move inventory in the quarter.
The decline in deliveries wasn't particularly surprising as Tesla had lowered prices a number of times over the last year, and CEO Elon Musk has complained about the impact of higher interest rates on car sales several times in recent months. In its fourth-quarter earnings report in January, the company gave vague production guidance for the year that indicated a significant slowdown in growth, but deliveries can still lag production if demand is weak.
Toward the end of the quarter, Tesla announced price hikes, which some analysts interpreted as a push to sell more vehicles before the end of the quarter. It also faced production challenges in the first quarter, including parts shortages because of attacks on ships in the Red Sea and the loss of power at its German plant due to an arson attack on the grid.
Rivian also underwhelmed with its first-quarter delivery report. The EV start-up, generally considered Tesla's closest pure-play EV competitor, reported production of 13,980 vehicles and deliveries of 13,588. It also reaffirmed its production guidance of 57,000 vehicles this year.
Those results missed production estimates but were better than delivery estimates at 12,415. The company's full-year guidance indicates little growth this year after it sold roughly 50,000 vehicles in 2023, and the results from the much larger Tesla indicate that demand trends are weak in the EV industry.
Lastly, Lucid has not yet reported first-quarter delivery numbers, but the company is in the weakest position of the three EV companies named here since it produced only 8,428 vehicles last year and delivered just 6,001.
Lucid is also the most at risk of a bankruptcy filing among these three automakers, with an operating loss under generally accepted accounting principles (GAAP) of more than $3 billion in 2023. The luxury EV stock did get a boost last week when it announced a $1 billion investment from the Saudi Public Investment Fund. However, based on the results from Tesla and Rivian, Lucid's first-quarter delivery report is likely to disappoint as well.
What's next for the EV industry
Tesla has announced a couple of price increases in recent weeks, indicating it might have exhausted its price war strategy and is instead focused on boosting profits, which have fallen in recent quarters.
But the EV industry is unlikely to emerge from its slump until at least one of several things happens: The technology gets significantly cheaper, allowing for lower prices; vehicle ranges and charging networks improve substantially, or interest rates fall significantly.
None of those appear on the immediate horizon, and even a decline in interest rates is unlikely to meaningfully change the demand curve since that would also make internal combustion vehicles more attractive as well.
Given that reality, these EV stocks are likely to struggle through 2024, and until business conditions or the underlying technology significantly improves.
