Shares of Indie Semiconductor (INDI 1.85%) fell on Monday, with the stock down as much as 10% in early trading before recovering to a 6.6% decline as of 2 p.m. ET.
The automotive semiconductor stock had been the subject of buyout rumors of late, but a slew of negative stories around electric vehicle (EV) demand in the past few days has caused it to sell back off. With no company-specific news to speak of, the across-the board declines in not just Indie but several EV chipmakers today are likely in response to the following EV news items -- with one involving Warren Buffett.
NASDAQ: INDI
Key Data Points
EV demand hitting a speed bump?
There has been lots of consternation in the electric vehicle industry these days, as generating demand beyond early EV adopters has been a challenge -- especially in the current interest rate environment.
On Monday, some incremental bad news came through when Warren Buffett's Berkshire Hathaway disclosed it had continued selling Chinese electric vehicle leader BYD. Although the sale only amounted to some 13 million shares, or $38 million, lowering the position from a 7% stake to a 6.9% stake, the incremental selling is still a negative. After all, BYD has arguably been the most successful EV maker on the planet, as it surpassed even Tesla in late 2023 in terms of electric vehicle sales. So, to see Buffett trimming his stake in the carmaker may have ruffled some feathers among EV stock investors who still believe in the growth of electrification.
Buffett's trimming could be in response to recent tariffs recently put on low-cost Chinese vehicles. The Biden administration slapped a 100% tariff on Chinese EVs back in May, and late last week, the European Union also added its own incremental tariffs between 17.4% and 38.1%, depending on the brand, on top of the existing 10% tariff.
While these tariffs will only limit the sales of Chinese vehicles in international markets, one of the big roadblocks to EV adoption these days is cost. EVs typically carry a higher sticker price than a regular internal combustion engine, especially with higher interest rates. So if low-priced Chinese imports are taken off the market in the U.S. and Europe, it could limit adoption even further.
As evidence, Germany's Federal Motor Transport Authority also reported today that the number of newly registered electric vehicles has fallen by 16% this year, with electric vehicle market share falling from 14.3% in the January to May time period last year to just 12% in 2024.
Lower EV adoption would limit demand for Indie's products
While Indie has a lot of business in autonomous driving hardware and software, it also has electrification hardware products, such as EV application-specific integrated chips (ASICs), charging controllers, diagnostic chips, and e-fuse solutions. When combined with the fact that the stock had recently spiked on rumors of a buyout, it's no wonder shares are coming back down to where they were essentially before those rumors.
Yet while the news around electric vehicle chip stocks is gloomy today, there have been some mixed signals in EV land, with positive comments on electrification from leading U.S. automakers happening as recently as early June. Therefore, for those who still believe in the EV trend over the long term, this sectorwide sell-off could be an opportunity.
