Expert auto journalist and avid electric vehicle enthusiast James May recently articulated the biggest issue with the EV industry: ambition is ahead of technology. Yes, more charging stations are built every day, but the deeper issue is that a battery cannot replace the performance of a gas tank.
However, for the industry, politicians have campaigned on the environmental prospects of an all-EV future, backing themselves into a corner of supporting the industry to the end. EVs will likely become a critical part of future urban infrastructure but may never replace gas and diesel-powered vehicles for longer-haul regions of the world.
Thus, the industry as a whole is likely massively overvalued, leading to many cases of EV stocks to sell. Here are three such examples that could see their value disappear rapidly as sales dwindle and margins tighten.
Faraday Future Intelligent Electric (FFIE)
When an EV stock becomes a meme stock, you know it’s time to exit. This happened to Faraday Future Intelligent Electric (NASDAQ:FFIE) in mid-May when short interest prompted a short squeeze. The train likely has already left the station for any investors looking to capitalize on this kind of market behavior. FFIE short interest has dropped below 3% as institutions move on from its cratered business prospects.
Moreover, taking a closer look at FFIE’s initial business model starts to make you wonder who they were planning on selling to in the first place. Ultra-high luxury electric cars don’t have a large enough market to be profitable. Even more worrying, FFIE continues to bleed money with no end in sight as it uses buzzwords like “generative AI” to keep hopeful shareholders hooked.
For most, FFIE is worth avoiding simply because of its $431 million in losses for Q4 2023, which it disclosed at the end of May.
Lucid Group
Electric vehicle manufacturer Lucid Group (NASDAQ:LCID) has been struggling to remain financially and technically relevant. This year’s first quarter’s $680 million loss accentuates its inability to provide returns for shareholders. As a result, LCID stock has sunk below the $5 mark and will likely stay there.
This is because the company has no product that will pull it out of its current downward spiral. Its current battery EV offerings are expensive and lack the brand recognition to justify the cost. For example, its starting sedan model, the Air Pure, costs over $69,000 but offers nothing exceptionally luxurious over competing models.
Pair this lack of competitive products with the recent layoff of 400 employees, and Lucid’s future isn’t looking bright. In under two years, the company has laid off 1,700 employees, impacting its morale and ability to provide returns to its shareholders, making it one of the EV stocks to sell.
Tesla (TSLA)
With overall demand for electric cars dropping, Tesla’s (NASDAQ:TSLA) best days may be behind it. Furthermore, the coming product pipeline for Tesla isn’t one in line with consumer trends. While Tesla is undoubtedly the best in the EV market, its prices are still too high to compete with the reality most Americans are facing. Interest rates are high, many cannot afford a home and holding onto your cash is more important than ever.
So, buying an electric car that is more expensive than a cheap hybrid at a high interest rate with no house garage to charge it in is likely contributing to decreasing demand and sales for the company. Thus, though Tesla may always have fans who champion its superiority, the car simply isn’t practical enough for the average person.
For now, it looks like TSLA stock will get the healthy correction it has needed for a long time. This means TSLA can be treated like one of the EV stocks to sell until its battery tech catches up to reality.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
