Consumer interest has definitely has started to shift away from EV stocks with many investors choosing to sell them in favor of conventional combustion engine companies. Everything from government subsidies to concerns about climate change has spurred growth in the sector. However, since the beginning of the U.S. Federal Reserve’s 2022 rate hike cycle, the space has begun to face a number of demand headwinds. The automotive market in the United States depends on cars loans to feed consumer purchases of new vehicles. Interest rates now being higher than they have been in more than two decades has made purchasing a new car significantly more expensive.
It’s important to note, not all public EV companies are performing the same in 2024’s volatile market. Chinese EVs overwhelmingly delivered better than expected results in Q1 2024. The three EV stocks below are amongst the worst performing in the sector, and investors should consider putting them on their sell list for May.
Rivian (RIVN)
Luxury electric vehicle maker Rivian (NASDAQ:RIVN) has certainly struggled to improve demand, despite targeting the high-end portion of the EV market. Rivian’s share price has fallen more than 57% on a year-to-date basis as of last Friday. Waning delivery growth coupled with compressing margins are just a couple of the reasons why RIVN has endured such a beating. In 2023, Rivian’s net loss came in at $5.4 billion, which was smaller than the $6.8 billion figure of 2022. Perpetual net losses should be a concern for investors, especially given the weak EV demand environment.
In the first quarter of 2024, Rivian was able to beat delivery estimates. However, analysts are concerned about how much there will be in the market in the next few years. Rivian will need to grow revenues exponentially to able to subsidize its substantial losses. With this increasingly more difficult, RIVN makes this EV stocks to sell list.
XPeng (XPEV)
While Chinese EV maker XPeng’s (NYSE:XPEV) shares have not performed as badly as Rivian in 2024, they are not far behind. XPEV has plummeted almost 38% on a year-to-date basis as of last Friday. However, XPeng’s financial performance, like many of its direct competitors, has beat expectations in 2024. At the end of the first quarter of 2024, XPeng delivered 21,821 vehicles, which represented a 20% year-over-year increase from the same period in 2023. The EV maker’s deliveries for just the month of March nearly doubled to 9,206.
What clouds XPeng’s future is the hypercompetitive environment that currently characterizes China’s EV market. XPeng will need to battle against EV giants like BYD (OTCMKTS:BYDDY) and Li Auto (NASDAQ:LI) as well as smaller players like Nio (NYSE:NIO). While the company will likely be able to increase deliveries, whether or not it can improve profits remains a big question market.
Nevertheless, because the Chinese EV space has morphed into an “eat or be eaten” environment, smaller EV companies like XPeng are particularly at risk to the large EV makers, ultimately placing XPeng as an EV stock to sell in May.
Tesla (TSLA)
Famed EV maker Tesla (NASDAQ:TSLA) has received considerable buzz over the past week. Tesla CEO Elon Musk’s trip to China was certainly out of the blue, but the trip seems to have borne fruit for the EV maker. As a result of his trip, Elon Musk was able to secure tentative approval for Tesla’s autonomous driving system in China. The company will be rolling out this feature with the help of Chinese internet behemoth Baidu (NASDAQ:BIDU).
Despite this piece of good news, it’s still hard to ignore the overwhelming sirens. Tesla has struggled throughout 2024 to increase deliveries, and automaker continues to suffer decreasing market share in China. During the first quarter, Tesla delivered 386,810 vehicles while Wall Street expected 449,080. This decline not only represents a sequential one from the fourth quarter of 2023 but also a year-over-year decrease from the same period in 2023.
These should concern Tesla shareholders. TSLA shares have already dropped 27.1% on a year-to-date basis as of last Friday. Current EV market conditions could send shares lower.
On the date of publication, Tyrik Torres 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.
