After a tumultuous start to July, electric vehicle (EV) stocks made a roaring comeback this week, spurred on by a surging market and declining interest rates that sent investors into a frenzy.
Market data from S&P Global Market Intelligence showcased the remarkable resurgence in the EV sector, with companies like Rivian (NASDAQ: RIVN), Nikola (NASDAQ: NKLA), and Blink Charging (NASDAQ: BLNK) experiencing significant upticks in their stock prices. Rivian saw an impressive 22.1% surge, Nikola jumped 12.6%, and Blink Charging soared by 10.6% at its peak. As the week drew to a close, these stocks continued to rally, with gains of 21.6%, 12%, and 18.5%, respectively.
Delivery Developments
Recent weeks saw a flurry of delivery news within the EV industry, with some underwhelming results coupled with Fisker’s bankruptcy casting a shadow. Issues like production disruptions at Rivian’s plant and a 5% decrease in Tesla’s (NASDAQ: TSLA) deliveries from the previous year raised concerns.
However, this week brought a glimmer of hope as Lucid presented a more positive outlook. The company reported producing 2,110 vehicles in the second quarter, with deliveries amounting to 2,394 – a significant improvement from the same period last year. This shift contrasts with the prior year, where production sat at 2,173 vehicles, with a mere 1,404 delivered.
Despite fears of declining EV demand due to decreasing option costs, the current market indicates lingering demand, particularly in the luxury segment. However, companies selling vehicles above $70,000 are still grappling with profitability challenges.
Impact of Interest Rate Fluctuations
Another critical factor influencing the EV stock surge this week was the movement in interest rates. The release of the Consumer Price Index (CPI) inflation data revealed a 0.1% drop between June and May 2024, with a mere 3% year-over-year increase. Market participants interpreted these numbers as a potential signal for the Federal Reserve to cut interest rates later in the year.
Furthermore, the 13 basis points decline in ten-year U.S. government bond yields over recent months reflects market anticipation of lower rates. Reduced interest rates are poised to facilitate easier financing for auto companies, enabling them to offer loans at lower rates and potentially boosting sales in the future.
Tesla’s Delay and Market Sentiments
While the overall sentiment was positive for most EV stocks, the week concluded on a slightly disappointing note as Tesla postponed a planned robotaxi event slated for August 8, 2024. The company cited the need for additional time to develop robotaxi prototypes, delaying the unveiling until October.
Given Tesla’s significant influence on the EV market’s recent upswing, this delay tempered high expectations and served as a reality check for investors.
The Path Ahead for EV Stocks
The potential impact of lower interest rates on EV stocks cannot be overstated, as easier business financing, reduced installation costs for charging infrastructure like Blink Charging, and lower customer financing rates could all catalyze future growth.
Nevertheless, the fundamental challenge remains unaltered – companies like Rivian, Nikola, and Blink Charging are still operating at a loss.
Reflecting on the recent market trends, there seems to be little indication of a paradigm shift in the EV industry. Until these companies demonstrate sustained profitability, caution may be advisable for investors considering entering the EV market.
It’s wise to tread carefully on the electrifying road of EV investments, keeping a close eye on financial fundamentals and competitive positioning.