Electric vehicle stocks have been punished in 2023 as concerns over demand, prices, and high interest rates have turned the tide on the Green Tidal Wave theory. The list of some of the rejects of the year so far includes Faraday Future Intelligent Electric (FFIE) -98%, Arrival (ARVL) -84%, Canoo (GOEV) -80%, Fisker (FSR) -77%, Arcimoto (FUV) -76%, Charging Blink (BLNK) -73%, Nikola (NKLA) -66%, REE Automotive (REE) -63%, Polestar Cars (PSNY) -57%, Lucid Group (LCID) -31%, and NIO (NIO) -24%. While EV juggernaut Tesla (NASDAQ:TSLA) has defied selling pressure with a 126% YTD gain, there are many analysts such as Bernstein’s Toni Sacconaghi sounding the alarm for 2024 on the basis that supply and margin growth will slow.
From a broader perspective, Piper Sandler recently highlighted that the electric vehicle industry may be in better shape than believed, although it may be a question of a few market share winners generating a lot of buzz and slowing down the EV field. The company updated its forecast for electric vehicle sales amid widely held views that EVs are facing a so-called demand crisis. “Although our new forecast implies a slower ramp between now and 2030, it is important to note that our long-term expectations have not changed,” reported Alexander Potter. “In particular, we still think the auto industry will eventually reach 100% EV penetration, and we do not agree with the notion that EV demand is about to be exhausted,” he added.
Previous electric vehicle forecasts from Piper Sandler called for electric vehicle penetration of 33% across the US, Europe and China by 2025, rising to 67% by 2030. The company’s new forecast lowers that expectation by 600 – 700 points to mean. 26% electric vehicle penetration in 2025, followed by 60% in 2030. Understandably, high-slope EV penetration is a function of huge market expectations for EV specialists such as Tesla (TSLA), BYD Company (OTCPK:BYDDF) (OTCPK) :BYDDY), and Rivian Automotive (NASDAQ: RIVN) Looking ahead, Piper Sandler expects the EV trio to represent about 25% of all vehicles sold in the US, China, Europe. “So, even if we were to expect a 0% EV mix across all other brands, we’d still be predicting a market-wide EV penetration of ~25% in 2030,” Potter noted.
What about others? Toyota (TM) is not expected to make any major moves after winning market share by selling affordable hybrids. With its EV penetration, Volkswagen (OTCPK:VLKAF) is said to have a long way to go before reaching its interim EV goals (35%-40% EVs by 2027, >65% in 2030). The downside of General Motors (GM) is that it makes a lot of noise about EVs, including a commitment to 100% electric by 2035, but results have been poor so far with the unprofitable Chevy Bolt the only high-end EV, and EV versions. The Equinox, Silverado and Sierra are all facing delays. Ford’s (F) real challenge is expected to convince Americans to ditch gasoline-based icons like the F-150, Explorer, Expedition, Bronco, and Ranger. Meanwhile, Piper Sandler thinks it’s hard to say whether Honda’s ( HMC ) EV targets are credible, given Honda’s radio silence in the segment. Across the pond, Mercedes-Benz ( OTCPK:MBGAF ) has said it will sell only BEVs by 2030 where markets allow, but the German automaker hasn’t vowed to phase out the internal combustion engine. Although Nissan (OTCPK:NSANY) was a pioneer in EVs, the Leaf is currently not among the top 50 EVs in the world. Regarding Chinese automakers such as Great Wall, BAIC, Dongfeng, Chery, FAW, GAC, NIO (NIO), Li Auto (LI), and XPeng (XPEV) – Piper said there is little evidence to suggest which of those companies . it may succeed in developed car markets such as Western Europe or the United States.
Wall Street is generally divided on Tesla ( TSLA ), with 15 equivalent Buy ratings stacking up against 21 equivalent Hold ratings and 6 equivalent Sell ratings. Rivian Automotive (RIVN) is more favorably viewed, with a 20 out of 26 rating at Buy-equal or better (reminder Amazon (AMZN) has a 17% stake in RIVN in its back pocket). BYD Company (OTCPK:BYDDF) is not widely followed on Wall Street, but has a clean sweep of the same rating as Buy on Seeking Alpha. BYD also has the highest Alpha Volume Rating in the automaker sector, which has been positively correlated with the market’s highest returns in the past.