Despite the promise behind electric vehicles (EVs), it would appear as though many companies in the sector, not named Tesla, are struggling. Just days ago, Polestar – the former performance division for Volvo, that spun off into its own brand for Chinese made EVs – posted a second-quarter loss of $304M. Notably, this is not the only sign of EV manufacturers ‘spinning their tires’ in recent months. The following is a brief look at a few examples of this, which, along with the inevitability of EV adoption, may have created a prime buying opportunity for savvy investors.
Notable Manufacturers
Before taking a closer look at the struggles currently being faced by EV manufacturers, we have highlighted a few key industry players below.
Polestar Automotive (NASDAQ: PSNY)
Prior to going its own way in 2021, Polestar functioned as the performance division for Volvo. While the two companies retain close ties, Polestar now operates as an independent company specializing in the production of high-end EVs. In its first two years of operation, Polestar saw its revenue double to $2.46B in 2022.
Polestar is based out of Gothenburg, Sweden.
Market Cap: $6.99B
Forward Price to Earnings Ratio (P/E) 1yr: N/A
Earnings Per Share (EPS): N/A
At the time of writing, Polestar Automotive (PSNY) boasted the above metrics and is listed as a ‘Buy’ among most major investment firms.
Rivian Automotive (NASDAQ: RIVN)
With early backers like Amazon and Ford, Rivian was able to generate massive interest in its fully electric truck known as the ‘R1T’ and its SUV counterpart, the ‘R1S’. While units shipped by the company failed to impress in 2022, its future still looks bright, as it still has a winning product on its hands without any real competition to be found.
Rivian Automotive is based out of Irvine, California.
Market Cap: $22.10B
Forward Price to Earnings Ratio (P/E) 1yr: -3.96
Earnings Per Share (EPS): $-6.47
At the time of writing, Rivian Automotive (RIVN) boasted the above metrics and is listed as a ‘Strong Buy’ among most major investment firms.
Lucid Group (NASDAQ: LCID)
As it looks to make a name for itself, Lucid Motors opted to go the luxury route with its offering known as the Lucid ‘Air’. These premium offerings showcase the future of what EVs will look like, boasting astounding performance metrics without sacrificing range.
Lucid Group is based out of Newark, California.
Market Cap: $14.52B
Forward Price to Earnings Ratio (P/E) 1yr: -4.21
Earnings Per Share (EPS): $-1.51
At the time of writing, Lucid Group (LCID) boasted the above metrics and is listed as a ‘Buy’ among most major investment firms.
Tesla (NASDAQ: TSLA)
Tesla, Inc. is both an electric vehicle and clean energy company. While it is renowned for its lineup of electric vehicles, it has increasingly expanded operations over the years to include solar energy products and energy storage solutions as well, such as the Powerwall and Solar Roof.
Regardless of the product, Tesla’s goal is to promote global energy sustainability through electrification and automation. Notably, Tesla has also become a major data aggregator, allowing it to develop the foundations for future autonomous taxi services, in addition to ancillary technologies like artificial intelligence.
Tesla was founded in 2003 and is based out of Texas, United States.
Market Cap: $777.66B
Forward Price to Earnings Ratio (P/E) 1yr: 83.05
Earnings Per Share (EPS): $3.53
At the time of writing, Tesla (TSLA) boasted the above metrics and is listed as a ‘Buy’ among most major investment firms.
David vs. Goliath
For multiple years, niche EV manufacturers like Polestar, Rivian, Lucid, and Tesla boasted a slight first-movers advantage with regard to full electric vehicles. While industry goliaths like Ford and General Motors now have offerings of their own, there was a period in which hybrid variants were as good as it got from each. Aside from Tesla, it is now unclear if the aforementioned EV specialists were able to take advantage of being a first mover to the extent needed to survive.
To date, Lucid and Rivian have each struggled to meet forecasted production numbers, while Polestar has seen its shares decline by as much as 65% since going public. Now that Ford, General Motors, and various other established automotive manufacturers have essentially caught up in the race, will each company’s vast resources result in the demise of more niche manufacturers?
Heck, even Ford has struggled, having already been forced to drop the price of its F-150 Lightning as sales failed to live up to expectations. The difference is that Ford can rely on sales from its existing lineup of internal combustion engine (ICE) vehicles to keep its EV aspiration afloat until industry kinks can be worked out.
Macroeconomics At Play
Whether it be a niche manufacturer or an industry mainstay, the fact remains that various macroeconomic factors are currently acting as an anchor on EV adoption. With central banks around the world doing their best to stave off inflation through manipulation of FIAT via rising interest rates, skyrocketing property values, etc., a question arises – who among the general public has enough liquid capital to purchase a rapidly depreciating asset like an EV?
For proof of this, just look at the average length of time car owners are keeping their vehicles in the United States. In 2017 a new record was set, with the average length of ownership rising to 11.6 years, with rising prices on new vehicles being one of the driving factors behind this. Fast forward to 2021, and this trend only continued, with new record length of ownerships being seen at 12.1 years.
With the cost of living and vehicle MRSPs only continuing to rise in the time since, it would stand to reason that EV adoption is clearly being held back from reaching its potential. At the end of the day, who has money for a luxury item like an EV at such times?
Has Tesla Won the Game?
While manufacturers like Polestar, Rivian, and Lucid are reliant on EV sales and fresh investment capital to stay afloat, Tesla has long since branched out, expanding on its revenue streams. Whether it be licensing access to its charging network, offering in-home battery solutions, or developing commercial offerings like its electric transport truck, Tesla continues to diversify while simultaneously building a strong foundation that can support its consumer EVs during trying times. Due to these reasons and many more, Tesla appears to be the only truly safe bet among pure EV manufacturers with a clear place among existing industry goliaths in the years to come.
Looking Forward
In the coming months, there are big developments expected from various EV manufacturers that may help each get back on track.
- Rivian puts the next-gen in-house powertrain known as the ‘Enduro Drive Unit’ into production.
- Will provide performance and efficiency boosts, while lowering production cost
- Lucid will launch its first SUV in 2024, known as the ‘Gravity’
- Targets the much more popular SUV segment in North America
- Polestar is set to begin production of the Polestar 4, a mid-size SUV, in October
- Also set to target one of the market’s most popular segments, bringing the functionality of a full-size SUV combined with the performance of a car
While only time will tell if these developments are enough to spur increased adoption/sales, they underscore a continuing drive by each company to persist and thrive.
Final Word
The bottom line is that despite recent struggles experienced by companies like Polestar, the transition towards EVs is inevitable at this point. Whether the public likes it or not, an increasing amount of governments have already, or are preparing to, enact laws incentivizing such adoption. Within a decade, EVs will be so widespread that any woes currently experienced may be looked back upon as mere hiccups, making the current share pricing of the aforementioned companies look like a steal.
Although there are no guarantees that niche manufacturers will be around to see that day as industry giants like Ford continue entering the fray, the potential for real growth remains.
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