Another bad EV news sends shockwaves to Lucid, Fisker, Canoo stocks

The electric vehicle (EV) industry is not doing well as the industry goes through a major slowdown leading to thin margins. Most EV stocks have crashed by double-digits this year while many small companies in the industry are running out of money. These events have also hit battery metals like cobalt, nickel, and lithium.

Latest EV news

The EV industry received another bad news when Tesla (NASDAQ: TSLA), its gold standard, published weak financial results. The report confirmed that the company’s growth stalled in the fourth quarter and that its margin issues were here to stay.

Tesla’s revenue growth was modest or non-existent based on its historic picture. It rose by just 3% to $25.16 billion in the fourth quarter while its gross profits tumbled by 23% to $4.4 billion. 

Most importantly, Tesla’s margins continued thinning because of its recent price cuts. Its adjusted EBITDA margin started the year at 22.2% but ended the last quarter at 15.7%. The challenge for Tesla is that it does not have room to grow its margins because of the rising competition in the industry.

On the positive side, Tesla still has a robust balance sheet, which it can leverage to find some growth and boost market share. It started the year with $22 billion in cash and short-term investments and ended with $29 billion. Its free cash flow surged to over $2 billion.

The problem for Tesla stock is that it has always done well because of its unparalleled growth, which has now faded. As such, there are concerns about the company’s valuation, which stands at 6.4x sales and 45x sales. These are huge numbers for a company that is not growing and one whose margins are thinning.

Watch here: https://www.youtube.com/embed/gvCYypoMAHM?feature=oembed

Implication for Lucid, Fisker, and Canoo

Tesla’s earnings will have an impact on other EV companies like Lucid Motors, Fisker, Rivian, and Mullen Automotive. They will also affect traditional automakers like Ford, General Motors, and Stellantis who are pivoting towards EVs. 

Most of these companies look up to Tesla, which has achieved remarkable success in the past few years. It is also the most well-known brands in the industry, with Model Y being the best-selling car globally.

As such, if Tesla is struggling, these companies will also continue going through these challenges. In the first place, it will be impossible for them to increase prices when Tesla is cutting them aggressively. As such, there is a likelihood that their margins will remain under pressure in the coming months.

Most importantly, Tesla woes are further confirmation that the industry is going through a major slowdown. This slowdown is happening even as governments, particularly the US, provide substantial incentives to companies in the industry.

Companies like Ford and GM can adapt well to the new normal since they maintain huge ICE plants in the US. The challenge is for the smaller companies that are running out of money. 

In a recent article, the Wall Street Journal found that companies like Faraday Future, Canoo, Phoenix Motor, Lion Electric, and Lightning eMotors were on the verge of running out of cash. For example, Canoo had just 18 days of cash at the end of its third quarter while Dragonfly Energy had 109 days.  Therefore, as I have warned before, it is hard to be optimistic about EV stocks for now. 

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