On Monday, electric vehicle shares experienced a significant surge in value.
Initial trading of electric vehicle company shares commenced on a positive note this week, following news that President Trump's administration plans to ease regulatory hurdles for autonomous driving. The specifics remain unclear, along with Elon Musk's involvement, yet the market responded favorably, at least momentarily.
Lucid's (LCID 1.57%) stock climbed as much as 9.5%, while Rivian's (RIVN 1.20%) shares surged 6.6%, and EVgo's (EVGO -2.09%) stock jumped 15.8% at the opening. However, these gains were later moderated, with Lucid and Rivian concluding the day up 5.7% and 0.4%, respectively, and EVgo recording a 7.5% increase at 3:30 p.m. ET.
The Electric Vehicle Rollercoaster
Since President Trump's election, the EV stock market has seen a series of ups and downs. Initially, investors anticipated an economic boom, which would benefit EV sales. However, the narrative subsequently shifted towards trimming EV subsidies, including the $7,500 EV tax credit, which had helped to make vehicles more affordable.
Today, the narrative shifted to autonomous driving, which is becoming increasingly popular though gradually, while Tesla (TSLA 4.34%) aims to accelerate its Full Self-Driving (FSD) software.
The challenge for Tesla has been the fragmented regulatory landscape in various states. If the company were to introduce a nationwide autonomous driving service, it can't secure state-by-state approvals. Presently, speculation suggests that Trump will address this issue.
Although optimistic, the particulars remain hazy. Regulations for autonomous driving would still be essential, and it's uncertain if Tesla, Rivian, or Lucid are prepared to introduce autonomous driving on a broad scale.
Troubles in store
Whilst today proved advantageous for EV stocks, future prospects may not appear as rosy.
I previously discussed the uncertainty surrounding the $7,500 EV tax credit, but the potential withdrawal of battery and EV production subsidies, and manufacturing grants, should also be considered.
Likewise, the financial losses reported by these companies are a significant concern. As competition intensifies in the EV market and subsidies decrease, these losses are likely to mount further.
Lucid and Rivian, in particular, have yet to demonstrate the ability to generate even a gross profit from their production. I'm unsure how they could achieve profitability, even in the context of autonomous vehicles.
Fundamentals versus Speculation
The market's momentum is driven by speculation in multiple sectors, including electric vehicles. This speculation may be influenced by President Trump's comments or simply reports on the potential winners and losers under the new administration.
However, the fundamentals paint a starkly different picture. EVs are becoming increasingly competitive, and companies are incurring substantial losses as they strive to grow their businesses, potentially leading to even lower prices. Profitability remains elusive for companies such as Lucid and Rivian.
In my opinion, today might be an opportune time to reduce exposure and seek better investment opportunities in the market. It's unlikely that the next administration will be more favorable towards EVs than its predecessor, and even if it were, profits may still be scarce.
In light of the potential regulatory changes for autonomous driving, investors might consider channeling some of their money into companies working on self-driving technology, such as Tesla, Rivian, or Lucid. (money, investing, finance)
However, it's essential to approach investing in electric vehicle stocks with caution due to the significant financial losses reported by many companies in the sector and the uncertainty surrounding subsidies and profitability. (money, investing, finance)
