Why Tesla, Rivian, and Lucid Fell Today

EV stocks dipped today as Tesla (NASDAQ: TSLA) and Rivian (NASDAQ: RIVN) posted poor first-quarter delivery numbers. It was the latest indicator that EV demand is declining and the sector's stocks are overvalued. Tesla is an EV bellwether, and other EV stocks react to Tesla news.

The industry leader produced 433,371 vehicles in the first quarter and delivered 386,810, down 8.5% from the year before and an indication of demand issues. Manufacturing and delivery delays indicate that Tesla struggled to sell inventory in the quarter.

The fall in deliveries wasn't surprising since Tesla had lowered costs numerous times over the last year and CEO Elon Musk has complained about higher borrowing rates hurting car sales in recent months. The corporation issued unclear output guidance for the year in its January fourth-quarter results release, indicating a major slowdown in growth, although deliveries can still trail production if demand is insufficient.

Tesla raised prices at the end of the quarter, which some analysts saw as an effort to sell more cars. In the first quarter, it encountered components shortages owing to Red Sea ship attacks and power outages at its German operation due to a grid arson attempt.

Rivian's first-quarter delivery report disappointed. The EV startup, Tesla's closest pure-play opponent, produced 13,980 vehicles and delivered 13,588. It confirmed its 57,000-vehicle production forecast for this year.

These results missed production projections but exceeded delivery estimates at 12,415. The company's full-year estimate shows modest increase this year after selling 50,000 vehicles in 2023, and data from the much larger Tesla suggests dismal EV demand patterns. Lucid, the weakest of the three EV startups, built 8,428 vehicles last year and delivered 6,001. Not yet released are first-quarter delivery data.

Lucid is the most likely of these three manufacturers to go for bankruptcy, with a 2023 GAAP operating loss of almost $3 billion. The Saudi Public Investment Fund's $1 billion investment boosted luxury EV stock last week. Based on Tesla and Rivian's results, Lucid's first-quarter delivery report may disappoint.

Next steps for EVs Tesla has raised prices twice in recent weeks, suggesting it may have exhausted its pricing war approach and is instead focusing on increasing profits, which have decreased in previous quarters. However, the EV business is unlikely to recover until technology becomes cheaper, car ranges and charging networks improve, or interest rates reduce.

None of those are imminent, and even a drop in interest rates would make internal combustion vehicles more appealing, so it is unlikely to affect the demand curve. Given that, EV stocks may struggle through 2024 and until business conditions or technology improve.

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