2022 turned out to be a terrible year for EV (electric vehicle) stocks. Yesterday, several EV stocks including Rivian, Lucid Motors, Lordstown Motors, and Arrival hit their lowest price level.

Life has come a full circle for EV stocks. In 2020, the sector saw a massive rerating. Tesla stock soared 743% in the year while NIO rose above 1,100%. There was a flurry of new listings in the EV industry that year, mostly through SPAC reverse mergers.

In 2021, markets started getting apprehensive about the valuations of some EV stocks. It was a mixed year overall though. While Tesla stock gained 50% and its market cap surpassed $1 trillion, most other EV stocks closed with losses.

However, there were multiple EV listings last year including from Lucid Motors which became the biggest SPAC merger, and Rivian which was the biggest IPO since 2014. Despite concerns over high IPO valuations, Rivian went on to command a market cap in excess of $150 billion. Lucid Motors’ market cap also hit almost $100 billion.

Both these stocks cracked though thereafter and the sell-off has only deepened in 2022. On Friday, Rivian stock hit its all-time low of $18.52 before eventually closing at $19.15. Its market cap is now a mere $17.6 billion.

To put that in perspective, it had $13.8 billion as cash and cash equivalents on its balance sheet at the end of September.

Rivian & Lucid Motors Stock Fall to All-Time Lows

Lucid Motors, which many analysts saw as the potential “Tesla killer” now has a market cap of just over $11 billion. The company recently completed a $1.5 billion stock offering after having previously said that it only has the cash to fund the business until the end of 2023.

Rivian meanwhile is better placed at least in terms of cash and believes that the humongous cash on its balance sheet would fund its capex and cash burn until 2025. However, in an apparent bid to lower its cash outflow, earlier this month Rivian halted its partnership with Mercedes-Benz to jointly produce electric vans in Europe.

Currently, RIVN produces cars at its Illinois plant and is setting up a second plant in Georgia. It currently sells the R1T pickup and R1S SUV.

Pickups and SUVs are the most lucrative models for carmakers and Ford apparently gets most of its profits from its best-selling F-150 pickup.

Truist recommends buying Rivian stock. Among others, it is bullish on the company’s exposure to the most profitable segments of the US automotive market.

EV Stocks Tumble Amid Slowdown Concerns

While Rivian and Lucid Motors are tanked, the crash in smaller EV plays is even more severe. Arrival for instance fell to a mere 16 cents yesterday and its market cap is now just above $100 million. At the end of September, it had $330 million worth of cash on its balance sheet which it says would fund the business until Q3 2023.

EV stocks falling below the cash on their balance sheet is a grim reminder of how pessimistic markets are on the sector. Earlier this year, Rivian’s market cap also fell below its cash balance. It however soon rebounded. That said, the company’s cash has continued to dwindle amid the continued cash burn.

Why are EV Stocks Falling?

Analysts list multiple reasons for the fall in EV stocks like Rivian. Firstly, the valuations of these companies surged to bubble-like levels last year. The Fed’s relentless rate hikes have changed the scenario for growth stocks and markets are now no longer interested in loss-making stories.

Almost all the EV companies have long been saying that they are supply-constrained and can only sell as many cars as they can produce. However, of late, markets are getting apprehensive about the demand for electric cars. Both Tesla and Lucid Motors are offering discounts in an apparent bid to spur demand.

During the Q3 2022 earnings call, Lucid Motors said that it has 34,000 orders for Lucid Air which was 3,000 less than what it had in the previous quarter. Rivian however reported an increase in the order book.

Rivian and Other EV Plays Need to Execute Well

Also, almost all the startup EV companies struggled with production in 2022 and Rivian expects to produce only 25,000 cars this year which is half of its original guidance. Even Tesla expects delivery growth to be below 50% this year.

Tesla’s market cap is now below $400 billion. At its peak, the Elon Musk-run company commanded a market cap of $1.2 trillion. Amazon and Meta Platforms have also lost their status as trillion-dollar companies. Analysts meanwhile find Amazon stock as a good long-term buy. We have a guide on how to buy Amazon stock.

Startup EV companies have been perennially burning cash and are struggling with execution. The sell-off in Tesla stock, to which markets benchmarked other EV plays, has also crashed, adding to the pressure on startup EV companies’ valuations.

Analysts are Apprehensive on Tesla Stock in Near-Term

Even die-hard Tesla stock bulls are now apprehensive about the stock’s near-term outlook. Many though see the Inflation Reduction Act of 2022 as a ray of hope.

Beginning next year, Tesla cars would be eligible for the federal EV tax credit as the law does away with the upper limit. After the passage of the Inflation Reduction Act, Wolfe Research upgraded Tesla stock to a buy and raised its earnings estimates

As for EV startups like Rivian, they don’t have the privilege of positive free cash flows as Tesla does. In order to bridge the cash burn, many EV plays are turning to capital markets. Thanks to the crash in markets, raising funds is becoming increasingly difficult for EV companies.

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