An emerging sector of the automotive industry, the electric vehicle market has seen its stock prices increasing over recent years thanks to the consumer interest in eco-friendly products. Many believe the adoption of EV will eventually see them take over our roads, and the International Energy Agency has projected that there will be 125 million electric cars globally by the year 2030.
With the exception of the Elon Musk-helmed EV company Tesla, it certainly seems as though Wall Street’s craze for electric vehicle stocks is coming to an end. With stock valuations now ballooning to unwarranted levels, many investors believe that the high share prices of many EV start-ups are positioning themselves for a massive drop. So how come the next big thing in auto technology is looking more and more like it has reached its peak?
Unreasonable Money Raising
EV companies are investing substantial capital yet while these investments are undoubtedly trendy, many of them may not be financially viable in the long term as they are somewhat reliant on government investment. And because the interest in electric vehicles is mainly psychological and societal, EV companies will always be vulnerable to consumer shifts in opinion.
Never Releasing A Car
This is by far one of the most logical reasons as to why the EV bubble may be ready to burst. The newer players haven’t manufactured any actual products yet that they can sell. For example…
The newest member of the EV market boasts that their Ocean SUV is the most sustainable vehicle as it’s manufactured using some recycled materials. But as of today, Fisker has no vehicles available to buy. In fact, they aren’t looking to begin production until at least 2023, with less than ten thousands deposits paid.
Even though Dubai-based EV manufacturer Devel only plans on building seven cars per year, they’re reportedly not even close to producing their Sixteen supercar. The UAE auto company definitely has enough financial backing to build what’s been called the most ambitious V-16 car ever envisioned, but they may not have enough technical know-how or the right business acumen. It’s hard to put faith in the Devel Sixteen when it was initially announced almost eight years ago now.
Electric battery and hydrogen fuel cell powered truck manufacturer Nikola plans to have a vehicle on the market sometime next year and another vehicle in 2023. The EV start-up has been valued at about $15 billion, after their stock price rose by almost 40% over the last quarter, which is a pretty sizable valuation. Especially taking into consideration the fact that Nikola hasn’t yet begun commercial production.
Smaller EV Companies Lack A Moat
Many of these new rivals to Musk’s infamous Tesla lack a competitive advantage or a defensible moat. They have no patented product, unique process, trade secret, exclusive license, partnership, or any other asset that warrants such a significant investment capital. Tesla, on the other hand, has a wide range of moats that enables the company to put their name on projects that most other auto companies would never even consider.
The Tesla bull market is not only real, but it’s also pretty spectacular. Sure, the other EV stocks may have a bull case to consider, but it seems much less substantial in comparison. Their rapid rise, especially amongst Robinhood traders, should convince most long-term investors to use caution. Certainly don’t jump in with both feet if you do decide to proceed and be prepared for some volatility.
Everyone knows what happened to bitcoin after it infamously reached an all-time high stock price near 20,000 thousand dollars a share. Most analysts agree that we will most likely see the same thing happen to the EV market in the not too distant future. It’s really only a matter of time before the EV bubble bursts, and the stock is already flashing warning signs.