Bad news for electric vehicles: avoid ARVL, Nio, VinFast stocks

on Oct 17, 2023
  • The electric vehicle market is going through major headwinds.
  • EV supply is rising so much as companies ramp production.
  • Companies like Nio, Arrival, and VinFast are high-risk investments.

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The situation is getting worse for companies in the electric vehicle (EV) industry as more signs of slowdown emerge. On Monday, Ford confirmed that it was slashing its Lightning output, a notable situation since it is one of the most popular EVs in the US. Ford is now doubling down on hybrid vehicles.

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EV slowdown is real

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Companies like Tesla have continued slashing their prices in a bid to boost sales and market share. And most importantly, studies shows that EV sales are slowing even as Internal Combustion Engine (ICE) rise steadily. 

Recent data shows that most EVs are spending a longer double the time at dealerships. This happened at a time when the number of charging stations has jumped in the past few years. Tesla has also opened its large network to other EV companies like General Motors and Ford.

Oversupply is a key concern that many EV investors and analysts are concerned about. For one, most companies, including traditional companies like Mercedes Benz, Stellantis, Nissan, and GM are all ramping up their production. For example, supply of ICE cars in dealerships stood at 52 days while pickup trucks rose to 57 while EVs rose to 90-100 days.

EV sales are also slowing because of their cost and resale value. The average EV stood at $53k in the US while that of an ICE car is less than $50k. Worse, because EVs are powered by batteries, they tend to have a lower resale value than ICE vehicles.

Another metric by S&P Global shows that fewer Americans are considering buying EVs than they did in 2021. The percentage dropped from 87% to 67%, pointing to more trouble in the industry.

Smaller EV companies at risk

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The implication of all this is that many EV companies will struggle to survive in this new normal. In China, the number of EV companies has retreated from over 500 a few years ago to less than 100 today.

This explains why many EV stock prices have crashed this year. Mullen Automotive’s (NASDAQ: MULN) stock price has plunged by over 90% this year and now sits at the lowest level on record. Other EV stocks like Faraday Future, Lucid Motors, and Nikola have also slipped. Lordstown Motors filed for bankruptcy recently.

In my previous article, I warned investors against companies like Faraday Future, Mullen Automotive, and Workhorse Group. I believe that Arrival (ARVL), Nio, and VinFast are extremely risky companies.

Arrival, a British EV company, hired advisors for a potential insolvency. Its stock has crashed by 96% in the past 12 months and it stands at $1.09. VinFast (VFS), the 4th biggest EV company in the world by market cap after Tesla, Li Auto, and Rivian, is another one to avoid.

VinFast is simply very overvalued and risky even as its growth momentum continues. It will likely need to raise additional cash to fund its American expansion.

Chinese EV companies like Nio are also highly risky because of the saturation in the market. They have also found some challenges as they seek to expand in Europe and other markets. China’s economy is also not doing well. Therefore, I suspect that stocks like Nio and XPeng will remain under pressure in the next few years.

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