Tesla stock tanked: Xpeng, Li Auto, MULN, VinFast brace for impact

Electric vehicle stocks are bracing for impact after the weaker-than-expected Tesla earnings on Tuesday. Chinese EV stocks like Xpeng, BYD, and Li Auto have already crashed by over 5% in Hong Kong and the trend could continue in New York. 

American EV companies like Rivian, Lucid Group, Workhorse Group, and Nikola stocks also dropped in the extended hours. Rivian shares dropped by 2.8% while Lucid, Workhorse, and Nikola fell by over 2%. 

Tesla stock chart

Tesla weak earnings

Tesla stock price staged a strong comeback in May as it jumped from the year-to-date low of $139 to $270 earlier this month. Most of these gains happened after the company announced plans to launch a cheaper car model in a bid to solidify its market share. 

The stock also jumped as the company laid plans for its robotaxi business, which Elon Musk believes will push its market cap to over $5 trillion. 

Recently, however, some of these gains have become undone as the company delayed the robotaxi business and its humanoids.The sell-off accelerated in the extended hours on Tuesday after it delivered another set of weak financial results. 

Its profit crashed by 40% in the second quarter to $1.6 billion as the company spent more money on restructuring its business. Automotive revenue dropped by 7% to $19.8 billion while its energy generation and storage revenue rose by 100% to $3 billion. Its services revenue rose by 21% to $2.6 billion. 

Most importantly, and on a positive side, Tesla’s free cash flow continued rising as it jumped to $1.3 billion during the quarter. 

These earnings confirmed that Tesla’s growth was slowing as was widely expected. The company is going through a difficult period as competition in the EV industry remains steady and as many customers opt for hybrid vehicles. In his statement, Elon Musk said:

“There have been quite a few competing electric vehicles that have entered the market and mostly, they have not done well, but they have discounted their EVs quite substantially, which has made it more a bit difficult for Tesla.”

The Tesla stock price also slumped because of its robotaxi business as the company works to refine the product. Elon Musk’s goal is to have many autonomous vehicles in top cities, a product it sees competing nicely with the likes of Uber and Lyft.

Analysts expect that Tesla’s business will stabilize in the second half of the year. Q3 revenue is expected to come in at $25.60 billion followed by $27.26 billion in the next quarter. That will bring its annual revenue to $98 billion, a 2% increase from last year.

Implication on Xpeng, Li Auto, VinFast, and Mullen Automotive

To a large extent, Tesla is like the Bitcoin of the EV industry. In the cryptocurrency industry, most altcoins rally when Bitcoin is doing well.

Similarly, to a large extent, EV companies like Xpeng, Li Auto, VinFast, and Mullen Automotive do well when Tesla is rising. 

A good example of this is what happened during the recent Tesla stock rally. Xpeng stock jumped by over 26% from its lowest point in May while Li Auto jumped by 11%.Other smaller EV companies like Faraday Future and VinFast also crawled back.

Therefore, there is a likelihood that these stocks will drop as investors react to the latest Tesla earnings. 

Looking ahead, these companies will also publish their financial results in the coming weeks. Rivian will publish its financial results on August 6th, its first numbers since Volkswagen took a stake. Analysts expect its revenue will come in at $1.12 billion while its earnings per share will be a loss of $1.40.

Lucid Group will also release its financial results on August 2nd. The company, which is backed by Saudi Arabia’s Public Investment Holdings (PIC), will release its numbers on August 5th. Analysts expect that its revenue will be $188 million, an increase from the $155 million it made last year. 

The main catalyst for Lucid Group is its upcoming Gravity vehicle, a SUV that will start selling at $80,000. It aims that its vehicle will be the biggest competitor to Rivian R1S, which starts at $77,000.

Xpeng, a leading Chinese EV company, will publish its financial results on August 20th. The average estimate is that its revenue rose to $1.13 billion from $904 million in Q1. Xpeng delivered 30,207 vehicles in the second quarter, a 30% increase from the same period in 2023.

Li Auto will release its results on August 19th and analysts expect its revenues to be $4.3 billion, an increase from last quarter’s $3.54 billion. VinFast will publish its numbers in August 15th.

These stocks will also react to their upcoming monthly delivery numbers that will come out next week.