Despite solid demand and regulatory support, shares of the EV (Electric Vehicle) makers are on a free fall. For instance, shares of Tesla (NASDAQ: TSLA), Nio (NYSE: NIO), and Lucid Group (NASDAQ: LCID) are down about 39%, 50%, and 57%, respectively, year-to-date.
Production challenges stemming from supply shortages as well as higher raw material and battery costs are taking a toll on the EV makers and their stock prices.
It’s worth mentioning that Tesla, which was managing the supply chain volatility and raw material cost headwinds well, has warned that its Q2 performance could take a hit due to supply issues.
Bloomberg, citing Tesla’s internal email, reported that Elon Musk has signaled that supply and production headwinds at its China facility negatively impacted its Q2 performance.
Following the update, Tesla stock closed 7.1% lower on Monday. Meanwhile, shares of Nio and Lucid dropped 11.9% and 9.5%.
Now What?
While supply and production challenges could continue to hurt the operations of EV makers, higher average selling prices and cost optimization could help counter the higher raw material costs.
During the last reported quarter, Lucid’s CEO, Peter Rawlinson, stated that the company is increasing the prices of its vehicles to combat increased costs. Meanwhile, the company reiterated its production forecast (12,000-14,000 vehicles) for 2022. However, it warned that extended supply disruptions and a COVID-led factory shutdown in China could impact its production guidance.
Meanwhile, Tesla’s increased deliveries and selling prices have led to higher automotive margins. However, production issues can hurt its operations.
As for Nio, its focus on cost optimization and the launch of a new hybrid battery is supporting its margins. Further, the company could raise prices to confront higher costs.
Bottom Line
Production and supply issues could hurt these EV makers’ near-term prospects and make it challenging to meet the high demand. However, the long-term fundamentals remain intact, underpinned by secular industry trends, a strong demand trajectory, and innovation.
While EV stocks have lost significant value amid the pandemic, TipRanks’ Stock Comparison tool indicates that the Street prefers Nio to outperform peers. Further, NIO stock scores higher on TipRanks’ quantitative Smart Score tool.
Nio’s new battery, expected price increase, new model launches, and easing regulatory pressure bode well for future growth.
Nio stock has 14 unanimous Buy recommendations for a Strong Buy consensus rating. Moreover, its average price target of $39.26 implies 145.5% upside potential. Also, NIO stock has a maximum Smart Score of 10 out of 10.
Meanwhile, analysts are cautiously optimistic about TSLA and LCID. Further, TSLA stock has an Underperform Smart Score of 3 out of 10, while LCID has a Neutral Smart Score of 6 out of 10.
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