Stock Analysis & Ideas

Falling Lithium Prices a Blessing for EV Makers

Story Highlights

Lithium prices have moderated from the peak. The Chairman of the Chinese Lithium mining company sees a further decline in lithium prices in 2023. The decline in price is likely to ease pressure on EV makers.

Lithium prices have seen a remarkable bull run in 2022 due to the higher demand from the EV (Electric Vehicle) sector and tight supply. However, Pingwei Wang, Chairman of the Chinese Lithium mining company, Sinomine Resource Group, sees prices cooling off in 2023, Bloomberg reported. A decline in the price of lithium, which is a key battery component, should bring some respite to EV makers, who are battling higher costs and supply shortages. 

In an interview with Bloomberg, Pingwei said lithium prices have moderated after a stellar run in the past couple of years. Moreover, he expects prices to drop further as more supply hits the market. Wang believes lithium carbonate prices could decline to CN¥400,000/ton in 2023 from the current price of CN¥527,500/ton. 

The drop in lithium prices will help EV manufacturers’ margins, which have suffered as a result of rising battery prices. Along with higher battery costs, the increase in the prices of other metals like copper and aluminum remained a drag. 

Cost headwinds, increased competition, production challenges, and China’s tight COVID policy have taken a toll on the stocks in the EV space. Shares of top EV makers like Tesla (NASDAQ:TSLA), Nio (NYSE:NIO), and Rivian Automotive (NASDAQ:RIVN) have decreased by about 68%, 69%, and 83%, respectively. 

While these stocks have lost substantial value, let’s look at what Wall Street analysts recommend about them. 

Why Is Tesla Stock Dropping in 2022? 

Apart from the reasons mentioned above, Tesla CEO Elon Musk’s acquisition of Twitter and discount on its vehicles had a negative impact on the company’s stock. Given the challenges, analysts are cautiously optimistic about TSLA stock. 

It has received 19 Buys, 10 Holds, and two Sells for a Moderate Buy consensus rating. Meanwhile, these analysts’ average price target of 270.04 implies a significant 139.59% upside potential to the current levels. 

What Is the Prediction for Nio Stock?

Citing the supply-chain challenge, NIO lowered its Q4 delivery outlook. While Nio stock has lost significant value, it has received nine Buy and four Hold recommendations from Wall Street. It carries a Moderate Buy consensus rating on TipRanks. 

Also, analysts’ average price target of $16.29 implies 66.22% upside potential based on its closing price of $9.80 on December 28. 

Is RIVN a Buy or Sell?

RIVN stock has slumped on production challenges. However, most analysts continue to favor the stock. Its Moderate Buy consensus rating is based on 12 Buys, four Holds, and two Sells. 

Moreover, these analysts’ average price target of $42.13 represents 137.49% upside potential. 

Bottom Line

The expected decline in lithium prices, analysts’ buy recommendations, and solid upside potential make these EV stocks attractive. However, the ongoing production and competitive headwinds could remain a drag in the near term and limit the upside in these stocks. 

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