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The EV market is a nuanced space. Like all business enterprises, in order to experience fiscal success EV manufacturers must harness investor confidence, consumer satisfaction, reputation within the industry, and social responsibility. Those variables can translate into a dynamic where accessing favorable government policies and prudent application of corporate standards lead to stock growth and sales dynamism.
While the EV market is still at a relatively early stage of development, it is poised to reshape industries and communities the world over. Indeed, few areas in the world of clean energy are as lively as the EV market. Yet as sales keep rising, much more needs to be done to support charging infrastructure and heavy duty vehicles, for example, to gain consumer confidence.
Like any transformative new technology, EV manufacturers in their earliest stages face a variety of potent economic development challenges.
Long Term Consequences of the 2022 EV Stock Plunge?
US stock markets have corrected significantly this year. As the Fool related, within the month the S&P 500 was down 17%, while the Nasdaq Composite had fallen more than 28%. Since growth stocks typically trade at high multiples, they tend to fall harder during market corrections.
This has certainly been true in 2022. Supply chain issues, rising costs, increasing competition, and the threat of a potential recession are all causing EV stocks to be volatile right now.
While Tesla stock has fallen 49%, Lucid, Rivian, and Nio have fallen more than 60% year to date. Each of those stocks fell precipitously from its all-time high price. Tesla stock dropped more than 55% from its peak, and the others are down more than 80% from theirs.
Yes, EV stocks have stalled here at the end of 2022 — and Barron’s forecasts ominously that “many won’t get started again.” Is the doom-and-gloom likely to hold and dim the bright new possibilities of 2023?
Tesla’s recent public airing of its laundry due to CEO Elon Musk’s incautious protestations and proclamations on Twitter sometimes make us forget that Tesla’s rise to all-electric prominence and a $1 trillion valuation last year caught established automakers such as Toyota and Volkswagen breathless. No longer are the holdout automakers publicly reluctant to go electric. As CleanTechnica‘s own Fritz Hasler notes, it doesn’t take a rocket scientist to observe that EVs are a much superior technology to internal combustion vehicles.
Yahoo Finance concedes that choosing EV stocks right now is challenging. Rising interest rates have hampered most growth stocks, including those in the EV space, by Wall Street. Yet investors looking for EV stocks to buy certainly have reasons to consider these growth companies. EV usage is expected to take off — absolutely. In the US, subsidies to support EV adoption have certainly helped. The Biden-Harris administration’s Inflation Reduction Act (IRA) includes a tax credit of $7,500 on new electric vehicles and $4,000 for used ones, which is likely to further bolster what’s expected to be the core market for most auto manufacturers in just a few years.
The Road Ahead for EVs
The EV market is growing and is starting to go mainstream. We also now know that electric vehicle sales jumped 70% in the first 9 months of 2022, as compared to 2021, while sales of conventional cars and trucks fell about 15%, according to the New York Times. Throughout 2022, established automakers such as Mercedes, Ford, and General Motors unveiled dozens of new EV models.
The automobile industry is directing more than $1 trillion into what Reuters calls “a revolutionary shift from combustion engines to electric vehicles guided by software.” In 2023, new options for electric vehicles sedans, SUVs, and pickup trucks will vie for consumer attention.
According to Beyond Market Insights, the size of the global EV market was worth around $178.5 billion in 2021 and is predicted to grow to around $1108.8 billion by 2030 with a compound annual growth rate of roughly 22.5% between 2022 and 2030.
A December Nasdaq forecast offers some hints about how 2023 might shape up for the EV market.
- The electric vehicle story is only expected to accelerate.
- Governments all over the world want millions of EVs on the roads in the future.
- President Joe Biden has stated explicitly that he wants 50% of all new vehicle sales to be electric.
- Automakers have long waiting lists. Growth in 2022 could have been stronger if automakers had been able to manufacture more electric cars.
- Production, which has been limited by shortages of computer chips, batteries, and other parts, could be alleviated in 2023.
Analysts are convinced that, with the right mélange of pricing and production, EVs could account for ~90% share of the market by 2027.
But that’s the prediction. As probable as these numbers seem to some industry insiders, there is a hard reality that needs to take place in the interim years: a mass market of consumers needs to buy into the EV phenomenon.
What is needed to support automakers as they transition to all-electric catalogs and renew their consumer relationships?
- Access to plentiful public fast-charging infrastructure will accelerate consumer confidence.
- Bringing the cost of batteries down will positively influence the cost of purchase.
- Offering a wide variety of models — some of which are quite affordable — will solidify the entire line.
- Governments must leverage private investment in sustainable mining of key battery metals and ensure clear and rapid permitting procedures to avoid potential supply bottlenecks.
- Continued government support, either through regulations requiring the building out of charging stations or through fiscal policies and support, should ensure equitable access to charging for all communities to ensure that nobody is left behind in the transition.
- Continue innovations like Vehicle to Grid (V2G), which is a reverse charge system. During peak hours of electricity demand, commuter vehicles that are sitting idle and can feed power back into the grid.
Final Thoughts about the EV Market & Its Growing Pains
The Small Business Administration (SBA) defines a “small” business as one with 500 employees or less. As of March, 2021, only 80% of startups survived after one year. Business owners attribute reasons for failure as lack of investment capital, inaccurate market situating, a lack of upfront research, bad partnerships, ineffective marketing, and lack of expertise in the industry. It is certain that those restraints will force several EV startups into bankruptcy.
However, Europe’s largest bank has agreed to stop funding new oil and gas fields. The press is on to move away from fossil fuel power and to electrifying everything. While the global economy is in a period of uncertainty and costs are being scrutinized closely as inflation pinches consumers and influences purchase decisions, automakers are rethinking their core objectives. The work has begun on the transformation of the industry to EVs, which is clearly the future of the automotive industry.
A bit of a falter step here at the end of 2022 should not be a warning about the demise of the EV market.
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