Critics of electric vehicles are rubbing their hands: ah ha! We told you so. Technology costs too much. Consumers don’t want it. Manufacturers are losing millions. Despite the pitfalls, the electric market is at a historic peak and is even flirting with the point of no return. Government decarbonization targets only require a little steering wheel… Fourth and final text in a series on the occasion of the Montreal Electric Vehicle Show: after the pandemic glory days, the stock market rout.
It seems a long time ago when the shares of electric vehicle manufacturers skyrocketed on the stock market. After their dazzling success during the pandemic, the euphoria has now dissipated.
“We are witnessing a recalibration of expectations because the shift will take longer than expected,” observes Cimon Plante, portfolio manager and wealth management advisor for National Bank Financial.
Same observation for Reena Atanasiadis, dean of the Williams School of Management at Bishop’s University. “As demand is less than expected, investors are not prepared to pay as much, and this lowers the share price. It’s very rational,” she says.
This week, Tesla’s stock finished below $150, erasing all the gains made over the past year. Indeed, the Texan electric vehicle manufacturer’s sales fell sharply in the last quarter, because demand is slowing and competition is intensifying on a global scale. For these reasons, Tesla has laid off 10% of its workforce, or around 14,000 employees.
During the first year of the pandemic, that is to say between the stock market low of March 2020 and February 2021, the “S&P Kensho Electric Vehicles” index – which tracks the price of companies in this sector – increased sixfold. Since then, its level has fallen to its pre-pandemic level.
“During the pandemic, the enthusiasm was perhaps exaggerated. But today, we are a bit in the opposite situation: there is just as much pessimism about the potential of electric vehicles,” believes Mr. Plante.
New manufacturers suffer more
The companies that are suffering the most from this downward trend are emerging companies.
This is the case of the American company Rivian Automotive, which specializes in the manufacturing of electric trucks and sport utility vehicles (SUVs). At the end of 2021, at the time of its IPO, the company had risen above General Motors to the rank of second American automobile manufacturer in terms of market capitalization.
Rivian’s value then stood at around $90 billion US, or roughly $125 billion Canadian. However, its number of vehicles delivered was only around 150 at the time. The General Motors company sells more than 6 million vehicles annually. Since that time, Rivian’s stock has fallen nearly 93%. Its market capitalization has fallen to less than 9 billion.
“Investors were willing to buy companies worth billions, sometimes without them making any sales and without ever having demonstrated the ability to be able to produce on a large scale, market and distribute,” underlines Mr. Plante. For the portfolio manager, “these investors were not prudent in their evaluation”.
In Quebec, the company Lion Électrique, which manufactures electric buses and trucks, as well as the manufacturer of snowmobiles and electric watercraft Taiga, also suffered a decline. Since their debut on the Toronto Stock Exchange in spring 2021, their share price has fallen 95% and 99%, respectively.
Faced with difficulties, the Saint-Jérôme electric bus manufacturer had to let go of 120 employees this week as part of a restructuring, but this should not impact production, it is said. Taiga, for its part, announced at the beginning of April a temporary interruption of its production and cut 70 jobs.