Despite progress, the electric vehicle (EV) industry still relies upon subsidies and tax incentives to increase adoption. These monies counter the high cost of batteries that put EVs above the price of average gasoline-powered cars. Given these economic dependencies, investors might consider evaluating their portfolios for EV stocks to sell, especially those companies most vulnerable to shifts in policy support.
Combined with questionable resale value due to battery degradation and charging infrastructure, this puts the EV sector in assistance-need mode. But what happens when an additional pressure comes from weakened consumer power?
The NY Fed data on household debt for Q1 of 2024 shows that delinquencies started to rise across all debt types. Having gone up by $9 billion to $1.62 trillion debt, 8% of auto-loans turned into delinquencies on an annual basis. The general credit card delinquency rate topped 9%, the highest in 13 years.
The decline of 625,000 full-time jobs in May, while job reports undergo constant downward revisions, also point in the contraction direction. With this macro sentiment in mind, which EV stocks should you sell to be on the safe side?
Lucid Group (LCID)
Nestled in the Bay Area, known as the startup hub for many tech companies, Lucid Group (NASDAQ:LCID) caters to high-end consumers. The company’s entry level Lucid Air luxury sedan is priced at around $71k, even more expensive than BMW i5 at $68k.
Typically, the focus on a wealthier market segment would provide a shield against recessionary trends. But not only is the market for luxury goods smaller by nature, it is also questionable if Lucid has the branding loyalty comparable to legacy automakers.
In Q1 of 2024, Lucid Group’s EV delivery increased by 40% year-over-year (YOY), but that amounted to only 1,967 cars. And it delivered a net loss of $680.8 million. While an improvement over $779.5 million net loss in the year-ago quarter, it signals a very long runway of losses ahead at a time when multiple Chinese automakers are pushing in.
Due to recent $1 billion financing, Lucid Group left the quarter with $2.16 billion in cash reserves. The company’s total revenue of $172 million missed the projected mark of $182 million. All of this points to major scaling issues that aren’t going anywhere soon.
Year-to-date (YTD), the penny LCID stock is down 36%, near its 52-week low of $2.29 at $2.54 per share.
Mullen Automotive (MULN)
Californian-based Mullen Automotive (NASDAQ:MULN) is focused on the utility aspect of transportation with its Mullen One delivery van that has a range of 110 miles. In addition to Mullen Three truck, the company offers Mullen Campus at MSRP of $24k.
The problem with EV utility vehicles, at this point in time, is it’s difficult to justify them. Not only is their range significantly lower, which is critical in the transportation business, but the average diesel fuel price dropped in May.
Last week, this demand slack prompted OPEC+ alliance to extend output cuts of 3.66 million barrels per day (bpd) into 2025. Yet, even despite the news, Brent crude (BRENT) barely budged upward at 0.79% monthly gain. This puts into doubt Mullen’s demand prospects.
In the meantime, the company is yet to achieve a profitable quarter. In fiscal Q2 ending March 2024, Mullen racked up a $193.9 million net loss. For the six-month period, the company delivered 362 vehicles worth $16.3 million. With the figures speaking for themselves, MULN stock is down 78% YTD.
At the present price of $2.67, MULN shares are far removed from their average price for the last 52 weeks of $38.47 per share.
Faraday Future Intelligent Electric (FFIE)
Also in California, Faraday Future Intelligent Electric (NASDAQ:FFIE) is trying to take a bite out of the crowded luxury EV market. Last August, the company released Faraday Future FF 91 as its first production model after five years of delays. At the time, the price was at $309,000 with the cheaper FF 91 2.0 Futurist available at $249,000.
The extraordinary price tag puts Faraday’s offering into the supercars category, owing to its impressive performance and luxury features. At the end of May, Faraday released its Q4 of 2023 earnings, having churned $784,000 revenue from sales. They yielded a total comprehensive loss of $429.38 million.
The glaring difficulties to lift off caused FFIE shares to drop by 99% over one year. However, the stock has acquired memetic properties lately, having gained nearly 300% in the last three months, narrowly avoiding delisting from Nasdaq.
Although Faraday managed to cut the operating loss from $437.1 million in Q4 of 2022 to $286 million in Q4 of 2023, the company’s viability is still very much in doubt. With $530.5 million in assets against $302.3 million in liabilities, and a current stock price deeply diminished from its peak, FFIE emerges distinctly as one of the top EV stocks to sell.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.