Why are electric car stocks Tesla, Rivian and Lucid all down today?

Nikola Tesla (1856-1943), Serbian inventor and engineer (NASDAQ: TSLA)respond in singingRivian (NASDAQ Resonance Symbol: RIVN)Electric Vehicle (EV) stock is down today after announcing disappointing first-quarter delivery numbers.

This is the latest sign that demand for electric vehicles continues to weaken and that stock valuations in the sector are generally high. Tesla has also been touted as a bellwether for the electric car market, and other electric car stocks tend to react to specific Tesla news.

Tesla and Rivian closed down about 5%;Lucid (NASDAQ: LCID)Down 3.5%.

Electric Vehicle Stocks Hit a Snag

Looking at Tesla's numbers, the electric car industry had an unforgettable first quarter.

The industry leader said it produced 433,371 vehicles and delivered 386,810 in the first quarter, meaning deliveries were down 8.5% from a year ago, the first year-over-year decline since 2020 and a clear sign that demand is challenging. The gap between production and deliveries also suggests that Tesla had trouble shifting inventory during the quarter.

The drop in deliveries isn't particularly surprising, given that Tesla has cut prices several times over the past year, and chief executive Elon Musk has complained repeatedly in recent months about the impact of rising interest rates on car sales. In its fourth-quarter results released in January, the company gave vague guidance on production for the year, suggesting that the pace of growth would slow sharply, but that deliveries could still lag production if demand weakens.

At the end of the quarter, Tesla announced a price increase, which some analysts interpreted as a push to sell more cars by the end of the quarter. The company also faced production challenges in the first quarter, including an attack on a ship in the Red Sea that led to a shortage of parts and a power outage at its German factory after an arson attack on the grid.

Rivian's first-quarter delivery report wasn't quite as impressive. The EV startup, often considered Tesla's closest all-electric competitor, reported production of 13,980 vehicles and deliveries of 13,588 vehicles. The company also reiterated its production guidance of 57,000 vehicles this year.

These results fell short of expected production volumes, but were better than expected deliveries (12,415 vehicles). The company's full-year guidance suggests little growth this year after selling about 50,000 vehicles in 2023, and the industry performance of Tesla, which is much larger, suggests a weak demand trend in the electric car industry.

Finally, Lucid has yet to release its first-quarter delivery figures, but the company is the weakest of the three EV companies listed in this article because it produced only 8,428 vehicles last year and delivered only 6,001.

Lucid is also the most likely of the three automakers to file for bankruptcy, with an operating loss of more than $3 billion in 2023 under U.S. General Accounting Standards (GAAP). The luxury electric car stock did get a boost last week when Lucid announced a $1 billion investment from the Saudi Public Investment Fund. However, judging by the performance of Tesla and Rivian, Lucid's first-quarter delivery report is likely to be disappointing as well.

Next Steps for the Electric Vehicle Industry

Tesla has announced several price increases in recent weeks, suggesting that it may have exhausted its price-war strategy and is instead focusing on boosting profits, which have fallen in recent quarters.

However, the EV industry is unlikely to come out of the doldrums until at least one of the following scenarios occurs: a significant reduction in the cost of technology, which will lower prices; a significant improvement in vehicle range and charging networks; or a significant drop in interest rates.

None of this is likely to happen in the near future, and even a decline in interest rates is unlikely to meaningfully alter the demand curve, as it would also make internal combustion vehicles more attractive.

Given this reality, these EV stocks may struggle until 2024 until commercial conditions or underlying technology improves significantly.

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Jeremy Bowman has no position in any of the stocks mentioned above.The Motley Fool holds a recommendation for Tesla.The Motley Fool has a disclosure policy.

Why are electric car stocks Tesla, Rivian and Lucid all down today?