Investors have lost patience with EV companies.
Electric vehicle (EV) stocks cratered this week after Fisker filed for bankruptcy. The troubled automaker never got off the ground after a promising vehicle was plagued by poor software. While a failure doesn’t say much about the other operators in the industry, it doesn’t bode well for the market’s willingness to fund EV losses long-term.
According to data provided by S&P Global Market Intelligence, EV makers Faraday Future Intelligent Electric (FFIE -2.58%) fell as much as 26.9% and VinFast (VFS -9.51%) dropped 9.9%. The two manufacturers are down 23.1% and 8.5% respectively for the week as of 2:45 p.m. ET. Charging companies Blink Charging (BLNK 1.12%) and ChargePoint (CHPT -5.33%) fell 14.1% and 20.1% respectively at their lows and are now down 12.8% and 19.5% on the week.
The collapse of Fisker and the fallout
Fisker had a lot of problems investors couldn’t fix. Software was an issue and manufacturing never hit production goals. But the other problem was demand.
Electric vehicle demand growth has slowed as more supply came onto the market. For companies that haven’t already built mature supply chains and generated significant sales and profits, the lack of demand meant growing losses.
FSRN Revenue (TTM) data by YCharts
With more options, buyers didn’t have much sympathy for start-up EV companies because they could find other options that had high quality and were readily available. Fisker was the first domino to fall, but it won’t be the last.
Faraday and VinFast look a lot like Fisker’s operations and may not have much of a lifeline left.
FFIE Revenue (TTM) data by YCharts
The market’s new EV scrutiny
Losses weren’t a problem when stock prices were high because companies could simply sell stock to fund operations. But as stock prices fall that becomes more difficult.
Debt markets close first and then equity markets don’t want to fund operations, which starts a downward spiral that’s almost impossible to stop.
I think most EV makers will reach the same fate if they aren’t acquired first.
The impact on charging stocks
Charging stocks weren’t spared from the sell-off and for good reason. Demand problems for EV manufacturers mean less demand for chargers. And if there are fewer EV manufacturers they can negotiate better terms for their users and commoditize charging networks.
ChargePoint and Blink Charging also don’t have much better financials than the EV manufacturers themselves, which you can see below.
CHPT Revenue (TTM) data by YCharts
The EV market is crumbling
The problem isn’t whether or not people are using electric vehicles, it’s whether or not the companies making EVs and chargers can make money selling products. So far, only one U.S. EV company has become profitable and even that may not be sustainable.
Companies that have been losing money year after year don’t look like they’ll be able to turn operations around and the market isn’t willing to fund operations indefinitely. That doesn’t bode well for EV stocks long-term and I think this is just one of a number of bad weeks to come for the industry.
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.