The electric vehicle (EV) industry’s growth over the past few years has been driven by strong demand, favorable government policies and funding, and rising fuel prices. Last year, automakers sold 807,180 fully electric vehicles (EVs) in the U.S., up 3.2% year-over-year, according to year-end figures released by market research firm Motor Intelligence.
However, increasing borrowing costs and recessionary fears could constrain EV demand this year. Furthermore, the strict requirements for federal incentives, mounting concerns about raw materials for batteries, and high vehicle prices add to the headwinds for the industry.
According to KPMG’s annual global auto survey, automotive executives are less bullish about EV adoption than they were a year ago. Estimates for new vehicles sold as EVs have fallen significantly, ranging from 10% to 40% compared to 20% to 70% in the previous year.
In the United States, the median projection for EV sales by 2030 is 35% of the new vehicle sales, down from 65% a year ago.
Given this backdrop, beaten-down EV stocks Lucid Group, Inc. (LCID), NIO Inc. (NIO), and Mullen Automotive, Inc. (MULN) could be best avoided this year.
Lucid Group, Inc. (LCID)
LCID designs, manufactures, and sells electric vehicles, EV powertrains, and battery systems. The company operates more than 20 retail studios in the United States.
On January 12, 2023, it was reported that LCID produced 7,180 Air sedans last year but only delivered 4,369 of them to its customers. The gap between the company’s ability to build automobiles and get them into the hands of purchasers highlights a significant difficulty in its operation.
Moreover, a year after LCID began delivering its sole product, the Lucid Air sedan, owners’ forums were swamped with complaints from users who claimed the vehicles either moved forward while in reverse or lost all power in the middle of the road. LCID’s vehicle owners have reported six instances of power loss or gear malfunction to federal car safety inspectors since mid-September 2022.
According to car safety specialists, the number of complaints submitted to forums and the government is significant for a company that has supplied around 2,500 of its expensive cars as of September.
LCID’s trailing-12-month gross profit margin of negative 213.72% compares with the 35.33% industry average. Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 46.49%, 27.38%, and 27.26% compare to the industry averages of 12.53%, 6.37%, and 4.34%, respectively.
For the fiscal 2022 third quarter that ended September 30, LCID’s total cost and expenses increased 77.6% from the year-ago value to $882.98 million. Its loss from operations widened 38.3% year-over-year to $687.52 million. The adjusted EBITDA loss stood at $552.90 million, compared to $244.96 million in the prior year’s period.
Furthermore, LCID’s net loss attributable to common stockholders came in at $670.25 million, worsening 27.8% year-over-year. As of September 30, 2022, total current assets came in at $4.16 billion, compared to $6.51 billion as of December 31, 2021.
Analysts expect LCID’s loss per share to be $1.11 for the fiscal year that ended in December 2022. Moreover, the company is expected to report a loss per share of $1.25 for the current fiscal year (ending December 2023). Also, the company missed its consensus EPS estimates in three of the trailing four quarters.
The stock has plunged 40.8% over the past six months and 61.1% over the past year to close the last trading session at $10.93.
LCID’s poor prospects are also apparent in its POWR Ratings. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an F grade for Stability, Quality, Value, and Sentiment. Within the D-rated Auto & Vehicle Manufacturers industry, it ranks #55 of 61 stocks.
Beyond what we stated above, we also have LCID’s ratings for Growth and Momentum. Get all LCID’s ratings here.
NIO Inc. (NIO)
Headquartered in Shanghai, China, NIO designs, manufactures, and distributes smart electric vehicles. It provides both smart electric sedans and electric SUVs with numerous seating configurations. Also, the company designs and manufactures e-powertrains, battery packs, and components.
On December 25, 2022, William Li, the founder and CEO of NIO, issued a warning, predicting that the first half of 2023 would be difficult for the company’s sales as a result of reductions in government subsidies and a general economic downturn that has suppressed domestic demand in China.
The nation's strict commitment to its Zero Covid policy hampered the company’s production, transportation, and delivery efforts, causing it to miss its annual delivery target of 150,000 units.
NIO’s trailing-12-month gross profit margin of 14.43% is 59.2% lower than the 35.33% industry average. Likewise, its trailing-12-month net income margin of negative 25.27% compares with the industry average of 4.81%.
For the fiscal third quarter that ended September 30, 2022, NIO’s gross profit decreased 12.9% year-over-year to $243.92 million. Its adjusted loss from operations widened 348.6% from the year-ago value to $458.10 million. The company’s adjusted net loss worsened by 514.2% year-over-year to $491.90 million.
In addition, the company’s adjusted loss per share came in at 0.36, widening 486.1% year-over-year.
For the fiscal fourth quarter that ended December 2022, Analysts expect NIO’s loss per share to widen 26% year-over-year to $0.27. Also, the company’s loss per share is projected to worsen by 22.6% from the previous year’s quarter to $0.21 for the current quarter (ending March 2023).
Moreover, the company failed to surpass the consensus EPS estimates in each of the trailing four quarters, which is disappointing. Shares of NIO have slumped 49.3% over the past six months to close the last trading session at $10.19.
NIO’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
The stock has a D grade for Stability, Quality, Growth, and Sentiment. Within the Auto & Vehicle Manufacturers industry, it is ranked #51 of 61 stocks.
Click here to see the additional ratings of NIO for Value and Momentum.
Mullen Automotive, Inc. (MULN)
MULN manufactures both commercial cars and electric vehicles. It also operates CarHub, a website that uses artificial intelligence to provide user-friendly ways to buy, sell, and own an automobile. Additionally, it offers battery technology and emergency point-of-care solutions.
On January 25, 2023, MULN convened its special meeting of stockholders. Its preliminary results showed that shareholders voted in favor of Proposal No. 2, which seeks to expand authorized common stock to 5 billion from 1.75 billion.
Issuing additional stock shares lowers shareholders' value of shareholders’ current shares, which is generally bad news for stockholders. This often also indicates that the company is struggling to stay solvent on its current revenue stream and is in constant need of new funding.
MULN’s trailing-12-month ROTC and ROTA of negative 144.39% and negative 217.80% compare to the industry averages of 6.37% and 4.34%, respectively.
For the quarter that ended December 31, 2022, MULN’s loss from operations increased 423.7% year-over-year to $73.62 million, and the company’s net loss attributable to common shareholders widened 141.5% year-over-year to $376.91 million.
Furthermore, as of December 31, 2022, MULN’s total assets stood at $440.95 million, compared to $302.59 million as of September 30, 2022, while its total liabilities came in at $420.20 million, compared to $145.64 million as of September 30, 2022.
The stock has plunged 73.5% over the past six months and 92.4% over the past year to close the last trading session at $0.28.
MULN’s POWR Ratings are consistent with its bleak fundamentals. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
The stock also has an F grade for Value and Stability and a D for Sentiment and Quality. Within the same industry, it ranks #57.
Click here to access the additional ratings for MULN (Momentum and Growth).
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LCID shares were trading at $10.93 per share on Monday afternoon, up $0.30 (+2.82%). Year-to-date, LCID has gained 60.03%, versus a 6.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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