Will Electric Vehicle Stocks Ever Cool Off?

By: Spencer Israel

Of course the answer to that question is yes. But at the moment, the electric vehicle trade is the hottest trade on Wall Street.

To be clear, the term “electric vehicle stock” is getting thrown around rather loosely right now. It doesn’t matter what kind of vehicle a company producers—whether it be a long-haul truck, passenger sedan, or scooter—just as long as it’s electric. It doesn’t even matter if a company has just a concept with no means of mass production yet. If a company has the words “electric” and “vehicle” anywhere near its product description, its stocks are getting lumped into the crowd.

There are 20 or so names in this group, many of which either did not exist as public companies or were priced as penny stocks six months ago. This includes a number of companies that have gone public via SPAC merger or are based in China.

The Catalyst
Part of what’s made the recent rally so surprising is that some of the names in this group—including Nikola, Hyliion, Workhorse, Lordstown Motors, Fisker, and Tesla—already had big runs in the summer only to cool off in August and September.

But the group has caught the attention of traders once again, and this time a few new names have been added to the list.

What’s the catalyst this time? It could be a reaction to Tesla’s inclusion in the S&P 500, which was originally expected in August but is now set to take effect on Dec. 21. It could also be a reaction to the Presidential election results, with the market anticipating a Biden administration being good for the renewable energy industry as a whole and electric vehicles in particular.

The long-term thesis for electric vehicles has always been there, with demand expected to skyrocket in the coming years. Let’s not forget about Ford and General Motors, both of which have unveiled or announced electric versions of their best-selling trucks in recent months.

But traders don’t care about the long-term thesis, they care about short-term price action. And right now price action is saying the market cares about the story of electric vehicles over company fundamentals.

All of these stocks will cool off eventually. This is the nature of markets. It’s just a question of how high they get in the meantime.

The Group (4-week performance)
Blink Charging (BLNK) 290%
Electrameccanica (SOLO) 286%
Ayro (AYRO) 265%
***XPeng (XPEV) 259%
FuelCell (FCEL) 259%
GreenPower (GP) 186%
CIIG Merger Corp (soon to be Arrival) (CIIC) 149%
***Li Auto (LI) 137%
Switchback Energy Acquisition (SBE) (soon to be ChargePoint) 118%
***Kandi Technologies (KNDI) 110%
***Nio (NIO) 103%
Plug Power (PLUG) 78%
Lordstown Motors (RIDE) 57%
Fisker (FSR) 54%
Workhorse (WKHS) 41%
Ballard Power (BLDP) 34%
Nikola (NKLA) 30%
SPI Energy (SPI) (owner of Phoenix Motorcars) 29%
Tesla (TSLA) 24%
Hyliion (HYLN) 22%

Four-week performance as of the November 23 close

PRODUCT KEY:
Scooter/other short-distance vehicle
Passenger cars/pickup trucks
Long haul trucks
Transit Vehicles
Charging stations
Battery/equipment
*** Chinese company

The author is long the S&P 500 in his retirement accounts.

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