Shares of EV and hydrogen vehicle stocks jumped this week as investors took a risk-on approach to the market and a government official gave some potentially positive news to the industry. But the bounce may not last if there aren't fundamental improvements in the financial performance of these stocks.
According to data provided by S&P Global Market Intelligence, Nikola(NASDAQ: NKLA) was up as much as 63.6% this week, Solid Power(NASDAQ: SLDP) popped 34.6%, and BlinkCharging(NASDAQ: BLNK) was up 31.4% at its peak. Shares maintained most of those gains in the short week of trading and closed up 57.6%, 30.1%, and 25.9% respectively.
Yellen's impact on EV stocks
On Wednesday, Janet Yellen warned that China could dump renewable energy products like solar panels and electric vehicles on the U.S., reducing prices and potentially taking market share from U.S. manufacturers. While nothing was announced, her stance could mean that protections could be put in place to increase tariffs on those imports, helping U.S. manufacturers.
The EV market, in particular, is becoming extremely competitive. Chinese companies like BYD and Xiaomi are introducing compelling low-cost vehicles that would likely do very well in the U.S.
Tariffs have been put in place against Chinese solar manufacturers in the past, but companies will often get around those rules by manufacturing in other parts of Asia or in Mexico, where costs are lower than in the U.S. So, as positive as protections seem in the moment and this week's reaction may have been positive, but the bounce may not last.
Paris pushed hydrogen
Hydrogen got a needed PR boost when Air Liquide announced an upgrade to its hydrogen station that can fill 500 cars per day. While hydrogen hasn't been popular among drivers, it could get some attention at the Olympics this summer and Nikola is looking for any PR it can get at this point.
There's been a push for more hydrogen vehicles and infrastructure for a decade, but it hasn't materialized, so be wary of buying into this week's bounce.
Will the bounce last?
Each of these stocks is trading significantly lower than their highs, and like other renewable energy stocks, investors are wondering if we've hit a bottom. That's why news of a protectionist stance by the U.S. was seen as good news this week.
The irony of Blink Charging is that more Chinese EV imports may increase adoption and the need for chargers. So no matter what happens, it's well-positioned for revenue growth.
Ultimately, I think the EV, hydrogen, and charging businesses are too risky to invest in now. Costs are coming down and low-cost suppliers from China are aggressively entering the market. That happened in solar and wind a decade ago and few U.S. companies survived.
Tariffs and other traditional protections won't be enough to save U.S. manufacturers from overseas competition and the companies already losing money are in a difficult position. That's why I think this is more a speculative bounce off extreme lows than a sign of any kind of recover. It's possible this week's gains may be given back next week.
Should you invest $1,000 in Nikola right now?
Before you buy stock in Nikola, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nikola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of March 25, 2024
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.
