Shares of both Tesla(NASDAQ: TSLA) and Rivian(NASDAQ: RIVN) have struggled this year. Since 2024 began, Tesla stock has fallen 8% in value. Rivian shares, meanwhile, are down by roughly 25%.
What has gone wrong? Could this be a rare buying opportunity?
2 trends you should know about
There are a few statistics EV investors must be aware of. The first is that the EV market continues to grow, even if growth rates move around quite a bit. Last year, for instance, EV sales in the U.S. jumped 60%, from 1 million in 2022 to 1.6 million in 2023. To put all this into perspective, in 2016, only 200,000 EVs were sold in the U.S. -- eight times fewer than the number sold annually today.
To be sure, gasoline vehicles continue to dominate, commanding around 75% of total U.S. vehicle sales. But so far in 2024, EV sales continue to climb. Why then, you might ask, are the share prices of EV makers like Tesla and Rivian down so much this year? The problem isn't growth -- it's expectations.
According to S&P Global, despite "clear demand for EVs in the U.S., the rate of EV growth was slower than some automakers had anticipated." This has caused many auto manufacturers to delay their EV introduction timelines by 12 to 18 months. "Slowing the development of vehicles and production capacity in 2024 and 2025 can reduce risk of having more inventory than the market wants, while being ready for presumed developing demand the last years of this decade," S&P Global observes.
These two trends are the most important factors in the EV market today. Yes, sales are growing, and will continue to do so likely for another decade or more. But short-term sales growth has lagged expectations, causing EV manufacturers to reduce investment and new model timelines. It is this reset in expectations that has weighed heavily on EV stocks this year.
Is this a buying opportunity for Rivian and Tesla stock?
Despite subdued EV demand growth this year, expect continued new product launches, including an entry-level Cadillac EV and Volvo's EX30 SUV. These product launches -- most of which were given the green light when EV demand growth was soaring -- will continue to add pricing and inventory pressure on existing manufacturers. "The increased model count will have a negative impact on volume per model in most cases, which will affect profit margin for the lower-volume vehicles," advises S&P Global. "It also increases costs, as marketing, sales and service are more expensive when those costs are spread across more models."
What will ultimately drive EV demand growth higher isn't necessarily more models, but more affordable models. "EV demand growth has slowed sharply in 2024, likely due in part to affordability," explains a recent report from Bank of America. The bank doesn't forecast enough affordable EVs hitting the market to drive growth higher until 2027.
How should you be investing in light of this bleak multi-year forecast? The biggest factor is simply to have patience. EV growth is still healthily in the double digits. The U.S. charging network, meanwhile, continues to grow by leaps and bounds. Recent research from The Motley Fool shows that Tesla's supercharger network, for example, now covers huge swaths of all 50 states. And due to technological advancements, prices continue to get closer and closer to mass adoption levels. By 2030, Bank of America expects nearly one-third of all U.S. vehicle sales to be electric.
If you're willing to wait through the pain, now might be a great time to capitalize on some rare EV stock bargains. Over the past 12 months, the price-to-sales ratios for Tesla has fallen by roughly 30%. Rivian's multiple, meanwhile, has been cut in half. Patient investors may be able to secure bargain prices until the adoption curve picks back up in 2026 and 2027.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and Tesla. The Motley Fool has a disclosure policy.
