The stock market has fallen out of love with electric cars

Renault’s decision to cancel the stock market listing of its Ampere division is the latest in a series of postponements, cancellations or – for those that did float – mistimed listings for EV-angled businesses. Lotus missed its deadline last year to list its electric arm in the US via the SPAC method and now says it will try for the first quarter of this year. Meanwhile, the planned US listing of fellow Geely brand Zeekr has been similarly postponed amid disagreements about its valuation and the turmoil in global financial markets, sources told Reuters in November. And in Germany, the Volkswagen Group has gone cool on plans to list its PowerCo battery business, Bloomberg reported this week, quoting unnamed sources. Renault cited “current equity market conditions” for cancelling its plan to list Ampere, although CEO Luca de Meo also referenced the current black cloud over EV in general. “The context isn't the ideal. On the EV market today, the conversation is going in the wrong direction,” he told journalists and investors on Tuesday. Analysts welcomed Renault’s decision, citing the poor stock market performance of other EV companies. “Current pure EV valuations made an IPO unattractive,” Philippe Houchois, an analyst at the bank Jefferies, said in a note, adding that we’re currently “at a low point in negative EV sentiment”. It's certainly pretty grim out there for those EV angled companies that have listed. Even Tesla, the world’s most valuable car company as calculated by share price, is well down from its $1 trillion peak to $619 billion now. Others are faring much worse after riding the initial wave of enthusiasm for EV start-ups fed by low-interest investment cash and excitement whipped up by smaller shareholders hoping for a similar wild ride to stock riches as that experienced by early Tesla investors. Polestar, for example, now has a market capitalisation of $4.9bn, down from $21bn after floating in 2022. Its fall has been so fast that the bank Bernstein recommended in January that majority owners Volvo and Geely should take it private again, describing it it as “on a road to nowhere” in terms of its journey as a standalone stock. Swedish bank SEB said recently it judged the shares to be now worthless. Polestar delivered 54,600 cars last year, up 6% on 2022 but below its predictions, and it said last week that it would cut around 450 jobs globally as it faced “challenging market conditions”. It's one of a slew of standalone EV makers inspired by Tesla’s success that listed, initially soared in valuation and sunk. Below Polestar, Fisker is now worth just $340 million, based on the value of its shares, down from $8bn. Nio hit the dizzying heights of almost $100bn back in 2021 but is now down at $13bn. Xpeng is at $8.4bn, down from $46bn. Vinfast in one crazy moment last year was worth $160bn but is now down at $14bn. Companies go to the stock market to hunt for new investors willing to bet their stake will be worth more in the future, but it’s also a way for early investors to cash in and claim their reward for that initial bet on an unknown. Floating also gives a chance for company employees paid partly in stock to cash in, again as a reward for presumably long hours and an uncertain future in the early years. For example, Zeekr said in a US filing that it had awarded management, employees and other Geely Group staff 150 million shares that can be cashed only when shares are listed. Investors right now, however, are much less tolerant of companies still losing money without any clear path to profits. Zeekr, Lotus, Polestar, Nio, Rivian, Lucid, Xpeng, Vinfast, Fisker and others are still spending more than they make as they scrabble to become profitable – a feat that took Tesla 18 years. EV sales are still growing, but there’s less visibility around when they will be consistently profitable for those going all-in. As high interests rates push up costs for both consumers and those car companies need to borrowing to invest, the tlimeline is growing. Even businesses like Ampere that are fully funded by a wider company don’t provide compelling cases, despite Renault’s claims that it will reduce costs for its next-generation EVs by 40%. Analysts looked on Renault’s prediction that Ampere will reach breakeven in 2025 and return 10% margin in 2030 with some scepticism. “Given the current market conditions and the intensifying competition, achieving the targets might take longer,” David Lesne, an analyst at the bank UBS, said in a note. The stock market’s about turn on EVs won’t change the rate of adoption, given the regulations in place, de Meo pointed out with a hint of frustration on Tuesday. “It’s pretty childish,” he said. “Three years ago, everybody was telling us that if we don't go 100% EV, we will be a bunch of zombies in 10 years. Now everybody is telling that we shouldn't do EV because of the profitability or whatever.” Companies like Renault have to keep “cool heads all the time”, he added. “The electric car is a train that's already left the station.”