Huge drop in value of Tesla's competitors – E24

Tesla's smaller electric vehicle rivals are being hit hard by the slowdown in the industry. Now investors are fleeing, according to Bloomberg.

With interest rates low during the pandemic and the success of Elon Musk's Tesla, many electric car companies have launched with high expectations and significant support from investors in recent years.

But now, investor interest in this growth industry has seriously turned, According to Bloomberg.

Two players launched as Tesla rivals in 2021, Rivian Automotive and Lucid Group, this week reported falling demand for vehicles – worsening the situation, the news agency wrote.

Steep waterfalls

Amazon-dominated Rivian Automotive, which among other things produces electric SUVs, reports that production in 2024 will be flat from last year. The Saudi Arabia-dominated Lucid Group confirms that only a slight increase in production is expected.

Bloomberg wrote that analysts expected both to report better prospects.

Chief strategist David Mazza at Roundhill Investments asserts the opposite Bloomberg And that developing companies that are not growing are “in trouble.”

– Having a major investor like Amazon or Saudi Arabia gives them a better time from a capital perspective, but their growth will be slower and profit margins lower than previously expected, he comments on the outlook.

Last fall, Tesla also announced slowing demand for electric vehicles. Bloomberg notes that this has severely hurt the giant's smaller competitors. Rivian's share has since fallen 44% on the New York Stock Exchange, while Lucid's share has fallen 33% in the same period.

Roundhill Investments' Mazza believes the decline could have been much worse if the two startups had not been backed by online shopping giant Amazon and Saudi Arabia respectively.

– If only these were stocks EveEveElectric car. – The noise, if the decline were much more than that, commented to Bloomberg.

– An expensive strategy

Rivian's market value now stands at about ten billion dollars, while at its peak it was $153 billion. For Lucid, the market cap fell from $91 billion to about $7 billion.

He points out that while Tesla has the opportunity to lower prices to meet low demand, smaller competitors do not have that opportunity Bloomberg.

High interest rates are negative, especially for growing companies, as profits lie in the future. Increased financing costs can reduce corporate profitability, which in turn affects the stock market.

Trying to be “the next Tesla” has become an expensive strategy, Adam Jonas, a Morgan Stanley analyst, wrote in a note this week, according to the news and analysis agency.