RIVN

Why Rivian, Lucid, and Freyr Stocks Just Dropped

Shares of electric vehicle (EV) stocks Rivian Automotive (NASDAQ: RIVN) and Lucid Group (NASDAQ: LCID) are sliding in afternoon trading Tuesday, down 1.1% and 4.2%, respectively, while electric car battery maker Freyr Battery (NYSE: FREY) underperforms them both with a 7.7% loss through 12:50 p.m. ET.

I blame the weather (mostly).

A double whammy for EV stocks

EV stocks are continuing to suffer this week from last week's announcement by Hertz that it will be liquidating 20,000 electric vehicles from its rental fleet. Hertz is essentially putting "for sale" signs on nearly 1% of all electric cars on the road in America today. And dumping that much inventory on the used car market is expected to depress prices for used EVs and new EVs alike, especially as analysts are forecasting that the liquidated inventory will be sold at "hefty discounts."

Also concerning for EV companies, and the companies that are trying to sell batteries to them, are the reasons for Hertz's fire sale: Specifically, the facts that EVs are turning out to be expensive to repair, and that demand for the gizmos is waning. From a "scorching 72%" year-over-year growth rate in 2023, Reuters reports that growth this year will flip those digits to just 27%.

On top of all that, news headlines today are being dominated by the latest winter storm warnings -- and related stories about what winter means for owners of electric vehicles. In Chicago for example, local news is reporting long lines and as much as two-hour waits at charging stations -- where it's about 2 degrees Fahrenheit outside right now. And after reaching the front of the line, NBC Chicago says EV owners can expect to need two more hours to charge up their cars.

Even then, the bad news isn't over. Driving away from the charging station, EV owners are finding their driving range is reduced by as much as 41% in cold weather -- a combination of battery-powered cars' poor efficiency in cold weather, plus (or rather minus) the added strain of using the battery to keep the car heated.

Read the fine print

Admittedly, EVs' inefficiency in winter isn't exactly "new" news. As far back as 2011, you can find news reports citing dramatic losses in range for then-popular electric cars such as General Motors' Volt or Nissan's Leaf. Nor is this particularly surprising. Gas-powered cars create heat as a waste product of combustion. In contrast, batteries have to drain their energy to give drivers both miles and warmth. It only makes sense that EVs wouldn't be as efficient as internal combustion engines in winter.

But cold days like today -- coming right on the heels of Hertz's announcement -- are an especially inconvenient time to be highlighting such stories. (Especially if you are an investor in EV stocks!) High price tags, combined with an increase in lower-priced supply, combined with yet another reason to not buy an EV in the form of the weather?

You have to expect that would have an effect on the stock price of anything EV-related today.

Finally, tack on the fact that none of these stocks are profitable, nor expected to become profitable for years, and you're looking at a perfect (winter) storm of bad news for EV stock investors.

Should you invest $1,000 in Rivian Automotive right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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