Yahoo Finance The other reason EV stock prices matter: Chart of the Week
This is the Chart of the Week from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
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Car companies often seem like brands that last forever, with names like Ford, Chevrolet, and Mercedes woven into the history books. Even Buick and Lincoln are still around, perhaps thanks in part to Tiger Woods, Matthew McConaughey — and Michael Connelly.
But like any business, the history of the auto market is littered with defunct car brands like Studebaker, Oldsmobile, Pontiac, Plymouth, Mercury, AMC, DeLorean, Saturn, and Saab.
People plan on having cars potentially for a decade (I am on year 15, myself) and count on having the company be available for support, parts, and — perhaps most importantly — critical recalls.
Knowing a car company will be around is a legitimate factor when considering what car to buy.
Which is why prospective car buyers may be looking at some version of our Chart of the Week.
The nascent EV market has given us many new names like Tesla, Polestar, Rivian, and Lucid. And with their startup status, new technology, and an extremely capital-intensive business, the possibility of them being around in a decade is even more of an uphill slog — even with hill-start assist.
This week, Volkswagen invested $5 billion in a joint venture with Rivian, giving the challenged EV maker a much-needed influx of cash. The stock jumped 67% before settling down around 30% up on Monday’s price.
“VW’s investments in Rivian will prove valuable in helping it achieve the scale necessary to get to positive free cash flow,” BofA analyst John Murphy wrote in a research note this week. “The company is one of the most viable among the start-up EV automakers with attractive product, solid long-term strategy, and adequate funding well into 2025+.”
Viability remains the operative word with these companies. As Murphy's team notes in its risk overview, the ability to raise money and sustain positive earnings and free cash flow are crucial factors.
Our chart lays these concerns bare: Rivian is down 89% since its 2021 IPO as Tesla and Ford are up 1,253% and 22%, respectively, over the last five years. (And down 45% and 37%, respectively, since Rivian's IPO.) Those numbers mean Tesla’s concerns about sticking around are mostly gone, for now.
And Ford’s conservatism, knowing its historical role as an automaker and staying focused in that literal lane — unlike Tesla, with its “we’re a robotaxi AI company” mindset — must be reassuring for buyers.
Concerns about whether Rivian and its competitors will make it won’t go away until more hit the road and the company keeps its head above water, proving it has the cash to not just survive but thrive.
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