Shares of auto makers, those who make traditional and electric vehicles, got hammered Wednesday. A few things were to blame, including the government, the Federal Reserve, stock charts, and the companies themselves.
Tesla (ticker: TSLA) stock closed down 3.7% at $185.52. Shares are down 10.6% for the week, following Sunday’s first quarter delivery report.
Shares of other EV producers were lower, too. Rivian Automotive (RIVN), Fisker (FSR), and Lucid Group (LCID) finished down 4.9%, 7.6%, and 2.5%, respectively.
Ford Motor (F) and General Motors (GM) shares weren’t spared. They dropped 2.3% and 1.8%, respectively.
Investors can’t really blame the market for the bad day, except maybe the Nasdaq Composite —at least in the case of higher-growth EV names. It finished down 1.1% The S&P 500 dropped 0.3%, and the Dow Jones Industrial Average rose 0.2%.
Cars are discretionary purchases, and consumer discretionary stocks in the S&P 500 dropped about 2%. The Fed might be the reason for the weakness there. Loretta Mester, chief of the Federal Reserve Bank of Cleveland, said Tuesday that interest rates need to go higher still. Higher rates makes cars less affordable.
The companies themselves deserve part of the blame. Many managers are speaking at the BofA auto conference in New York this week. It is happening just ahead of the New York Auto Show, which begins on Friday.
GM Chief Financial Officer Paul Jacobson, on Tuesday, talked about cost savings the company achieved via a voluntary management buyout program. Cost reductions are good news, but he also struck a slightly more cautious tone about the pace of EV sales.
GM wants to sell 400,000 EVs cumulatively in North America between 2022 and mid-2024. It is on track to sell about 210,000 through the end of 2023, leaving about 190,000 in the first half of next year. That works out to about a 90% increase over the planned volume for the second half of 2023. It may take GM a little longer to meet its 400,000 goal. GM stock dropped 1.5% Tuesday.
Rivian CFO Claire McDonough spoke at the conference Wednesday morning. She backed Rivian’s guidance for 50,000 units of production in 2023, detailing how supply chain-related production constraints are being overcome. She also said that Rivian can get to positive gross profit margins by the fourth quarter of 2024. It isn’t too different than Wall Street expects, but analysts had projected positive gross profit margins in the third quarter of 2024. That could be a small disappointment.
News from Ford, too, might be affecting all EV stocks today. Ford said its Mustang Mach-E and E-Transit van would qualify for EV tax credits of $3,750 beginning on April 18, down from the $7,500 currently available. Investors knew things were changing. The Internal Revenue Service was incorporating other qualification requirements laid out in the Inflation Reduction Act that it ignored earlier in 2023.
Ford is losing half the credit because it doesn’t meet domestic battery sourcing requirements. That will be a problem faced by many EV makers, as most EV batteries come from Asia. Tesla and GM are likely in the best position to keep that benefit. Both have local battery manufacturing. Most auto makers are building domestic battery capacity with battery-making partners.
Investors don’t really care that Tesla has its own battery-making capacity. They are selling shares anyway. That leaves the stock chart looking weak.
Tesla’s “pullback leaves resistance intact at the down-trending 200-day moving average,” says Fairlead Strategies founder and technical analyst Katie Stockton. “Support [is] now initially near $160…the $156 level is important longer-term support still.”
CappThesis founder and technical analyst Frank Cappelleri agrees with Stockton: “Tesla is at a critical point right now. It’s testing both its 50-day moving average and the year to date uptrend line.”
If the stock doesn’t bounce off its 50-day moving average, about $190.50, he sees $164 as the next stop. That is down another $20.
Stockton and Cappelleri aren’t making a fundamental call. They are just looking at the charts. The next fundamental data point for Tesla will be earnings, due out in a few weeks.
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