Investors have been falling out of love with electric vehicle startups — particularly the ones that have merged with SPACs.
- But the mood has changed as incumbent automakers, Ford and GM, have stepped up their plans to become more competitive in the EV market.
- Growing regulatory scrutiny over SPACs and broader market sentiment shifts are also casting shadows over the sector.
Driving the news: Shares of pre-revenue EV company Lordstown Motors plunged 15% after the Monday announcement that the company needs to raise additional capital — though the stock has recovered throughout the week.
- On the flip side, shares of Ford have gained 13% since Wednesday, when the company said it expects EVs to make up 40% of its worldwide sales by 2030.
- Ford's message, in a nutshell: We have the scale, plus manufacturing and engineering know-how, that the startups lack.
The SPAC factor: Entrepreneurs eager to capitalize on the clean energy revolution opted to fast-track pre-revenue EV companies to the public markets through SPAC deals.
- Congress and the SEC are now investigating rules around speculative projections and erroneous accounting practices in SPACs.
- In EV-land, the SEC is specifically probing Canoo and Lordstown.
By the numbers: Four EV makers that completed a SPAC merger last year — Fisker, Canoo, Lordstown and Nikola — are trading between 72% and 90% lower than their highs.
- Shares of 19 EV and EV-adjacent companies that have gone public via SPACs have seen their share prices fall about 50% from their highs, according to an Axios analysis of SPAC Research data.
- Even Tesla is down 16% so far this year.
- Meanwhile, GM and Ford shares have gained 43% and 61%, respectively.
What they’re saying: The initial hype for EV stocks is similar to what happened during the early 2000s tech boom, Bill Selesky of Argus Research tells Axios.
- Like pre-revenue tech companies then, these new EV makers have warned investors that it could take years to grow — but investors are showing more skepticism, and less patience.
- Dan Ives at Wedbush notes that SPACs have also added more EV companies to the public markets, creating an "arms-race" feel.
- "As appetite for risk has declined in this environment, no sector besides tech has been hit as hard as the EV landscape," Ives says.
Our thought bubble: New EV companies are motivated by the idea of being the next Tesla, while investors want to find the next Tesla.
- But history is littered with examples of car companies that have failed — even Tesla has come close many times.
The bottom line: Incumbent carmakers will likely end up winning a large portion of the EV market, while smaller companies get scooped up or fold.
- Some investors will get burned along the way. But the world will ultimately have a lot of EVs.