The shift to battery-powered cars has spawned a deluge of new entrants. With a lower barrier to entry than their engine-powered forebears, electric vehicles are being produced by companies that have never shipped a single vehicle to a customer. That, combined with the helium-filled valuations of Tesla and the market’s tolerance for lightly scrutinized reverse takeovers, has led to a stampede of businesses listing their shares on public markets, squinting into the full glare of the world’s investors. The EV startups that have recently been listed include Canoo, Lucid Group, Nikola, Lordstown Motors Corp., and Fisker.
These nascent companies all have one thing in common: They’re not profitable or, in many cases, even revenue-generating. Yet their shares have posted massive weekly gains, doubling or more in value for some of them over the past few sessions.
That rally has come without any apparent news or catalyst for these companies, coinciding with a record-winning streak by market leader Tesla. This EV maker has the most market share of any carmaker. The stocks of EV startups also have drawn strong support from retail investors, with used-car retailer Carvana and EV charging station company Nikola among the top five most-traded U.S. stocks by retail investors this week, according to J.P. Morgan’s retail flows tracker.
In the case of Nikola and other EV manufacturing startups, their surge has been fueled by hopes to follow in the footsteps of Tesla’s record-setting production success. The budding companies’ plans include investing billions in large, greenfield assembly plants capable of producing thousands of cars annually.
But, as Tesla’s decade-long struggle with production demonstrated, launching an EV factory isn’t easy. Bringing cars from concept to delivery is rife with pitfalls, from ensuring suppliers meet deadlines to assembling vehicles that don’t leak when it rains.
Amid all the hope, the question remains: Will EV startups survive the manufacturing gauntlet? It will be hard for Canoo, Lucid, and Lordstown to prove they can do what it took for Tesla to achieve a trillion-dollar business.
There’s no easy answer to that question because the next 12 months will be critical for determining which EV startups will go the distance. But there are a few things to keep in mind as investors consider the prospects of these firms:
