EV Stocks Have Lost a Ton of Value. Here's Just How Much. - Barron's

Electric-vehicle stocks are XXX.

Patrick T. Fallon/AFP via Getty Images

The electric-vehicle industry is in a bear market.

Stocks in EV makers, and some key suppliers, are have dived over the past few weeks. The reason isn’t EV sales. it’s inflation—or, more accurately, fear of inflation. Whatever the reason, the EV crash has wiped out roughly $400 billion of market value.

So much value has left EV stocks, in fact, that makers of traditional vehicles with internal combustion engines are back in the lead, with a larger combined market cap than the group of EV makers.

Stock in EV makers is worth about $1 trillion, down from about $1.4 trillion back in early January. Tesla (ticker: TSLA) accounts for about 70% of the decline. That makes sense, as Tesla accounts for about 75% of the total market capitalization of EV makers.

Look at the decline in these stocks from their 52-week highs, the picture is even uglier. On that basis, EV stocks are down more than 40% on average. Tesla stock is off about 32% from its 52-week high. Shares of Chinese EV maker NIO (NIO) are down 42%.

Traditional auto maker stocks haven’t been hit nearly as hard. The average decline in those stocks, from their 52-week highs, averages about 14%.

EV stocks are more richly valued that traditional auto maker stocks. The reason for higher valuations is obvious: Investors believe faster-growing EV companies are the future. That may be the case still, but rising interest rates—a crude approximation for inflation expectations—hit highly-valued stocks far more than other stocks. That’s because fast-growing companies generate most of their cash, and potential dividends, far in the future. That cash is worth less today when interest rates are higher. That’s the way the math works.

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The EV industry has simply been bitten by the inflation bug. There isn’t much EV investors can do, except to wait for interest rates to settle down.

Sometimes when market caps crash, traders jokingly quip the lost value has gone to money heaven. That isn’t exactly the case for EV makers—the value can return. The questions are how much will return and when.

EV stocks Barron’s track were down about 3% on Friday, on average. The S&P 500 and Dow Jones Industrial Average both rose almost 2%.

Write to Al Root at allen.root@dowjones.com

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