It’s possible that the electric vehicle bubble has exploded

Lucid Motors, which is a Silicon Valley start-up that plans to sell luxury electric cars for as much as $169,000, has yet to sell a single vehicle. It plans to sell only 20,000 vehicles next year, and it will not break even until the year 2024. However, the firm revealed intentions to go public this week, with a valuation of $24 billion, or about the same as Peugeot. The merger with the already listed blank cheque corporation, or “SPAC,” resulted in the largest deal of its kind.

Despite the scale of the contract, Lucid’s announcement was met with criticism.  Investors have bid up shares of the Churchill Capital IV, the takeover vehicle combining with Lucid, to the astronomical levels in the weeks after rumors of the Lucid transaction first surfaced, in expectation of a much higher valuation. As a result, Churchill’s stock fell by 39% on Tuesday. Lucid’s lower-than-expected valuation may be a potential indication that the electric vehicle valuation boom is coming to a close.

Tesla, the leader of the battery-powered revolution, saw its stock fall for the second day in a row on Tuesday, while Nio, which is a Chinese competitor, also saw its stock fall. Tesla as well as Nio both manufacture and sell vehicles, but other companies whose valuations are based primarily on assumptions did much worse. Fisker, an electric carmaker centered in Los Angeles whose first vehicle is expected to hit the market this year, saw its stock drop 10%, while Nikola, an Arizona rival, saw its stock drop 6%.

Fisker and Nikola are two companies that, such as Lucid, utilized SPACs to go public at the multibillion-dollar valuations. Lordstown Motors, which is an electric pickup truck manufacturer, as well as ChargePoint, a well-known charging network, are two other examples. Arrival, which is a British electric van manufacturer, and China’s Faraday Future are expected to follow in the following days.

As the stock market rose and interest rates fell last year, investors searching for safe havens for their money flocked to blank cheque companies. As investors flocked to the green car boom, electric vehicle firms became common targets. SPACs are also beneficial to electric carmakers because they make it much easier to go public depending on potential hopes rather than current facts.

However, this boom has sparked concerns about overconfidence. According to Rob Arnott of fund manager Research Affiliates, “this looks like the frothiest weeks of the dotcom bubble.” Many publicly-traded electric carmakers, according to Arnott, have no sales, let alone income, similar to the late-twentieth-century internet mania.

He goes on to say that the total value of firms that only produce electric vehicles hit $976 billion earlier this month, closing in on the $1.2 trillion valuations of conventional automakers. Despite the fact that fully electric vehicles accounted for approximately 3% of worldwide sales last year.

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