Why Investors Slammed the Brakes on Electric Vehicle and Related Stocks Monday

Why Investors Slammed the Brakes on Electric Vehicle and Related Stocks Monday

In the still-developing electric vehicle (EV) industry, what happens to its leading company tends to affect every other manufacturer and supplier. That’s why some troubling news from the No. 1 EV maker almost immediately filtered down into the rest of the sector Monday, impacting the prices of fellow manufacturers and associated companies alike.

Up-and-coming Asian EV maker VinFast (NASDAQ: VFS), for example, saw its share price decelerate sharply by over 9% on the day. Next-generation EV battery developer QuantumScape (NYSE: QS) also took it on the chin, with its market value eroding by almost 7%. Its fellow power pack specialist, Freyr Battery (NYSE: FREY), managed to escape significant collateral damage, but its stock’s flat performance on the day wasn’t inspiring.

Large-scale layoffs coming

No prizes for guessing which major EV company was the bearer of the bad news. It was Tesla (NASDAQ: TSLA), of course.

On the basis of an internal company memo written by CEO Elon Musk, Business Insider reported that the EV giant is about to enact a large-scale set of layoffs. That report was widely disseminated in other media, and triggered a mild case of investor panic about the EV industry as a whole.

In the memo, Musk said that Tesla’s workforce is to be reduced by over 10%; he did not get more specific. He did say that the layoffs would affect the company’s workers throughout the world.

The high-profile CEO wrote that Tesla’s rapid growth had resulted in some duplication of job positions and roles, therefore, “As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity.”

“There is nothing I hate more, but it must be done,” he continued. “This will enable us to be lean, innovative, and hungry for the next growth phase cycle.”

It what doesn’t seem to be a coincidence, on Monday long-serving Tesla senior vice president of powertrain and energy engineering Drew Baglino announced his resignation from the company on the Musk-owned X (formerly Twitter). Baglino is the second high-ranking executive to depart Tesla in less than a year. He did not provide the reasons for his move.

When the leader stalls…

That rapid (and possibly haphazard) takeup of personnel alluded to in Musk’s memo tells only part of the story. EV sales growth has been slowing notably of late, and as competition has increased, Tesla and other manufacturers have made price reductions in order to keep consumers sweet. Meanwhile, the company’s recent delivery figures have come in under analyst expectations.

When Tesla sneezes, the rest of the EV sector catches cold. Hopefully for the industry’s bulls, Tesla will soon have more encouraging news to report.

Should you invest $1,000 in VinFast Auto Ltd. right now?

Before you buy stock in VinFast Auto Ltd., consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and VinFast Auto Ltd. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $540,321!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of April 15, 2024

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

Why Investors Slammed the Brakes on Electric Vehicle and Related Stocks Monday was originally published by The Motley Fool