The stock market as a whole had a fine Tuesday, but electric vehicle (EV) stocks — and those of companies related to their business — really had a fine trading session. Many were well in positive territory.
SUV maker Fisker (FSR 5.50%), for example, closed nearly 6% higher. Charging station specialist ChargePoint Holdings (CHPT 9.78%) added just under 10% to its share price, while battery recycling company Li-Cycle (LICY 11.64%) rose by just under 12%. Canoo (GOEV 1.67%), a utility vehicle maker, advanced nearly 2%.
Several factors were pushing up the prices of EVs and affiliated companies.
A major one is the United Auto Workers (UAW) strike, which continues to intensify. Each day seems to bring news of layoffs at, and a work stoppage targeting, at least one of the three incumbent carmakers targeted by UAW — General Motors, Ford, and Stellantis.
While the strike is deleterious to the auto industry as a whole, EV and related companies aren’t directly affected. That’s why the Fiskers, Canoos, and ChargePoints of the world are generally looked on more favorably than any of the Big Three these days.
Another factor bringing investors back to EV and adjacent stocks is bond yields. The benchmark 10-year Treasury note yield came down notably after market hours Monday. It’s now retreated from multiyear highs.
This development with Treasuries can be seen positively for the EV segment in two important ways.
First, the production of vehicles and related products (like batteries) is an expensive activity undertaken by companies that are frequently still at an early stage of their business lives. Many have had to take on debt to fund their operations, so cheaper borrowing can benefit them financially.
Second, since Treasuries (and other federal government debt instruments) are considered to be among the safest investible assets, if their yields decline, they become less attractive to investors. And a flight from safety often benefits riskier assets; the market is more willing to take a chance on relatively uncertain plays.
While the rare EV maker or affiliated stock is no longer considered to be high risk — hello, Tesla! — for the most part, such titles are lumped into that somewhat intimidating category.
As I’ve warned previously, no investor should casually fling money at any EV or related company due to short-term factors. The strike won’t last forever, while it’s entirely conceivable that the Federal Reserve will hike interest rates again (a move certain to broadly increase yields).
Rather, it’s smart to be very choosy when investing in the segment, as its companies are very much not created equal. Some (Canoo, for instance) have compelling and offbeat product lines, while others (ChargePoint) have become dominant in their niches.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and Stellantis and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.