Beware! 3 EV Stocks Waving Massive Red Flags Right Now.

Stocks to sell

The electric vehicle market is extremely competitive, with dozens of established American companies and an increasing number of overseas competitors, primarily from China. Part of the reason for this hypercompetitive space is the growth potential that the EV market has: Both consumers and governments are starting to favor EVs over gas-fueled cars.

The growing increase in demand for EVs — with 300,000 EVs sold in the U.S. in the last quarter — has increased the stakes of competition. Many EV companies are investing heavily before making sales, and losing money with each car they sell.

While the EV space has significant potential for success, it also has significant potential for failure. Below are the three EV stocks that I have  the worst outlook for. 

Ford (F)

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If you are looking to pick the next leader in electric cars, Ford (NYSE:F) is not the right company. It has currently been dealing with labor issues, causing considerable volatility in the stock price. In one of the largest U.S. strikes in the past few years, the United Auto Workers (UAW) walked off the job. The UAW has made demands which Ford has refused to meet: a four day workweek, a 36% pay increase, and more paid time off. Even if Ford strikes a deal, labor will continue to be problematic. 

Ford’s Mach-E model initially fared well, with Ford selling 86.4% of its inventory within 30 days in the second quarter of 2022. However, it only sold 27.7% of its inventory during the same period in 2023. Its Lightning model did not fare any better, selling 70% of its inventory within 30 days in the second quarter of 2022, but only 39.3% during the same period in 2023. 

It is worth noting that Ford loses money with every EV sale. This would not be extremely concerning if it was experiencing strong revenue growth, but when coupled with slowing sales, Ford’s EV future seems bleak. 

Lucid (LCID)

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Lucid Group (NASDAQ:LCID) is an American electric vehicle manufacturer that specializes in premium sports cars. The company has branded itself as making “luxury electric cars” to gain competitive edge in the fierce EV market. However, the company continues to struggle with consumer demand and deliveries.

Just last month, the company announced massive price cuts for its Air sedan models, bringing the price down between $5,150 and $12,550 to boost consumer demand. The implementation of price cuts alongside ongoing production challenges and recent drop in registrations indicate a bleak picture for Lucid’s Q3 earnings. 

Furthermore, from January to June, Lucid had delivered only 2,810 of 4,487 cars produced during this time frame. The company is struggling to ramp up consumer demand and troubling trends in profitability, sales, and cash flow all indicate that Lucid’s future is not bright. 

VinFast (VFS)

Source: NamLong Nguyen / Shutterstock.com

Vietnamese electric vehicle producer VinFast (NASDAQ:VFS) has garnered some of the most pervasive hype in the EV industry, making headlines for briefly receiving a higher valuation than Ford and General Motors (NYSE:GM) in August 2023. Furthermore, the firm also drew recognition from President Joe Biden for opening a $4 billion dollar manufacturing facility in North Carolina.

At the peak of VinFast’s rise, the firm hit a market capitalization of $200 billion, but after a rapid decline in value, the company currently sits at $36 billion, and a recovery in value is very unlikely. With a steep price-to-sales ratio of 70x, VFS stock is overvalued.

Furthermore, VinFast’s product quality will not be the determining factor in it achieving the branding necessary to allow the firm to separate itself in an already overcrowded U.S. electric vehicle market. With more than 90 new models entering the U.S. electric vehicle market by 2026, and some dealers having over-inventory of almost 100 days worth of unsold electric vehicles, many firms will struggle to reach profitable sales volumes. VinFast’s high-cost cars which have a projected MSRP of $50,000 will struggle to distinguish themselves in the U.S. market, especially considering their reputation for causing motion sickness and dangerous defects such as faulty turn signals.

On the date of publication, Tomas Levani did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Tomas is a self-taught investor with a passion for ESG investing. He has managed the portfolio of a small investment fund, interned at a Fortune 500 investment company, and started his own research firm. Through his freelance writing, he now aims to find favorable investments in companies with a mission of bettering the world.

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