President Biden paid a visit to a General Motors facility in Detroit, which will begin producing electric vehicles next year. He offered a speech to emphasize how his $1.1 trillion infrastructure bill, which he recently signed, will hasten America’s shift to electric vehicles (EVs).
E.V. company stocks have already soared to absurdly high levels. And several have yet to produce any automobiles, let alone earn any money. The drive-by policymakers to boost E.V. sales, as well as climate awareness among certain car consumers, has aided the sector. The frenzy, on the other hand, depicts a widespread bullishness that has swept various assets, which might be difficult to trace to conventional financial fundamentals.
The rise in stock prices demonstrates investors’ enthusiasm, according to Jack Ewing and Niraj Chokshi of The New York Times. Take Lucid Motors, that began delivering cars in a limited edition of 520 automobiles last month and aims to produce 20,000 cars next year. Lucid’s stock has roughly quadrupled in value in the previous month, valuing the firm at roughly $90 billion, or $10 billion more than Ford, which sold roughly 4.2 million vehicles last year. Rivian, an electric pickup manufacturer that has yet to begin producing vehicles, decided to go public last week and is now valued at $127 billion, surpassing General Motors. Then there’s Tesla, which is worth more than $1 trillion, which is more than practically every big automaker combined.
Wall Street seemed to be keen to join in the fun. Morgan Stanley’s top auto analyst, Adam Jonas, suggested Lucid might be worth up to $100 billion in a report to customers this week. To get there, it was going to have to complete the following:
- Sell 700,000 automobiles every year by 2030, which is nearly the same number as Mercedes and BMWÂ sell in the United States combined.
- Earn an average profit of about $80,000 per car, which is roughly double what consumers now spend for a car in the United States.
For the record, Jonas has stated that this is unlikely. He stated, alluding to Lucid’s value, “We feel the market is pricing in an unusually high probability of success.”
Lucid might be worth $150 billion, according to Dan Ives, who works as a tech analyst at the Wedbush Securities who monitors the electric car market. How is he going to get there?
- Ives estimates that $5 trillion will be spent on electric vehicles globally between now and the year 2030.
- Tesla will receive half of that, leaving $2.5 trillion for Lucid, Rivian, and all other automakers.
- Even if Lucid is only able to grab 3% of the E.V. market, the current stock price would be justified – and then some.
Aswath Damodaran, who is a New York University professor and expert in company valuation, is skeptical of the whole thing. Damodaran told DealBook, “Let’s be extremely honest.” “Rivian and Lucid are undervalued by Wall Street experts. They’re chasing the price and looking for ways to justify it.”
