The electric vehicle (EV) market has faced several headwinds, including high inflation, semiconductor chip shortage, and persisting supply chain disruptions. These factors have affected the production of companies in this space, making it difficult for them to meet the pent-up demand.

Although vehicle orders have surged to unexpected heights, the shortage of automotive semiconductors and other parts forces auto manufacturers to cut production levels. 

Moreover, consumers’ concern about the upfront cost of EVs, lack of enough charging infrastructure, and long charging hours on a road trip have been weighing down the industry’s growth prospects.

Due to these challenges, we think it could be wise to avoid fundamentally weak EV stocks NIO Inc. (NIO - Get Rating) and Lucid Group, Inc. (LCID - Get Rating).

NIO Inc. (NIO - Get Rating)

Headquartered in Shanghai, China, NIO is a pioneer and leading high-end smart electric vehicles manufacturer. It provides power solutions, battery swapping services, rapid charging, vehicle internet assistance, and extended lifetime warranties. Dubbed the “Tesla of China,” NIO is a leading EV manufacturer globally.

For the fiscal quarter ended March 31, 2022, NIO’s gross profit decreased 6.9% year-over-year to RMB1.45 billion ($214.97 million). Its adjusted loss from operations widened 760.4% year-over-year to RMB1.71 billion ($253.51 million), while its non-GAAP net loss came in at RMB1.31 billion ($194.21 million), up 269.3% from the prior-year quarter. In addition, its non-GAAP loss per share widened 243.5% year-over-year to RMB0.79.

Analysts expect NIO’s earnings per share to remain negative in fiscal 2022. Shares of NIO have declined 49.9% over the past nine months and 53.7% over the past year to close the last trading session at $19.73.

NIO’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an F grade for Growth and a D for Value, Stability, and Quality. It is ranked #51 of 65 stocks in the D-rated Auto & Vehicle Manufacturers industry. Click here to see additional ratings (Momentum and Sentiment) for NIO.

Lucid Group, Inc. (LCID - Get Rating)

LCID uses its own equipment and factory to design, develop, manufacture and sell electric vehicles, EV powertrains, and battery systems in-house.

For the fiscal first quarter ended March 31, 2022, LCID’s loss from operations widened 100% year-over-year to $597.53 million. Its total costs and expenses increased 119% year-over-year to $655.20 million. The company’s net loss and net loss per share narrowed 97.2% and 99.9% year-over-year to $81.29 million and $0.05, respectively.

Analysts expect the company’s EPS to remain negative in fiscal 2022. The stock has slumped 50.7% over the past nine months and 52% year-to-date to close the last trading session at $18.25.

LCID’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It also has an F grade for Value, Stability, and Quality and a D for Sentiment. Within the Auto & Vehicle Manufacturers industry, it is ranked #52. Click here to see the other ratings of LCID for Growth and Momentum.

NIO shares were trading at $20.14 per share on Monday afternoon, up $0.41 (+2.08%). Year-to-date, NIO has declined -36.43%, versus a -12.73% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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