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The electric vehicle (EV) market continues to suffer from major demand risks. Interest rates in the United States and abroad remain high and are likely to remain so for some time. Sticky inflation has left U.S. Federal Reserve officials with no choice but to take a “wait-and-see” approach regarding potential interest rate cuts. The U.S. economy is fueled by soaring consumer debt, which is likely to slow if interest rates remain where they are. Key sectors that rely on consumer loan access, such as automobiles (e.g. EVs), are already showing clear signs of a significant slowdown.
EV charging, a subsector of the broader electric vehicle sector, will also be subject to headwinds facing the broader market. In other words, if many EV stocks fall sharply, the corresponding EV charging stocks will also fall sharply. There are three things to avoid in the face of a potential market crash:
Tesla (TSLA)
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It’s hard to make a list of electric vehicle charging stocks without mentioning the biggest of them all. tesla (NASDAQ:TSLA). Tesla agrees and has pioneered the construction of electric vehicle charging infrastructure across the United States. The $1 trillion infrastructure bill signed into law by the Biden administration nearly two years ago also allocates billions of dollars to further develop the nation’s EV charging network, largely leveraging Tesla’s existing network technology.
Unfortunately for Tesla and its shareholders, the EV maker is ultimately suffering from the current downturn in EV demand. Throughout the first quarter, Tesla’s monthly deliveries completely missed its targets, while its Chinese peers increased deliveries year-over-year despite sacrificing profits. Recent news that Chinese regulators have given Tesla tentative approval to use self-driving technology in its cars in China is likely to help boost profit margins, but sales will still suffer. Headwinds remain.
Charge Point (CHPT)
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charge point (New York Stock Exchange:CHPT) has made commendable progress in building out EV charging networks for Tesla competitors. The EV charging company has built over 286,000 charging stations in both the US and Europe. Unfortunately, this business faces many headwinds. In ChargePoint’s fiscal year 2024 (ending January 31st), revenue increased by a meager 8% from $468.1 million in 2022 to $506.6 million. ChargePoint’s net loss was $457.6 million, roughly equal to his reported annual revenue. The EV charging company also expects its revenue to decline 19% in the first quarter of fiscal 2025.
ChargePoint’s stock price is also feeling the market turmoil. CHPT stock has fallen approximately 84% over the past 12 months. CHPT stock has fallen nearly 40% this year alone.
EVGO
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The final EV charging stocks to avoid on this list are: EV go (NASDAQ:EVGO). This EV charging company claims to be the largest public charging network in the United States. EVgo continues to develop infrastructure with locations in over 35 states. The company’s future challenges lie not only in the competitive environment but also in its cost structure. The company is not profitable on any profitability measure other than gross profit. It seems likely that it will still be a long time before it generates operating income or net income.
Considering the current headwinds in this space, EVgo is likely to struggle with this in the long term. The charging company’s stock price has fallen about 47% since the beginning of this year. If a market crash were to occur, stocks like EVGO would face some of the most volatility, so investors may want to avoid stocks for that reason.
On the date of publication, Tyrik Torres did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
Tilik Torres has been studying and participating in financial markets since his university days and has a special passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software stocks. He has experience working in both investments (public and private markets) and investment banking.
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