Electric vehicle (EV) companies have been performing well in financial markets, but the sector has seen notable volatility and rising competition. Since 2019, EV stocks, including those of vehicle and battery manufacturers and companies involved in battery metal extraction or processing, have consistently outperformed general stock markets and major traditional carmakers. Between 2019 and 2023, the return on investment for these companies increased significantly. The combined market capitalization of pure EV makers surged from USD 100 billion in 2020 to USD 1 trillion by the end of 2023, peaking at over USD 1.6 trillion in late 2021, largely driven by Tesla. Similarly, the market value of battery makers and battery metal companies also rose substantially.
Despite the overall upward trend, the EV market has experienced significant volatility. Factors such as supply chain disruptions, battery metal price fluctuations, competition, price wars among original equipment manufacturers (OEMs), and expectations of slower annual growth as major EV markets mature have negatively impacted investor confidence and EV stocks. For example, Tesla’s shares were on average 15% lower in 2023 compared to 2021-2022. BYD’s stock also fell by 15% in 2023 relative to 2022, and the combined market capitalization of pure EV carmakers dropped nearly 20% on average relative to 2022.
Emerging EV players like VinFast, Polestar, Canoo, Fisker, Lucid, and Nikola have missed sales targets and traded low. Competition and shrinking profits have also affected upstream EV battery makers. In early 2024, CATL traded near a three-year low, with its market capitalization at its lowest point since the end of 2020. The combined market capitalization of pure EV players in the first quarter of 2024 fell below that of major incumbents, even though their financial performance remained robust.
To counter the increasing competition, carmakers are securing direct deals with battery makers and companies involved in mining and processing critical minerals. Investors, including large banks and funds, are pouring capital into the metal industry. For instance, in 2023, Stellantis partnered in Argentina to secure copper demand, investing USD 155 million. Volkswagen, Glencore, and Chrysler invested USD 100 million each in a Special Purpose Acquisition Company operating nickel and copper assets, supported by global investment banks in a USD 1 billion deal. Tesla and several Korean battery makers, including LG and SK, met with Chilean government agencies in 2024 to secure lithium supply for the US market, supported by IRA tax credits.
Due to increasing investor appetite and growing EV markets, the valuation of critical mineral companies has increased significantly over recent years. From 2015 to 2022, the market capitalization of companies involved in lithium extraction and processing increased sixfold. However, in 2023 and early 2024, volatile metal prices, increasing competition, and pressure to lower EV and battery prices have led major mining companies to revisit growth and performance forecasts. Many companies are struggling to finance projects with their revenues, suggesting a need for external sources for large-scale capital expenditure.
Global competition in the EV market is intensifying, pushing down company margins. BYD and Tesla remain leaders, accounting for 35% of all electric car sales in 2023. This competition has led to price cuts and squeezed margins for many manufacturers. In China, for example, prices for compact electric cars and SUVs fell by up to 10% in 2023. Tesla further slashed prices in early 2024, forcing competitors to follow suit.
Competition is also fierce outside China. Tesla’s share of new US electric car sales shrank from over 60% in 2020 to 45% in 2023. Hyundai-Kia overtook GM and Ford in 2023, accounting for 8% of US electric car sales. European carmakers, led by Stellantis, accounted for 25% of US electric car sales, their highest share since 2017. However, in Europe, the share of electric car sales by local carmakers has been falling since 2015. In 2023, European carmakers accounted for 60% of electric car sales in the region, down from over 80% in 2015.
Overall, the EV market continues to grow and evolve, with companies and investors exploring new opportunities across the supply chain, despite the challenges posed by increasing competition and market volatility.
