Last year, consumers continued to cut back considerably on buying expensive items. Inflation hurt their disposable income, causing demand for electric vehicles to fall. EV firms that did not establish themselves early enough struggled. This included Rivian (RIVN) and Lucid Motors (LCID). Lordstown Motors and Fisker filed for bankruptcy.
Last week, Tesla (TSLA) re-emerged as the leader. Measured by market capitalization, TSLA stock topped $1 trillion. Fearful EV investors parked their worries about Tesla’s operating margins and falling average selling price. Instead, they bet on CEO Elon Musk delivering a cyber cab and a $25,000 affordable EV.
TSLA stock has the potential momentum to re-take the former high of over $400. This is the peak price in 2022. Markets are rewarding Tesla’s valuation with a higher premium after Musk put his support for Trump.
Tesla stock has risks in the year ahead. The Republican Party may reverse legislation that benefited EV markets. China is accelerating its export of EVs in European and Asian countries. This will squeeze Tesla out of those markets.
Despite those risks, Chinese EV firms like Nio (NIO), Xpeng (XPEV), BYD (BYDDF), and Li Auto (LI) may not enter U.S. markets. The U.S. may impose more tariffs on them. This would push prices too high, deterring consumers from buying Chinese EVs.
