Why Tesla, Rivian and Lucid shares all fell today

What happened

Some different news was putting pressure on You’re here (TSLA -4.92%) share Monday. But other electric vehicle (EV) manufacturers were also losing ground, including Rivian Automotive (RIVN -4.78%) and Lucid Group (LCID -5.63%). As of 12:10 p.m. ET, Tesla was down 6.2%, while Rivian and Lucid were down 6.4% and 6.1%, respectively.

So what

These electric vehicle stocks were falling as the tech-laden market Nasdaq Composite Index led all markets down. At this point in the session, it was down almost 2%. It’s no surprise to see these names see bigger moves than the index, as they all rely on future growth to justify their current valuations. The environment for tech and growth stocks is unstable as it remains unclear how the economy will perform amid the Federal Reserve’s measures to stifle inflation.

Tesla faces its own company-specific challenges, however. A headwind that could directly impact its business is China’s struggle to prevent a new wave of COVID-19 infections. Tesla’s second-quarter production and delivery figures, which were released last week, showed its Shanghai plant lost production due to that city’s lockdown in April and May. The plant came back strong in June with its highest vehicle production month on record. But on Monday, China announced another shutdown in Macau – the casino hub shutting down operations for a week. Other Chinese cities have also implemented new restrictions to combat a rise in new cases. And Shanghai will carry out another round of mass testing after someone there is found to have a new, highly transmissible omicron subvariant.

The other factor hitting Tesla shares on Monday is the ongoing dispute between CEO Elon Musk and the company’s board of directors. Twitter. Musk is trying to renege on his deal to buy the social media company, and Twitter is suing him to force him to follow. Musk had put up Tesla shares as collateral for the loans to finance the purchase. While there’s no way to know how this legal battle will play out, it’s a distraction for Tesla’s CEO, to say the least. Since Musk first disclosed his initial stake in Twitter in early April, Tesla’s stock value has fallen about 35%.

Now what

This drop wasn’t just due to Musk’s quest to buy Twitter, of course. And investor fears of an economic slowdown and potential recession continue to plague the stocks of other electric vehicle makers. Rivian actually delighted investors with its second-quarter production results last week. It shows a noticeable ramp-up in production and management appears confident that it can meet its previously lowered 2022 targets. Rivian’s latest news has drawn a price target increase from an analyst who sees the stock as more than 30% up from recent levels.

On Monday, however, investors were selling electric vehicle names and instead opting for more stable investments. This could mean an opportunity for long-term investors, but as Tesla stock has shown, there could be a lot more volatility ahead.

Howard Smith holds positions at Lucid Group, Inc. The Motley Fool holds positions and endorses Tesla and Twitter. The Motley Fool has a disclosure policy.

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