The electric vehicle bubble popped around a year ago. Tesla (TSLA) is the only stock whose valuation defies the overall headwinds. While the robotaxi announcement this week should prop TSLA stock at current levels, the rest of the industry is in trouble.
Last week, the European Union imposed large tariffs on China-made EVs. Germany, Europe’s largest economy, opposed the tariff. The country does not want a trade war with Beijing, but doing so would hurt its economy since it raises costs for suppliers. Consumers would end up paying for the tariff.
The tariffs will add up to 45% in costs for automakers, worth billions of dollars. However, the EU needs to impose such measures to offset Chinese subsidies offered to its domestic industry.
Watch for Chinese EV firms like XPeng (XPEV), Li Auto (LI), Nio (NIO), BYD (BYDDF), and Zeekr (ZK) pulling back from current levels.
European automotive stocks like Stellantis (STLA), BMW (BMWYY) and Mercedes-Benz (MBGAF) already sold off in the last year ahead of the news. Their shares may settle at current levels.
American automotive stocks are not in immediate danger yet. General Motors (GM) trades at a discount at current levels. Executives scaled back their ambitions in building an EV business. That will lower GM’s capital expenditures in the next year.
Ford Motor (F) may trend lower as it continues to struggle to compete in Chinese markets.