Bullish on EV stocks like Rivian? This statistic suggests you may be right.
EV stocks have had a rough year. Rivian (RIVN 2.87%) shares, for example, are down by 40% since 2024 began. Tesla‘s stock price, meanwhile, has fallen by more than 10%, wiping out roughly $70 billion in value.
There are several reasons for the decline in valuations. But if you’re still bullish on EV stocks long term, there’s one statistic that you should know about. It’s perhaps the biggest reason why investors shouldn’t abandon EV stocks just yet.
This is why EV stocks have struggled this year
Before we get into why it’s reasonable to remain very bullish about EV stocks like Rivian, it’s important to review why these companies have struggled so far this year. The biggest problem has been a lag between reality and expectations. Consumer data company J.D. Power, for instance, was forced to lower its 2024 EV sales forecast only a few months into the year. A few months later, it lowered its sales growth estimates yet again.
“EV adoption is growing but at a slower pace,” a J.D. Power representative noted. Digging deeper into the numbers, however, paints a more worrisome picture. Tesla actually posted negative quarterly sales growth earlier this year, while Rivian’s growth rates have quickly collapsed and are now approaching 0%. That’s a tough pill to swallow for stocks that were priced between five and 10 times sales at the start of the year.
The share price weakness for EV stocks, therefore, has simply been the reconciliation between high expectations and a weaker-than-expected reality for sales growth. But now that valuations have come down sharply — Rivian, for example, now trades at 2.5 times sales — there are a few reasons investors shouldn’t ditch EV stocks just yet.
TSLA Revenue (Quarterly YoY Growth) data by YCharts
These numbers suggest huge growth is still ahead
There’s one important statistic that should keep EV investors bullish. But before we dive into that, there are a few other figures that suggest Rivian, in particular, is set for a bright future in the coming years. In a recent research report, J.D. Power Vice President Elizabeth Krear stressed that recent weak sales growth hides a growth trend within specific EV categories. “While premium segment retail sales are down 13% — driven by Tesla’s 22% decline — the mass market segment is up 63%,” she highlighted. “This is primarily due to increasing product availability as the percentage of mainstream shoppers who have viable EV alternatives has jumped to 56% from 38% in January.”
Over just six months, then, the percentage of vehicle shoppers who can afford an EV jumped dramatically. But these shoppers are in the mid-priced, mass market category. That’s a segment of the market that hasn’t seen many affordable options. But that’s changing quickly. In 2024 alone, the average price of a compact electric SUV has fallen by around $10,000. “As availability and affordability continue improving in the mass market segment,” said Krear, “EVs will attract more mainstream shoppers.”
For its part, Rivian is well positioned. Over the next 24 months, it expects to launch three new mass market vehicles: the R2, R3, and R3X. All of these vehicles are expected to debut at $50,000 or less, granting Rivian access to the largest and fastest-growing segment of the EV market.
Long term, EV sales growth should continue to impress, even if there are occasional years of disappointment like 2024. That’s because of this important statistic: Just one in 10 of new vehicle registrations in the U.S. is currently for an EV. Compare that to China, where one in three registrations is for an EV, or even Europe, where the figure is one in five.
While the growth rate may be lumpy, there’s little doubt that EVs will continue to build in adoption over the next few years. With leading brand loyalty and a slate of new mass market vehicles expected to hit the market soon, long-term Rivian investors have plenty of reasons to remain bullish.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
