Why EV stocks tumbled on Wednesday

The electric vehicle (EV) industry continued to receive bad news on Wednesday, this time led by Polestar Automotive (PSNY -16.37%) CEO Thomas Ingenlath has resigned from the company. Michael Lohscheller has been named CEO, but he won’t be able to quickly fix the company’s problems or change the dynamics of the industry.

Polestar shares fell as much as 18.6% in trading today. Xpeng (XPEV -9.00%) decreased by 10.5% and Lucid Automotive (LCID -4.14%) decreased by 6.8%. At the close of trading, the three stocks were down 16.4%, 9% and 4.1% respectively.

Polestar management change

Lohscheller comes to Polestar with a lot of experience in the automotive industry, but not much success. He was previously CEO of Opel, VinFast and Nikola — not exactly the industry’s biggest giants.

He is also taking control as global demand growth for electric vehicles slows and competition becomes fierce. Not only are EV-focused companies facing losses, which you can see below, but falling share prices are making it more difficult to raise capital to fund growth aspirations.

PSNY Revenue (TTM) data by YCharts

Canada Tariffs on Chinese Electric Vehicles

Xpeng was hurt today by the news that Canada will add a 100% tariff on electric vehicles made in China. The company is likely to face similar pressures in the US and Europe, potentially closing off more of the market as Chinese competitors grow on a global scale.

The market doesn’t see Lucid’s potential

Yesterday, Lucid Senior Vice President of Design and Brand Derek Jenkins said in an interview with CarBuzz that the company is working on three more affordable vehicles, which could begin production in late 2026.

Like Polestar, the issue is the timing and capital required to achieve the vision. Lucid has not proven its ability to turn a profit on its existing range and will burn billions before launching a wider and cheaper range. It’s not clear the company will have the financial ability to get there.

The uncertain electric vehicle market

What all these companies face is an uncertain future for the electric vehicle market. For more electric vehicle start-ups to survive and live up to their valuations, the industry needs to transition to electric vehicles quickly and be significantly more profitable than legacy automakers. It is not clear that either of these things will happen.

The longer it takes to reach profitability, the more investors question the EV market and the more stocks fall. Falling stock prices make it harder to raise equity funds and can even make debt more expensive. And they all want to expand, that means capital expenditure at a time when capital is harder to come by.

I don’t think more than a few electric vehicle companies will survive the next decade, and many companies will either go bankrupt or be forced to sell to larger rivals for a fraction of what they’re worth today. Polestar may already be heading in that direction.

Xpeng and Lucid have more time to prove themselves, but it’s an uphill battle to add any value in the EV industry today.