Can Stocks for EVs and Self-Driving Cars Recover?

Many auto stocks have taken a hit as of late, but the damage seems to be even worse for companies specializing exclusively in EVs and self-driving cars. 
Written by Preston Charles
Reviewed by Serena Aburahma
It doesn’t take a business school grad to see that the economy is in a questionable position right now. This reality is heightened when you zoom in on the
EV
market. 
While some sets of numbers and upcoming policies paint a bright picture for their future, others, like September's huge stock dive,
show something much grimmer for EVs
.  
Is it just another short-term gold rush that we’re beginning to see the end of, or is this merely a blip to be endured? What will it take to get the stocks back on track? 

A bad sign

According to
CNBC
, Global X Autonomous and Electric Vehicles EFT, a major EFT for EVs and self-driving vehicles, closed last month at a mere $20 a share; more than 37% off the group’s 52-week high.   
It was the group's second-worst-performing month on a percentage basis only behind March 2020 when the overall stock market took a massive hit. 
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What’s the cause?

The economy is a complicated mechanism with a lot of moving parts so it’s hard to pin one cause for this current position. That said, one of the possible causes is investors' fear of a recession compounded with the Feds' continual increase of the interest rate. 
The result of this is more costly vehicles for businesses and individuals that need to finance their purchases.
Consumers are already experiencing sticker shock as well as a limited supply when shopping for new vehicles, which has caused some dealerships to demand additional premiums.
According to J.D. Power, the average price for a new car in August was a whopping $46,259, the highest ever recorded. The average price of an EV was even much higher than that. 
It’s not a large leap to imagine consumers balking at these steep prices, especially as inflation makes every other aspect of their economic life more expensive. The idea of affordability is being truly tested.

Even worse for startups 

Should a recession hit, the auto industry juggernauts will undoubtedly take a hit, but it’s the newer startups (which are the bread and butter of EV and self-driving tech) that will be burdened even more. 
Additional borrowing for EV startups will carry with it a higher interest rate, putting companies even further behind in their profit projections, giving them less runway to get going. 
EV and self-driving technology are fuelled by innovation, and innovation seems to often be a luxury for more lucrative times. When the tide turns, people tend to buckle down and stick with what they know.  
MORE: Why Aren’t Carvana’s Low Q2 Earnings Causing Their Share Prices to Drop?

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