Will sagging stock prices lead to consolidation in the EV industry?
Despite the broad-based tech bull market, times haven’t been easy in the EV space. From big boys like Tesla (NASDAQ:TSLA) and BYD (OTC:BYDDF) to emerging startups such as Canoo (NASDAQ:GOEV) and Sono Group (OTC:SEVCQ), the industry appears to have lost momentum on both the equity and financial sides.
But while the rout has hit the sector as a whole, smaller companies are bearing the bigger brunt, with multiple stocks trading near or at 52-week lows.
As most of these companies rely on loans to drive growth and innovation, persistently high interest rates have ballooned debt levels on their balance sheets, increasing the risk of bankruptcy. At the same time, declining consumer demand keeps pressuring future growth projections — a true double whammy.
“We could be bound to see tons of bankruptcies within the industry,” warns Joseph McCabe, President and CEO of AutoForecast Solutions.
Against this backdrop, many analysts are beginning to wonder whether larger EV and other legacy players will be looking to speed up their EV plans via takeovers.
Such is the case of Sandeep Rao, Senior Researcher at Leverage Shares. “Given the current circumstances, consolidation within the EV industry is entirely logical,” he notes.
Larry Tentarelli, Chief Technical Strategist at Blue Chip Daily Trend Report, also believes the scenario could favor M&As, but prefers to adopt a more cautious stance: «Consolidation is highly possible, but we do not believe it is a given,” he ponders.
Just last week, Reuters reported that Nissan (OTC:NSANY) is in advanced talks to invest more than $400 million in smaller pure EV player Fisker (NYSE:FSR). This move could offer a much-needed financial boost to the struggling startup while broadening the
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