What's Going on With the EV Market?

Every Friday we host a live 1:1 discussion via discord with Moby Premium members at 12pm EST. 

This gives you the opportunity to ask us any questions you have on the markets, the economy, crypto, and more!

Here are the 4 key things we went over: 

• How the market is staying flat in rising inflation

• What caused the mild bloodbath in EVs last week

• Where we see the small-launch market moving in the next few months

• Why the crypto market suddenly stumbled

And if you're too busy to listen to the entire recording, below we included a compact summary of what went down.

To get all the juicy details, just listen to the entire recording. And now, onto the summary👇

Overview:

Stocks and crypto slid a little as we entered March and the market continued to try and make sense of this inflationary environment. We're still over a week away from the next CPI print, but until then--there are a lot of pieces of economic data we can go over. 

We're seeing the first true waves of competition hit the EV space as Rivian and Nio missed certain earnings projections while the market lightly bailed on Tesla after a solid investor day that was a little light on specific details. 

Meanwhile--the potential collapse of Silvergate Capital is still reverberating through a crypto market that was finally looking poised for a bull run. 

There's a lot more to cover here, so let's dive through the details.

The EV Hiccups:  

One of our main threads that we're watching in 2023 is rising competition in the EV space. We're finally starting to see some real reverberations from that. 

One thing that we've forgotten about EVs since Tesla started to dominate in the last ten years is the simple fact that it is really hard to scale a car manufacturing process. 

Even though building EVs reduces a lot of the complexity of building a car--getting that manufacturing base off the ground is positively Herculean. We're finally seeing just how hard that is with Rivian and Nio stumbling a little last week. 

Rivian got hit harder with the news that they might not hit a bigger manufacturing goal this year. Rivian built 25,000 cars last year and some analysts were projecting they would get all the way to 60K this year. However, Rivian's earnings call gave investors the impression they wouldn't even be able to make 50K. The stock stumbled big--but recovered a bit over the back half the week. 

Meanwhile--Chinese EV manufacturer Nio managed to keep their projections, but with far more costs than anticipated. Their stock didn't stumble nearly as hard as Rivian and mounted a similar recovery across the back half of the week. 

Both of these earnings stumbles show us just how volatile the EV market is. First of all--it's still really hard to build anything in this macro environment. Secondly, this is a sign of just how competitive the EV space is going to be this year. Investors are jumpy in the EV space and are desperate for a few manufacturers who can get the same ludicrous margins Tesla has accomplished. As competition drives up the cost of the raw materials EV makers need, we're going to see real winners and losers emerge across the next two quarters. We're sticking with our EV portfolio for now and are excited to see where the industry goes. 

The New Crypto Concern:

Meanwhile, we're a little more worried about the growth trajectory for the crypto market. 

Last week, Silvergate capital all but declared bankruptcy--causing all sorts of reverberations throughout the market.

Silvergate is a big deal--they're a bank that tailors specifically to crypto and crypto clients. Them going out of business won't tank the market--but this raises concerns about who exactly will offer liquidity to crypto projects. 

One big part of our crypto bull thesis is the eventual institutional adoption of cryptocurrency. We want to see a lot more big institutional money hitting the crypto space. A bank like Silvergate exiting the market has the potential to further delay institutional adoption--extending the current crypto winter potentially even further. 

For now, though, we're holding through crypto winter and more using the industry to assess the appetite for risk in the market. The more money flows into crypto, the more likely the market is feeling ready for riskier investments. We don't see Bitcoin or any particular crypto project as a leading indicator for the wider economy--but continued crypto investment is another data point that we're monitoring to make sense of exactly where the market is in our current boom/bust cycle. 

Wrapping this Up:

So while the market ended flat-to-down last week and is looking to continue that trend this week--we still have a lot to watch here. We're really interested to see how Meta stock performs as legislative pressure continues to mount towards blocking their biggest rival: Tiktok. 

We're also eager to see the slate of retailers posting earnings this week so we get a better sense of exactly how strong the 2022 holiday shopping season was. 

All in all, though, this is another one of those weeks late in the quarter when the market simply holds its breath until new economic data is published. For us, that will be next week's CPI print. 

We'll keep you posted and guide your through this market until that publishes.