Electric and autonomous vehicle ETF drops 15% in September

Electric and autonomous vehicle ETF drops 15% in September
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GMC vehicles are on display at the Sterling McCall Buick GMC dealership on February 2, 2022, in Houston, Texas.

Brandon Bell | Getty Pictures

A major ETF for electric and autonomous vehicle stocks had an ugly month in September, dropping nearly 15% amid fears a recession could slow automakers’ revenues.

this Global X Autonomous and Electric Vehicles ETF It closed at around $20 on Friday, more than 37% off the group’s 52-week high. It was the second-worst-performing month on record for the group, on a percentage basis, after March 2020, when the overall stock market saw dramatic drops.

Investors are concerned that the potential for a recession will not deter the Federal Reserve from its target. plans to continue raising interest ratesThis can make new vehicles more expensive for consumers and businesses that need to finance purchases.

Consumers are already with ever higher sticker prices and some dealers charge additional premium. According to JD Power estimates, average transaction price New car sold in August It was $46,259, the highest on record.

TrueCar analyst Zack Krelle thinks consumers are already hesitating at these high prices, especially as inflation drives up other spending and especially as interest rates continue to rise.

“We see that consumers are faced with the fact that they have to increase their upfront payment to be able to get the same car with the same monthly payment as last year, which creates new affordability challenges,” Kelle said on Thursday. she said. “Testing affordability with rising interest rates.”

If the US goes into recession, automakers’ profits are likely to fall. This put pressure on the auto giants’ shares. Ford Engine (27% decrease in September), general engines (18% decline) and Volkswagen (13% down), all of which are in the holdings of the ETF.

It also puts pressure on the stakes of suppliers and start-ups in the electric vehicle and autonomous driving fields, which make up the majority of the ETF portfolio. Not only does a recession limit automakers’ ability to invest in new technologies, but higher interest rates – and the market weakness that can accompany a recession – also make it harder for these smaller companies to raise additional capital from other investors.

Most major automakers are ready to come out of a recession. But many of the smaller companies in the EV and self-driving fields can struggle. Some names that have attracted the attention of investors in the last few years are still far from sustainable profitability and likely to need additional cash infusions over the next few years.

Some, like EV battery startup Quantum Landscape (a component of the ETF, down 21% in September) may not have a few more quarters of meaningful revenue, much less profit.

Among the ETF’s other big moves in September:

  • macro lidar Luminar Technologies decreased by 13% month-on-month.
  • Chinese electric vehicle manufacturers No and XPeng closed the month with 20% and 34% declines, respectively.
  • Electric heavy truck manufacturer Nicholas It fell 35% in September.

– CNBCs Gina Francolla contributed to this report.

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