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The Japanese battery maker sees fewer electric vehicles (EVs) being sold next year, especially high-end models that don’t qualify for tax breaks under the Inflation Reduction Act.
PCRFY stock fell 2.5% this morning to $9.35 per share, a market capitalization of $23.33 billion. Over the last 24 hours, TSLA stock is down 4.8%, opening this morning at $197 per share, a market capitalization of about $620 billion.
EV Market Fail
In response to Tesla’s dominance in the luxury car market, both start-ups like Rivian (NASDAQ:RIVN) and established makers like Ford Motor (NYSE:F) bet on enormous EVs requiring heavy batteries and carrying high price tags.
Demand has become saturated, but buyers in the mid-market have not been served. General Motors (NYSE:GM) has only recently resumed production of its Chevy Bolt, which starts at $26,500. Tesla price cuts have generated demand in the upper middle class, but margins have fallen.
The U.S. market has also been hurt by its charging infrastructure. Potential buyers fear running out of electricity on road trips and are reluctant to commit to full EVs. As a result, hybrids like the Toyota (NYSE:TM) Corolla I bought last year are in big demand.
China, with better recharging infrastructure and lots of EV competition, is doing better. BYD (OTCMKTS:BYDDF), which serves the mid-market there, sells more cars than Tesla. But even in China, there is a big demand for hybrids, like the plug-in hybrids of Li Auto (NASDAQ:LI).
Toyota stock is up 3% over the last three months, while Tesla is down over 25%.
TSLA Stock: What Happens Next?
An EV can be just a battery with wheels. Reports of the market’s demise are exaggerated.
However, it will take time for charging infrastructure and car makers to seize the real opportunities of the market and IRA tax cuts, and until they do, expect EV stocks like TSLA to fall.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.