11/08/23 09:11 AM EST

Have We Seen the Peak of the EV Market?

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Today’s bonus section is another update on the auto industry. The bonus chart displays the most significant Tesla drawdowns since 2012. We will leave the company-specific analysis Industrials sector head Jay Van Sciver, who has done an expert job covering Tesla.

As car lots fill up with EVs across America and only 1% of the American auto fleet has been replaced by electric vehicles, we may have seen the peak of the EV market as well. Producers have lost pricing power despite the enormous subsidies from the Inflation Reduction Act. With limited capital, limited resources, limited materials and limited labor, this may not have come soon enough as we focus on technologies of the green transition that work.

In other auto news, some relief for the auto consumer. Auto lending standards continue to tighten but at least there is some relief in price and negotiability. In October, wholesale used-vehicle prices fell by 2.3% as indicated by the Manheim Used Vehicle Value Index, with a notable year-over-year decline of 4.0%. This was part of a market correction that also saw three-year-old vehicle values drop more than average. Despite softening demand as shown by decreased sales conversion rates, the market maintained a healthy level relative to previous years.

Used vehicle retail sales also declined by 2% from September, continuing a year-over-year downtrend. New vehicle sales saw a modest year-over-year increase, even with a monthly dip in sales volume. Fleet sales were mixed, but retail SAAR figures improved both from last year and the previous month. Rental risk auction prices and mileage saw decreases, reflecting the broader trends of adjusting market conditions.

Learn more about the Market Situation Report written by Tier 1 Alpha.