U.S. electric vehicle adoption will be much slower than in the coming years than previously anticipated, Morgan Stanley analyst Adam Jonas says. EV makers Tesla and Lucid fell modestly in Wednesday's trading, extending a big recent sell-off, but Wednesday's big losers were lithium and certain chip plays, including Albemarle, SQM, On Semiconductor and Aehr Test Systems.
Jonas now sees electric vehicles reaching 11% of the U.S. auto market in 2025, and 26% in 2030, according to a new note released Wednesday. That's down from his prior U.S. EV penetration forecast of 13% and 32%, respectively.
A weak global economy and high battery costs are raising concerns about EV demand in China and Europe as well.
Jonas cites a "complete narrative change for EVs" over the past six months.
"Tesla is cutting prices in China and used Tesla prices are falling," Jonas wrote. "Lucid is seeing lower reservations and cancellations. Rivian stopped reporting reservations altogether. Discussions with OEMs and suppliers throughout the value chain suggest supply is growing faster than demand."
Tesla stock has plunged in the past several months, especially in December, amid concerns about demand in China and elsewhere.
Tesla stock fell 2.6% to 156.80 in Wednesday's market trading.
Late Wednesday, Elon Musk disclosed that he sold nearly 22 million Tesla shares for more than $3.5 billion in the three days ended Dec. 14.
Goldman Sachs cut its Tesla stock price target to 235 from $305, citing softer demand. Goldman also cut its Q4 delivery forecast for Tesla.
However, Morgan Stanley's Jonas said TSLA stock is a Top Pick for 2023. He says Tesla is "the only company able to sell EVs at ICE-like margins and have an un-presented presence in the battery supply chain. With the introduction of the Cybertruck and Tesla Semi in 2023, the company is expanding its auto product lineup."
Rivian stock slipped 1.7% to 24.54, right at seven-month lows. LCID stock sank 3.9% to 7.68 to a fresh record low.
Meanwhile, some EV-related plays are tumbling.
ALB stock slumped 5.4%, nearing its 200-day moving average. SQM stock sank 4.1%, below its 200-day. There's growing speculation that lithium prices, which have soared in 2022, may fall next year.
Meanwhile, ON stock fell 5.55% to right above its 50-day line, hitting a one-month low. AEHR stock skidded 5.8%, testing its 10-week moving average for a second straight week.
Both On Semiconductor and Aehr Test Systems stock are highly volatile. So it's possible that the current pullbacks could offer buying opportunities with a strong rebound.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
