Tesla leads the decline of new energy vehicle stocks, and investors may turn to traditional car companies

Currently, stocks related to the electric vehicle industry are still in a sharp decline, which continues to impact related investors. Last week, Tesla's stock price fell for four consecutive days, down 33.6% from the peak of 900.4 yuan per share on January 25, leading the decline in the automotive sector and causing huge losses to funds with heavy holdings in automotive stocks.

This is painful for traders who have positioned themselves in the electric vehicle and battery sector in 2021. According to Bloomberg data, relevant funds have invested nearly $2 billion, and before the sell-off, fund assets in the sector had increased to a record $4.6 billion.

“It’s clear that the electric vehicle industry will continue to exist, but it’s still unclear who the winners are,” said Chris Grisanti, chief equity strategist at MAI Capital Management. “The market has been treating these companies (star stocks) as winners, but it’s unclear what the future holds.”

At the same time, traditional automakers are also shifting their business focus to electric vehicles. For example, GM CEO Mary Barra promised at the end of January that GM will only sell zero-emission models starting in 2035. Volvo Cars also announced last week that it will only sell battery cars by 2030 and has accelerated its transformation plan.

Although, Wedbush Securities analyst Dan Ives is still listing the benefits of the fund: "We see an arms race among electric vehicle companies, so many (traded funds) allow investors to invest not only in an electric vehicle company, but in the entire industry." But when the nest is overturned, the eggs will not be intact. According to Bloomberg, in the last three trading days of last week, almost every stock fell by more than 6.6 percentage points. These phenomena have triggered market concerns that the industry may be overheated.

However, it is worth noting that thanks to the environmental protection policies and promotional measures introduced by various governments, global electric vehicle sales increased by 15% in 2020. It is estimated that by 2040, the electrification rate of passenger cars sold worldwide will reach more than 50%.