Not long ago, the electric vehicle (EV) industry was the hottest segment of the U.S. economy. Now it increasingly appears the industry could be entering a long winter. And investors want nothing to do with EV stocks – especially not after such a massively disappointing quarterly update from Tesla (TSLA).

The EV maker just reported its fourth-quarter earnings, and they were not great. The firm came in below consensus estimates for both earnings and revenues. And management’s outlook wasn’t any better. It warned that its vehicle volume growth “may be notably lower” in 2024 than it was in 2023.

Moreover, it seems competitors from China’s electric car market are giving Musk & Co. a run for their money right now. And that headwind is one that could impact all U.S. EV makers.

As a result, the entire sector has been in decline, led by TSLA, which has plummeted around 12% since announcing Q4 earnings.

It’s a bloodbath out there. 

And the bad news is that this EV Winter is far from over. Dozens of EV startups will go bankrupt, which means many EV stocks will go to zero. 

Poorly positioned investors will likely lose everything. 

But here’s the good news: This EV Winter will end. And when it does, the EV stocks that survive will absolutely soar. 

And well-positioned investors could stand to make fortunes.

The Chilling Reality of EV Stocks This Winter

So, what’s going on for this once-hot sector? 

Every new technological revolution goes through the same three steps: invention, consolidation, then boom. 

When a new technology is first introduced, everyone gets really excited about it. There is a premature euphoria about that technology’s potential applications. 

Then, a sobering reality sets in. New technology will not change the world overnight – it will take time. Consumers and investors alike cool on the industry. The market stalls. Dozens of startups in that tech industry go bankrupt. And the whole industry consolidates around a few solid names. 

Once that happens, the technology starts to live up to its early promise and starts to change the world. Consumers and investors jump back on the bandwagon. And the tech firms that survived the sector’s consolidation become industry titans. 

This is exactly what happened when the automobile was first introduced to the world. 

Lessons from the Gas-Powered Auto Boom

In 1893, bicycle mechanics (and brothers) J. Frank and Charles Duryea of Springfield, Massachusetts, designed the first successful American gasoline automobile. An automotive gold rush ensued.

A decade later, some 485 companies entered the automobile manufacturing business. All were hoping to strike it rich as the gas-powered car redefined the world of transportation.

It was a “gas-powered car boom” – much like the “electric vehicle boom” of today.

What happened next?

Well, the gas-powered car did go on to redefine the world. Today, around 70 million new passenger cars are sold every single year.

But almost none of those 485 companies that popped up back in the early 1900s became a success story.

Less than 50 were still in operation by 1930. And just three accounted for 80% of the market.

But then, the automotive industry entered its “boom.” Throughout the 1900s, the market grew like crazy. And the auto makers that survived the consolidation have become titans of the modern economy. 

I’m talking about companies like Toyota (TM), Ford (F) and General Motors (GM) – multi-billion-dollar centerpieces of the global economy. 

So, the investment takeaway here? When it comes to technological revolutions, invest in the next generation of winners during the consolidation phase – when the industry is whittled down from hundreds of hopeful startups to a handful of future titans. 

That’s exactly where we are with the EV industry today.

The Stalling of the EV Industry

Due to a confluence of headwinds ranging from high financing rates to flailing consumer interest, U.S. EV sales have slowed dramatically.

In 2021, the EV market grew by nearly 90%. In 2022, it grew by 65%. 

But in the final three months of 2023, the EV market in the U.S. grew by just 40%. 

Sure, that is still 40% growth – but it’s much lower than 65%. 

The EV market is slowing. 

Perhaps more importantly, EVs have stopped gobbling up market share from traditional autos. From mid-2021 to mid-2023, EV sales penetration soared from 3% to 8%. But over the past six months, EV sales penetration has plateaued around 8% of total auto sales in the U.S. 

No matter which way you slice it, the EV market is slowing. 

This is the consolidation phase of the EV industry. 

Over the next 12 months, the industry will keep struggling. Dozens of EV startups will file for bankruptcy. Many EV stocks will head to zero. And some investors are likely to lose everything. 

It will get rough for the industry in 2024. 

But some EV firms will survive. And those that do stand to make fortunes once this winter ends, likely in 2025. 

That means that the best time to buy the right EV stocks is now, while they’re on sale – and before they rebound with vigor

The Future of EV Stocks After the Winter Season

Navigating EV Stock Investment During the Consolidation Period

Investors have been bracing for the EV Winter, anticipating turbulent times for electric vehicle (EV) stocks. While it may be tempting to view the market’s current state as a dim wintry landscape, there remains a glimmer of hope that EV stocks, like migrating flocks, are merely consolidating before the spring sun.

Winners Among the Chilling Storm

As the EV industry hunkers down, certain stocks have weathered the storm more successfully. Rivian (RIVN) is one such company, demonstrating resilience amidst market vagaries. Backed by robust financial support and accelerating their manufacturing operations, Rivian is positioning itself as a marque of EV durability. Furthermore, their vehicles are achieving ubiquitous presence and favor among customers, fortifying their standing among investors.

QuantumScape (QS) emerges as another top contender. Revered for spearheading the development of groundbreaking solid-state batteries, QuantumScape’s recent breakthrough data has triggered optimism about the imminent practical application of their batteries in the automotive sector, adding a new spark to their stock appeal.

These standout companies showcase a beacon of hope, serving as a reminder that amid the industry’s hibernation, opportunities for growth and resurgence continue to simmer.

Embracing the Winter for Spring’s Bounty

Balance sheets and market forecasts may offer a chilling tale, but history has shown that industry consolidations, despite their harsh toll, lay the groundwork for future victors. As investors witness the current EV Winter, they are also witnessing the genesis of future industry leaders. Embracing this period is not only inevitable but visionary. This cyclic period of consolidation paves the way for a transformative epoch in the EV industry, inaugurating the evolution of future industry pinnacles.

Recognizing the latent potential amid the frigid climate of the EV Winter holds the promise of reaping a bountiful harvest upon the thaw of spring.

Investors should set their sights on these enduring symbols of resilience, embodying the potential for growth in the EV sector. Moreover, they should seize the opportunity to align themselves with promising stocks that will flourish when spring eventually casts its beneficent light upon the EV landscapes.

As the wise adage goes, “Winter is the silent transformational phase preceding the resurgence of vivacious life.”