Growing consumer interest and government incentives should drive the growth of the electric vehicle (EV) industry. However, intense competition and a semiconductor chip shortage will keep some industry participants under tremendous pressure in the near term. For example, analysts have recently downgraded EV stocks Hyliion (HYLN) and Lordstown Motors (RIDE). Read on to learn more as to why.Last year was tough for the automotive industry. However, increasing fuel prices and government incentives to encourage the transition from traditional, internal combustion vehicles to electric vehicles (EV) have boosted EV sales this year. To meet the rising demand, automakers are increasingly investing in this space. And the global electric vehicle market is expected to reach $812.89 billion by 2028, registering a 19,8% CAGR.
While most EV players have benefited from the industry tailwinds, some are struggling to stay afloat due to intense competition. Furthermore, an acute semiconductor chip shortage and supply chain constraints are hampering the production of EVs.
Given this backdrop, we think it could be wise to avoid EV stocks that possess weak fundamentals and poor growth prospects. Cases in point are Hyliion Holdings Corp. (HYLN) and Lordstown Motors Corp. (RIDE), which due to their fragile financial health have recently been downgraded by analysts. Therefore, we think these two stocks are best avoided now.