Several electric vehicle (EV) stocks had outstanding returns in the month of July. That included Rivian Automotive(NASDAQ: RIVN) shares, which jumped 22.3%. The stock of fellow EV maker Lucid Group(NASDAQ: LCID) soared 34.9%, and EV battery maker QuantumScape(NYSE: QS) pushed 31.3% higher, according to data provided by S&P Global Market Intelligence.
Those moves each came from positive company-specific news. But much of those gains evaporated in just the first trading week of August. That shows just how volatile these early-stage EV stocks can be.
Let's review what made them jump, and whether the August retreat is now a buying opportunity.
Rivian's big new partnership
Rivian stock first gained fresh momentum at the end of June when it announced a major new investment from global auto giant Volkswagen.
The automaker first plans to invest $1 billion with Rivian in the form of a convertible bond with a yield of 4.75%. In total the agreement will have Volkswagen investing up to $5 billion with Rivian over the next two years. The company will buy $2 billion in Rivian's common stock. Lastly, $2 billion will be used to create a joint venture (JV) to develop software platforms and architecture to be used in both companies' EVs.
Investors took that announcement as a big vote of confidence in Rivian's ability to grow and become profitable. The capital injection should now allow it to begin production of its new R2 SUV without raising additional capital. That model will be sold at lower prices than its existing lineup and is expected to begin shipping in early 2026.
Another catalyst for Rivian's stock last month was its second-quarter production and delivery report. The company delivered about 13,800 EVs. While management reaffirmed its volume guidance for 2024, it may be in a good position to increase that guidance of 57,000 units in the future.
Image source: Rivian Automotive.
Investors also don't mind that the company is only seeking to match last year's production volume, since that is partially due to retooling work in its Illinois factory in preparation for the start of R2 vehicle production next year. Investors may get more information when Rivian releases its full second-quarter report after the market closes on Tuesday, Aug. 6.
Volkswagen also invests in QuantumScape
Volkswagen wasn't finished with its EV investments in July. It also announced its battery division, PowerCo, reached a new partnership with EV battery maker QuantumScape. Under its agreement PowerCo will get the right to license and mass produce batteries with QuantumScape's solid-state technology.
In addition to also being a confidence boost for investors, the non-exclusive agreement gives QuantumScape another 18 months of runway for its cash position that should take it into 2028.
For its part, Lucid stock gained ground in July mostly thanks to its vehicle delivery update beating expectations. But Lucid still only produced about 2,100 vehicles and delivered about 2,400 in the second quarter. Investors will hear more from that company in its second-quarter report due out on Monday, Aug. 5 after the market close.
The bigger picture in focus
With all that positive news, investors might wonder why all three stocks have plunged since the start of August. The answer is that the companies don't operate in a vacuum. And higher-risk, unprofitable stocks are getting hit due to renewed recession concerns. Recent jobs data showed fewer jobs being created and higher unemployment than many expected.
Investors in these volatile stocks shouldn't be surprised to see them get hit hard in that environment. Owning these stocks means believing that not only the underlying businesses will succeed, but the companies have enough of a cash cushion to get there even in a slow economic environment.
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Howard Smith has positions in Lucid Group, QuantumScape, and Rivian Automotive and has the following options: short August 2024 $3.50 calls on Lucid Group. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
