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Traditional automaker Ferrari surprisingly came out at the top of auto stocks for 2022, beating out EV companies.
Amid the selling pressure in the tech space that characterized much of 2022, top-performing auto stocks were those with the lowest decline. Some auto stocks outperformed others this year because they escaped the worst of 2022’s selling pressure. However, the best-performing auto stock for the year was not from the emerging EV industry but rather the fossil-fueled Ferrari.
Several once-promising EV startups constituted the biggest losers of 2022 due to capital hurdles or production scale limitations. According to reports, companies such as Nikola (NASDAQ: NKLA), Canoo (NASDAQ: GOEV), Lucid (NASDAQ: LCID), and Rivian (NASDAQ: RIVN) all experienced massive 76% drawdowns year-to-date (YTD). Meanwhile, traditional auto manufacturers were able to moderate their stock declines better than the EV platforms. For instance, Italian luxury automaker Ferrari sat at the summit of the top-performing auto stocks for 2022. The company achieved this feat by sustaining a relatively smaller 18% decline YTD amid more significant drawdowns by its contemporaries.
Ferrari Leverages Product Exclusivity to Top 2022 Auto Stocks
Ferrari was also able to better manage losses by limiting annual production to preserve exclusivity and pricing power. Although the company’s cars are high-end and expensive, Ferrari projects to sell far less than other traditional manufacturers and EV makers. This approach gives Ferrari excellent profit margins and ensures that its production plants run at a balanced capacity.
According to Ferrari CEO Benedetto Vigna, the car manufacturer has a long waiting list, even though its products are pricey. In addition, at Ferrari’s Q3 earnings call, Vigna also forecasted healthy demand for the company’s high-performance cars in 2023. The Ferrari CEO stressed the Italian maker would not see any shortage in demand regardless of how global economies fare.
Other traditional automakers managed declines much more extensive than Ferrari’s 18% but relatively more minor than EV setbacks. For example, prominent American auto manufacturers General Motors (NYSE: GM) and Ford Motor (NYSE: F) sank 40% in the year. Beyond the US, automotive companies such as Stellantis, Nissan, Toyota, and Volkswagen experienced declines of around 25%.
The Tesla Way
Although Tesla (NASDAQ: TSLA) featured prominently in 2021 and this year, the famous EV maker was not among 2022’s best-performing auto stocks. Tesla’s shares have plunged 68% YTD, with much of the decline coming since CEO Elon Musk acquired Twitter. Oppenheimer analyst Colin Rusch commented on the Tesla situation, saying:
“We believe increasing negative sentiment on Twitter could linger long term, limiting its financial performance and become an ongoing overhang on TSLA.”
Since the Twitter deal closed on October 27th, Tesla stock is trading down more than 50%.
The EV industry experienced significant stock growth last year but ran into micro and macroeconomic constraints in 2022. These constraints include low vehicle inventories, surging interest rates, and pervasive fears of a recession. Although several leading automakers performed reasonably well this year, they could not replicate 2021’s profitability. In an investor note from earlier in the month, Morgan Stanley analyst Adam Jonas observed:
“We are preparing for a challenging FY23 outlook for auto earnings on demand decline (higher rates), deflation (lower price/mix) and unfavorable changes in the supply/demand balance for EVs.”
Wall Street analysts also anticipate that automotive stocks will experience choppiness in 2023.