As the electric vehicle craze fades, the stock prices of traditional American car manufacturers are on the rise

As the craze for electric vehicles subsides, investors are turning their attention to traditional car companies, causing electric vehicle stocks to fall while traditional car stock prices rise.

As of last Friday, Stellantis and General Motors saw their stock prices rise by 22% and 13% respectively this year, outperforming the S&P 500's 7.3% increase. Ford's stock price remained flat, while Tesla plummeted by 34%. Both Rivian Automotive and Lucid, two unprofitable electric vehicle companies, experienced even larger declines.

In response to this, Dave Mazza, Chief Strategic Officer of asset management company Roundhill Investments, stated:

"Financial indicators such as P/E ratio and P/B ratio of traditional car stocks are often more conservative and reasonable, with a significant valuation discount compared to electric vehicle stocks. Therefore, amidst the winter of electric vehicles, investing in traditional car stocks may be seen as a more stable investment strategy, as these companies have cash flow and profitability to support them, and they are usually valued lower and priced cheaper, implying a higher margin of safety." "Although the arrival of the electric vehicle era is inevitable, 'faster' does not mean 'tomorrow'. In the short term, traditional car manufacturers will still exist and continue to operate their businesses."

Last week, some analysts believed that due to the weakening demand for electric vehicles, the "Big Three" - General Motors, Ford, and Stellantis - may emerge as winners in the industry.

Their reasoning is that while traditional car companies also have a presence in the electric vehicle field, their current revenue and profits mainly come from conventional fuel vehicles and hybrid vehicles, and they have established stable sales networks, brand loyalty, and profit models. Moreover, these vehicle types still hold a significant share in the global market and will continue to bring in substantial cash flow for the companies in the future.

Furthermore, traditional car companies can use the stable income generated by their fuel vehicle business as an economic "buffer" when transitioning to the electric vehicle sector. Even in the face of significant expenditures on developing new technologies and market uncertainties during the transition, these traditional car companies can rely on the funds accumulated from their fuel vehicle business to support their development and transition, reducing risks and pressures.

In contrast, emerging electric vehicle companies lack such a "buffer" and are more reliant on the rapid growth of electric vehicle demand in the market