In 2023, electric vehicle (EV) stocks faced turbulent times.

Market pressures, declining demand, and receding government backing have pummeled companies, leaving them reeling. This, combined with extravagant expenditures and dwindling profits, has brewed a perfect storm.

While some companies may see growth in the long run, it might be prudent to start culling the most vulnerable EV stocks from your portfolio until conditions improve. By doing so, you can steer clear of imminent stock plunges as the EV sector continues to face challenges.

Fisker Inc. (NYSE:FSR) is an EV company specializing in electric vehicle design and development. Their innovative Fisker Flexible Platform Agnostic Design (FF-PAD) allows for flexible car development on a Fisker-compatible EV platform of varying sizes.

The release of the Fisker Ocean, a crossover SUV in 2023, garnered mixed reviews from the market. While some lauded its build quality and interior, criticisms arose regarding issues with the key fob, software glitches, and missing features. The company’s upcoming releases, including Fisker Alaska, Fisker Pear, and Fisker Ronin, aim to address these shortcomings.

However, Fisker Inc. faced production delays and unforeseen challenges in 2023, significantly impacting its financial performance. Notably, the gross margin for Q4 of 2023 plummeted by 35%, with a Q4 EPS loss of $1.23. This loss represented 55% of the full-year EPS decrease of $2.22. Additionally, the company saw a 56% decline in full-year cash and cash equivalents, dropping from $736.55 million to $325.45 million.

Moreover, FSR received a non-compliance notice from the NYSE due to its stock trading below $1 for 30 consecutive days, raising concerns about potential delisting. These compounding challenges have shifted Fisker Inc. from a promising EV manufacturer to a company teetering on the brink of insolvency.

With discussions about potential fundraising from an existing noteholder unconfirmed, investor confidence remains shaky. Considering these uncertainties, selling FSR and exploring alternate EV investments may be advisable.

For investors in Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE), the standard brokerage disclaimer about potential significant losses has unfortunately become a harsh reality. The company, known for manufacturing the luxury EV FF91 Futurist Alliance priced at $309,000, has witnessed a staggering decline in its stock price from $100 to $0.10 in a year, signifying a rare -99.9% 1-year return.

Despite efforts to maintain market presence and address Nasdaq’s non-compliance notice, FFIE underwent two stock splits within a short timeframe, a worrisome indicator. Financially, the company continues to struggle, with no revenue generation reported in its latest quarterly financials, reflecting only $551,000 in auto sales.

Additionally, competing with established players in the luxury EV sector poses further challenges for FFIE. While highlighting operational enhancements and expansion strategies, the company faces substantial losses and cash drain. Investors holding out hope may find a more secure investment by divesting from FFIE and exploring alternative EV stocks.

Founder’s Downfall

Once a shining star, Nikola Corporation (NASDAQ: NKLA) faced its first major setback when founder and ex-CEO Trevor Milton was convicted of fraud in 2022. Milton’s deceptive practices artificially boosted share prices, tarnishing the company’s reputation irreparably. Consequently, he is no longer associated with Nikola, leaving a trail of damage in his wake.

Struggles and Scandals

In a bid to salvage its standing, Nikola underwent significant restructuring under the leadership of former GM executive Thomas Okray. Despite a brief resurgence in mid-2023, the company’s woes persisted. Issues came to a head when 209 electric semis were recalled due to a battery defect, resulting in fires and considerable financial losses. These incidents marked a downward spiral for the once-promising electric vehicle manufacturer.

Financial Freefall

The financial metrics paint a grim picture for Nikola. With a jaw-dropping negative 597% gross margin, a drastic revenue dip from $49.72 million to $35.84 million, and net losses totaling $214 million, the company’s future appears increasingly bleak. Such abysmal figures have pushed Nikola to the brink of insolvency, eliciting concerns from investors and regulators alike.

Looking Ahead

Amidst a turbulent past marred by executive misconduct and product safety concerns, Nikola finds itself teetering on the edge of obscurity. The specter of delisting looms large, further jeopardizing its market viability. Prospective investors are advised to exercise caution and explore alternative opportunities within the electric vehicle sector to mitigate potential risks.