What Companies Can Learn from the Forecasted EV Recession
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What Companies Can Learn from the Forecasted EV Recession
Throughout my years of business experience, I’ve encountered many challenges. Markets are constantly fluctuating. Sometimes these fluctuations can lead to a recession. At first glance, a recession seems bad for the industry.
However, it brings many opportunities and drawbacks if you know how to navigate it. The forecasted EV recession provides a perfect example.
Is an EV Recession Coming?
EV stocks began to decline heavily in late 2022. There are a lot of similarities to the dot.com boom and subsequent bust. There are a few powerful companies, like Tesla, and many new players.
Many experts agree that the industry is heading toward an inevitable recession. The question is how low it will go.
Many forecasters, and business owners, are hoping for a slow decline rather than a crash. They expect growth to slow but not stop completely. They also expect stocks to rise again relatively soon.
Tesla Price Cuts
Tesla recently made a move many found surprising. The company made a bold move amid low sales numbers, lower-than-expected growth, and falling stock prices.
They dropped their prices by as much as $25,000. The Model Y’s price was slashed from $65,990 to $52,990. The cut also made the Model Y eligible for the Inflation Reduction Act EV tax credit, which provides a $7,500 credit for qualifying electric vehicle purchases.
Why did Tesla cut prices so drastically? It’s likely an attempt to increase their sales significantly, which may improve profits over time. There may be another reason for the cuts as well.
A recession will tighten the field. Companies without the cash flow to ride it out will fall, making Tesla even more profitable in the long run.
What can you learn from Tesla’s daring cuts? Taking the right chances can pay off big, particularly in uncertain times.
It’s Possible to Come Out on Top
It’s impossible to say for sure, but experts expect some EV companies, including Tesla, to come out of the recession better and stronger. The Harvard Business Review analyzed how companies fared in recent recessions.
The study “Roaring Out of Recession” discovered that 17% of businesses didn’t survive the recession. However, 9% outperformed other companies by 10% in the 3 years after the recession.
What can be learned from this? A recession is a make-or-break period for any business. You can come out on top if you are adequately prepared before the recession hits.
Cashflow is the Biggest Concern
The recent EV struggles reinforce what we already knew. Cash flow is the biggest problem for companies facing a recession. For example, the new company Lurid had a net loss of $670 million and a free cash flow loss of $860 million in 2022’s 3rd quarter.
When things are going well, taking cash flow for granted becomes easy. However, having a contingency plan or an open line of credit is an excellent idea if things change rapidly.
Written by Raul Francois Russian Morrison.
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