Shares of leading electric-vehicle (EV) manufacturers, such as Tesla Inc. and Rivian Automotive Inc., are a prime target for short sellers, according to financial analytics firm S3 Partners. They reported that more than three-quarters of short sellers in the auto sector focus on EV stocks, resulting in a remarkable $33.3 billion invested in these companies. However, shorting the EV sector, as well as the broader auto manufacturing sector, has proven to be an unprofitable trade this year.
Challenging Times for Short Sellers
S3 Partners revealed that short positions in the U.S. auto manufacturing sector have recorded mark-to-market losses of 58.1%. Despite the overall average U.S. short position experiencing a 16% decline in year-to-date mark-to-market losses, shorting the EV manufacturing sector has resulted in an abysmal -73.0% annual 2023 return, making it an especially risky endeavor.
July’s Short-Selling Performance
In July, EV manufacturing shorts experienced a 9.1% decrease, slightly outperforming the overall sector’s losses of 8.4%. Lucid Group Inc. stands out as the most profitable short in July, while Tesla, Rivian, and Nikola Corp. fare less favorably, according to S3 Partners’ data.
China’s Nio Inc. ranks among the top three heavily shorted stocks with $1.13 billion in short interest, following the expected market leader Tesla, which has amassed a staggering $26.3 billion in short interest. Rivian holds the second position among EV manufacturers, capturing $2.14 billion in short interest.
Recent Trends in Short Selling
Over the past thirty days, there has been an increase in short selling for both Rivian and EV manufacturers Xpeng Inc., Lucid, and Fisker Inc. On the other hand, short covering has been more apparent for Tesla, Nio, and Li Auto Inc., representing a shift in market sentiment, as highlighted by S3 Partners.
In conclusion, the EV sector continues to attract significant attention from short sellers in the auto manufacturing industry. However, recent market trends indicate that shorting EV stocks may not yield desirable returns. As the EV market continues to evolve rapidly, investors may need to rethink their strategies in the face of these challenging conditions.
Don’t Miss Out on Upcoming Tesla Earnings
As the market eagerly awaits Tesla’s upcoming earnings report, all eyes are on the Cybertruck maker to see how their performance will unfold. Stay informed and make informed investment decisions by keeping tabs on the latest developments.