Albemarle And Other EV Vendor Stocks Are Having A Tough Year. What Lies Ahead?

Our theme of EV Supplier stocks - which includes companies such as Albemarle stock and TE Connectivity stock that supply components and raw materials used in the manufacture of electric vehicles - has been a weak performer this year, declining by about 7% year-to-date, compared to the S&P 500 which has gained over 18% over the same time frame. Price cuts in the EV space by bellwether Tesla over the last two quarters have triggered a price war, particularly in the sizable Chinese EV market. This could be weighing on supplier stocks to an extent, as lower selling prices could mean more stringent component cost management on the part of OEMs. ALB stock has seen a decline of 15% from levels of $150 in early January 2021 to around $125 now, vs. an increase of about 20% for the S&P 500 over this roughly 3-year period. The decrease in ALB stock has been far from consistent. Returns for the stock were 58% in 2021, -7% in 2022, and -43% in 2023. Consistently beating the S&P 500 - in good times and bad - has been difficult over recent years for individual stocks; for heavyweights in the Materials sector including LIN, RIO, and SHW, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Unlike the EV market, which has low barriers to entry, with competition mounting, top EV component suppliers should stand to benefit irrespective of which automakers eventually win the market share battle in the EV space.