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The automotive market is currently going through massive changes while dealing with supply chain woes and an economy on the verge of recession. So, it’s fairly easy to identify automotive stocks with troubles presently. And the current bear market makes it easy to identify shares that will continue to bleed out as negative factors mount.
That said, there are a few reasons the equities listed below are on this list. The pivot away from internal combustion engine vehicles continues, but at a decreased clip. Two out of the three stocks listed are EV makers. Further, indicators in China, the world’s largest electric vehicle market, are mixed. Lastly, cracks have emerged in the iBuying model, with one business remaining a cautionary tale.
With these factors in mind, here are the top auto stocks to sell now.
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Auto Stocks to Sell: Li Auto (LI)
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Li Auto (NASDAQ:LI) stock faces a few obvious issues. For one, it is a Chinese-listed American Depositary Receipt (ADR). That means it represents shares of a non-U.S. company held outside the country, in this case, China. So, political risk is evident.
LI stock’s peers, including Nio (NYSE:NIO) and Xpeng (NYSE:XPEV), suffer from the same issue. However, Li Auto is doing much worse on one important front: deliveries.
In August Li Auto reported that it delivered 4,571 vehicles. Not only was that down 52% from a year ago, but it was also a 56% decline from July. Both of Li Autos’ aforementioned peers performed better. In Xpeng’s case, August deliveries increased 33% but were 17% lower than those in July.
Nio saw deliveries increase 81.6% in August YOY, and actually reported a modest 6% increase in deliveries between July and August. That strongly implies that LI stock is one to avoid for any investors interested in playing the reopening in China via EV stocks.
Carvana (CVNA)
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Carvana (NYSE:CVNA) was one of the success stories of the pandemic as its iBuying model really took off. The company had long been noted for its aggressive sales growth. That worked well in the lower-rate environments of past quarters and years. But as rates have gone up and used car demand has slowed, the narrative surrounding Carvana has shifted.
Macroeconomic forces have drastically affected the company’s fundamental picture. Sales declined in the most recent quarter, a first. And net losses reached $260 million, a massive shift from the $36 million profit a year earlier.