General

Why Ford, Rivian and Lucid Stocks Raced Ahead Today

Why Ford, Rivian and Lucid Stocks Raced Ahead Today

What happened

Auto stocks opened higher on Tuesday. As of 11 a.m. ET, auto giant stocks Ford (F 1.06%) 1.8% gained and smaller electric vehicle starters Rivian Automotive (RIVN 2.31%) and Lucide Group (LCID 4.35%) rose similar amounts — 1.9% and 2%, respectively.

Granted, with the stock markets glowing green across the board today, auto stocks may just be keeping up with traffic. But on an encouraging note, there seems to be some really good news for the auto sector today:

Car sales in Europe are growing again.

And then

According to the latest report from the European Automobile Manufacturers’ Association, new passenger car registrations in the European Union increased by 9.6% year-on-year in September.

On the one hand, this growth was measured by the low base of subdued sales in September, hampered by widespread shortages of critical auto parts – especially semiconductors. Also, car sales so far in Europe are still down year on year — 9.9%. But on the other hand, September’s numbers may reflect the start of a trend of positive and growing sales in the automotive sector, as September was the second consecutive month of positive growth. (August sales in the European Union were also higher – 4.4%.)

What now

If this is If the beginning of a trend, auto investors may now be seeing the first glimmer of hope that the major global shortage of semiconductor chips — which seemed far from over six months ago — could finally be nearing its end.

For investors who are despairing of Ford’s admission that there are 40,000 to 45,000 Ford SUVs and trucks on lots half-built for lack of parts, or angry to learn that Rivian and Lucid have lowered production estimates for similar reasons, this would certainly be good news. It increases the likelihood that supply chains will begin to unravel and that car and truck sales can finally grow again. And on an optimistic note, this theory is doing seem consistent with recent reports of semiconductor companies scaling back to expansion and production plans as buyers fail to pick up every new semiconductor they can produce.

That said, according to auto stock analysts, Rivian is still not expected to even report pro forma gains from its auto business before 2027 at the earliest. And Lucid is not expected to do this before 2029. If, after hearing today’s car news, you are inclined to invest in each I still think Ford stock — for which analysts predict nothing but profits as far as the eye can see — is probably the best bet.

Rich Smith has no position in any of the listed shares. The Motley Fool has no position in any of the listed stocks. The Motley Fool has a disclosure policy.