Even though the electric vehicle (EV) industry is expected to achieve solid growth in coming years fueled by governments’ support worldwide, the ongoing semiconductor chip shortage is a significant challenge to the industry’s growth in the near term. It might be wise not to invest in overpriced EV stocks Hyzon Motors HYZN, Lordstown Motors RIDE Vicinity Motors VEV and Ayro AYRO. These were among the most undervalued players in the sector last month. Let’s discuss.The electric vehicle (EV) industry is expected to grow significantly in the long run based on supportive government policies and regulations amid rising automobile emission concerns. However, the EV market faces chip and labor shortages and supply chain issues, which make the industry’s near-term prospects bleak.

The industry is becoming overcrowded with many new players competing for market share. However, investors should be cautious about investing in EVs due to the overvaluation and fundamental weaknesses of so many new competitors. In a reference to how the market values EVs versus traditional internal combustion engine (ICE (NYSE:)) makers, Bernstein’s Tony Sacconaghi stated, “In 2014, they accounted for 15% of all BEVs [battery electric vehicles]Sold. Today, they represent 28%. However, even if they ultimately were to account for 50% of all EVs sold by 2030—which may be aggressive—it remains difficult to justify their current valuations.’’

This backdrop makes it possible to steer clear of EV stocks Hyzon Motors Inc. HYZN, Lordstown Motors Corp. RIDE (VEV), Vicinity Motor Corp. VEV (VEV) or Ayro Inc. AYRO (AYRO). The high valuations of these stocks aren’t justified by their poor financials or growth prospects. These stocks also ranked among the lowest-performing sector participants in last month’s market.

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