Tesla has regained its footing in the waning days of the year, but some of the other names in the electric-vehicle space don't seem to be following suit. Shares of the EV giant dipped in mid-November and early December as CEO Elon Musk dumped stock to pay his tax bill and tech stocks in general moved lower. However, Tesla has bounced back over the past week and is on track for a healthy fourth-quarter return. But strangely, Tesla's recovery has come even as the rest of the EV industry has struggled. For example, popular ways to gain exposure to the booming battery industry, such as QuantumScape or lithium mining stocks, have badly underperformed Tesla in recent months. Fellow EV companies have struggled as well, with Lucid down sharply in December and Rivian losing its initial IPO pop from last month, even with a jump of more than 10% on Monday. There are several explanations for why Tesla's stock is diverging from other green auto plays, according to Wall Street pros. One potential clue can be found in the options market, where Tesla and other EV stocks get more traction than battery names. "Tesla clearly is on the top list of equity options traded almost every day ... Lucid has had extremely high option volumes for quite a while. It may not be on the list every single day, but it's often up there," said Randy Frederick, the managing director of trading and derivatives for the Schwab Center for Financial Research. "The battery companies, those have a tendency to just hit the list whenever there's a specific news story about them," he added. Increased options activity can lead to extra volatility, especially around expiration dates, and suggests that certain types of trades may be more attracted to Tesla than to other names in the space. Another potential reason for the struggling battery-related stocks is the price of lithium, which appears to play a bigger role in moving mining stocks such as Albemarle than excitement about the launches of new electric vehicles. "It is absolutely based on the price of lithium. I think that's what it mostly comes down to, and I don't think that's going to change anytime soon," said Bill Selesky, an equity analyst at Argus Research. The price of lithium has soared in 2022, but some investors are growing worried that it may be close to peaking and the future price level in the years ahead is uncertain, according to Aleksey Yefremov, equity research analyst at KeyBanc Capital Markets. "I do hear lately a little more concern about how long these price increases ... will continue," Yefremov said. Additionally, the final weeks of 2021 have seen a slight defensive shift in the stock market, with small caps and the tech-heavy Nasdaq underperforming. Tesla, after years of being seen as one of the most speculative stocks on Wall Street, is now a more mature company that can turn a profit, potentially making it seem like a safer option for investors who are spooked by start-up auto and battery makers with little or no revenue. "I think risk is becoming a little more crazy for some people, and they don't want to play that game anymore," Selesky said.
The logo marks the showroom and service center for the US automotive and energy company Tesla in Amsterdam on October 23, 2019.
John Thys | AFP | Getty Images
Tesla has regained its footing in the waning days of the year, but some of the other names in the electric-vehicle space don't seem to be following suit.