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Shares of EVgo (NASDAQ:EVGO) tumbled 6% and FREYR Battery (FREY) dropped nearly 4% on Wednesday after brokerage TD Cowen downgraded the companies from Outperform to Market Perform.
According to brokerage, rising interest rates and a potential ‘higher for longer’ scenario has created a difficult environment for mobility tech companies to raise external capital needed to support their numerous business plans.
TD Cowen noted that despite record EV deliveries YTD in the U.S., business appear to be cutting down on discretionary capital spending, which would indicate fewer EV charging installations.
Rising U.S. vehicle prices, a weak economic picture in Europe, and dimnishing EV subsidies are expected to further add pressure on EV charging businesses.
“Standing up gigafactories and manufacturing batteries remains a challenging low-margin business that requires significant capital,” added TD Cowen.
Brokerage stated that easing demand, particularly in China, along with a strong supply partly propped up by government incentives has led to an oversupplied oversupplied LFP / ESS market.