Electric vehicle stocks are being heavily shorted: Tesla is shorted for $22 billion, which is ten times that of Rivian!

The United Auto Workers (UAW) is demanding significant pay raises and a four-day workweek from Ford and two other Detroit-based automakers.

These demands could disrupt the industry's cost structure and give an advantage to electric vehicle manufacturers without union organization. However, electric vehicle giant Tesla is the most heavily shorted automotive stock.

Tesla Shorted for $22 Billion

A new report from short-selling research firm S3 Partners reveals how much money is being shorted on automotive stocks.

According to S3's data, short sellers have borrowed and sold approximately $22 billion worth of Tesla stock. This is roughly 10 times the amount shorted on the second-largest shorted automotive stock, Rivian.

Ford is the third-largest shorted automaker, with shorts borrowing and selling $1.9 billion.

The other two of Detroit's Big Three automakers, General Motors and Stellantis, rank seventh and tenth, respectively, on the most shorted list.

Tesla's current stock price is about 58 times the projected earnings for 2024, while the traditional price-to-earnings ratio for the S&P 500 index is around 18.4. Ford's price-to-earnings ratio is approximately 6.6.

High valuations, whether absolute or relative to other companies in the industry, are often key concerns for short investors.

Electric Vehicle Stocks Generally Shorted

Of the tradable Tesla shares, nearly 3% are being shorted. In comparison, the average short interest rate for stocks in the S&P 500 index is around 2%.

Tesla's short position is not significantly higher than the average level, but it is also unlikely to be that high. Tesla's market capitalization is approximately $830 billion, and short sellers do not have that much available capital.

Ford, General Motors, and Stellantis have short positions of approximately 4%, 2%, and 2%, respectively. Even in the case of a strike by the United Auto Workers in the United States, the average short interest rate for traditional automakers' stocks is not that high.

Among automotive stocks, electric vehicle startups have the highest short interest rates. Fisker has a short interest rate of 43%. According to the S3 Partners report, this is the highest.

Lucid ranks second with a short interest rate of 23%. Nikola and Rivian have short interest rates of approximately 21% and 13%, respectively.

Fisker, Lucid, Nikola, and Rivian have not yet turned a profit or generated free cash flow. The positioning of short investors suggests that they do not believe all electric vehicle startups will succeed.