Morgan Stanley Downgrades Lucid, Rivian to Sell, Warns of ‘EV Winter’ Into 2026

Morgan Stanley’s new automotive analyst just declared open season on EV startups. The investment bank downgrades Lucid and Rivian to Sell, warns ‘EV winter’ will last into 2026 as post-subsidy demand collapses, reports Barron’s. GM was upgraded to Buy.

Why it matters: The call validates what EVXL has warned about for months: the post-subsidy EV market is entering a prolonged contraction that will crush companies without profitable core businesses.

The Details

• Andrew Percoco, who took over Morgan Stanley’s auto coverage from Adam Jonas, issued sweeping rating changes on Monday.
• Percoco downgraded both Lucid (LCID) and Rivian (RIVN) to Underweight (Sell) from Equal Weight (Hold), citing slowing U.S. EV sales and the loss of federal tax credits.
• The analyst slashed Lucid’s price target to $10 from $30 and maintained Rivian’s target at $12.
• Tesla was cut from Overweight to Equal Weight, though Percoco raised its price target to $425 from $410, acknowledging AI opportunities are “mostly priced into shares.”
• General Motors was upgraded to Overweight with a price target of $90, up from $54, as traditional automakers benefit from the EV slowdown.

By The Numbers

Lucid (LCID):

• Dec 8 Close: $12.76 (-4.9%)
• New Price Target: $10 (down from $30)
• 52-Week High: $36.40
• 52-Week Low: $11.46
• Market Cap: $4.14 billion
• YTD Performance: -56%

Rivian (RIVN):

• Dec 8 Close: $17.61 (-1.9%)
• Price Target: $12 (unchanged)
• 3-Month Performance: +28%
• YTD Performance: +35%

Tesla (TSLA):

• Dec 8 Close: $439.58 (-3.4%)
• New Rating: Hold (from Buy)
• New Price Target: $425 (up from $410)

General Motors (GM):

• Dec 8 Close: $75.71 (-0.5%)
• New Rating: Buy (from Hold)
• New Price Target: $90 (up from $54)

EVXL’s Take

Percoco’s “EV winter” thesis isn’t a prediction. It’s already reality. When the $7,500 federal tax credit expired on September 30, U.S. EV sales collapsed 24% in a single month. GM announced 3,400 layoffs. Ford halted F-150 Lightning production indefinitely. The subsidy cliff we warned about all summer arrived exactly as expected.

The uncomfortable truth for Lucid and Rivian investors: neither company is profitable, and both depend on a market that just lost its biggest demand driver overnight. Lucid’s Saudi backing and Rivian’s Volkswagen partnership provide lifelines, but lifelines aren’t growth strategies.

Morgan Stanley now projects U.S. EV volumes will fall 20% in 2026, with battery-electric penetration dropping to just 6.5% of light vehicle sales. That’s the market these startups must survive in without the $7,500 crutch that propped up the entire industry.

Frequently Asked Questions

Why did Morgan Stanley downgrade Lucid and Rivian?
The analyst cited slowing U.S. EV sales following the September 30 expiration of the $7,500 federal tax credit and neither company achieving profitability.

What is the “EV winter” Morgan Stanley is warning about?
Percoco projects an extended period of weak EV demand lasting into 2026, with U.S. EV volumes potentially falling 20% and battery-electric market share dropping to 6.5%.

Why was GM upgraded while EV stocks were downgraded?
Morgan Stanley believes fewer EV sales mean more internal combustion engine and hybrid sales, benefiting traditional automakers like GM with profitable truck and ICE lineups.