At times, Tesla may have made electric vehicle (EV) production look easy, but other companies have learned it can be much more difficult than it looks, The Wall Street Journal reports.
Lucid Group, Fisker and Rivian Automotive are just a few of the companies that spend considerable amounts of cash to expand their factory production and sales — only to wind up losing money each vehicle they sell.
So what’s the problem? First, the more EV manufacturers there are, the more choices customers have. More choices mean more competition among auto makers, who find themselves offering steep discounts to help move their product. Unfortunately for EV automakers, once product demand slows, they are left scrambling trying to think of ways to stay in business.
When Tesla found initial success in the EV market, companies tried to follow its lead and deploy its own lineup of EVs in 2018 and 2019 with expectations of unseating established automakers and become industry household names. After all, Tesla’s Model 3 sedan was a hit, any EV that followed should have similar success.
The blueprint appeared to work — at first. These new companies enjoyed high valuations, despite their lack of revenue and car building experience. Analysts, investors and the general shopping public believed other EV manufacturers could match Tesla’s success as a traditional car market disruptor. Rivian’s market value even surpassed Ford and General Matters for a short time, The Wall Street Journal reports.
That was then. Today, these same EV companies are doing all they can to keep their lights on. Battery-powered vehicle sales haven’t reached their expected heights in the U.S., and even bigger names like Ford and Tesla have had to reduce prices to boost demand again. Even with those price cuts, customers have been slow to switch to EVs. The combination of cost, lack of a robust EV charging infrastructure and concerns about long-term reliability have kept many drivers sticking to their gas-powered cars and trucks.
Meanwhile, many EV startups are losing money and have opted to cut down their spending and postpone investments in an effort to hold on to whatever cash they have left, according to The Wall Street Journal. Lordstown Motors, an electric pickup truck manufacturer, and electric van company Arrival have filed for bankruptcy. Others may be still standing but aren’t selling many EVs.
Many of these EV manufacturers rose into prominence when optimism around battery-powered cars was high. Time will tell which ones will be able to withstand these rockier roads and which will have no choice but to call it quits.
The Wall Street Journal broke down several EV startups’ current standing in the industry. While Rivian is losing money each quarter, executives said they expect losses to decline this year. The company still has its sights set on becoming of the world’s biggest auto maker and unveiled a new $45,000 that’s expected to go on sale in 2026.
Lucid meanwhile has a factory in Saudi Arabia and is producing EVs as part of its deal to sell at least 50,000 to the country’s government, The Wall Street Journal reports. The company also plans to begin producing its Gravity SUV this year and extend its EV offerings in 2026, when it will unveil a new, less expensive midsize vehicle.
Fisker’s prospects look less promising. In February, the company said it could run out of cash this year. It had approximately 5,000 unsold cars as of mid-March and saw its cash reserves drop to $89 million (it had $991 million in cash reserves during its 2020 initial public offering). Fisker said it’s raising $150 million in new cash from an investor and is in negotiations with another large auto manufacturer for another investment.
At the same time, Fisker hired restructuring advisers to help get ready for a potential bankruptcy filing, according to sources.
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