Our Take, With Doug Sheridan
Our Take: Autos are a tough sector. Doubly so when you're trying to sell vehicles that are, on balance, twice as expensive and only half as good as those they seek to replace.
Our Take, With Doug Sheridan
The WSJ writes, companies like Rivian Automotive, Lucid Group and Fisker are burning through their cash reserves as they spend heavily on expanding factory production and sales—all while losing money on every vehicle they sell.
For consumers, the increased competition translates into steep discounts on some of the flashiest EVs. But for EV automakers, a slowdown in demand starts the clock that might determine how long they can keep the lights on.
Many of these companies first unveiled innovative battery-powered cars and SUVs in 2018 and 2019, following Tesla’s pioneering success in the new market. It seemed like an army of upstarts was poised to supplant stodgy giants such as Ford Motor and Toyota Motor Corporation as the next household name in the industry.
These young companies went public at stratospheric valuations, even though many had no revenue and little experience building a car. Investors, analysts and ordinary shoppers believed EV makers could emulate Tesla’s success in disrupting the traditional car market. Rivian’s market value briefly surged higher than that of Ford or General Motors.
Now, these companies are fighting to stay afloat amid stiff competition. Sales of battery-powered cars and trucks have been weaker than expected in the US, leading companies from Ford to Tesla to slash prices to jump-start demand. Too few buyers have been willing to switch to BEVs, worried about the relatively high sticker prices, still-nascent charging infrastructure, and the long-term reliability of EVs.
Money-losing startups are pulling back on spending and delaying investments as they seek to conserve their remaining cash. Some, like electric-pickup maker Lordstown Motors and battery-powered van company Arrival, have already filed for bankruptcy, and others are producing only a trickle of vehicles.
These carmakers that went public in an era of low interest rates and rising buzz around EVs now have to prove they can withstand tougher conditions. They say they are focused on stabilizing their cash-bleeding operations, but not all of them will weather the storm. A tough road ahead, to be sure.
Our Take: Autos are a tough sector. Doubly so when you're trying to sell vehicles that are, on balance, twice as expensive and only half as good as those they seek to replace.