The soaring cost of raw materials and production means that every time Lucid Group Inc. (LCID.O) or Rivian Automotive Inc. (RIVN.O) sells an electric vehicle, they lose hundreds of thousands of dollars, according to their most recent earnings reports.
Electric vehicle (EV) manufacturers’ quarterly reports from the last two weeks reveal that they are having difficulty meeting their delivery deadlines and are quickly depleting their financial resources.
In the July-September quarter, Lucid’s cost of revenue increased to $492.5 million from $3.3 million a year prior, and its deficits grew as customers withdrew orders out of concern for lengthy wait periods.
The business’s market value decreased by two-thirds this year to roughly $20 billion from $95 billion at its high in November 2021. The company went public a little over a year ago and is supported by Saudi Arabia’s Public Investment Fund.
The business claims to have enough cash on hand to go at least through the fourth quarter of 2019 and is aiming to raise $1.5 billion through the selling of shares. After the results, its stock price fell 17% before recovering some of those losses in the following two sessions to close Friday at a loss of 4.4%.
British company Arrival SA, which is listed in the United States, issued a warning this week that job cuts would be necessary if it doesn’t have enough capital to operate through the end of next year. Mass production of it has not yet begun.
Avinash Rugoobur, director of Britain’s Arrival SA, said on Friday that it is impossible to be in this position and pretend that the current situation is not trying.
It’s difficult since workers are there day and night working on technology, automobiles, and fundraising.
Canoo Inc (GOEV.O) stated in May that there was “serious doubt” as to whether the company would continue to operate. It had $6.8 million in equivalents and cash at the end of September, a significant decrease from $415 million a year earlier.
Due to rising inflation and a worldwide supply chain crisis, many EV companies reported enormous losses in the third quarter and issued a warning that high prices would continue to be an issue. A year ago, many were enticed by the success of Tesla (TSLA.O), the present most valuable automaker, to list their stocks at exorbitant values.
Tesla overcame supply shortages via battery agreements with important suppliers, ramping up production for the wildly successful Model 3, and surviving what company leader Elon Musk at the time called “production hell.”
However, the firm had to deal with those difficulties when there was little competition from established automakers like General Motors (GM.N) and Volkswagen (VOWG p.DE) and it was arguably the only pure-play and sheer EV manufacturer.
The most recent quarter saw $3.3 billion in revenue for Tesla.
Being early stage of the EV industry is a money-burning exercise, and it’s challenging to overcome the hurdle, as per Canaccord Genuity analyst George Gianarikas.
Analysts claimed these businesses need to find ways to cut costs if they wish to survive a weak economy. Companies have used various strategies.
While Lucid is exploring it as a possibility, Rivian is switching more automobile deliveries from across the United States onto rail freight.
The output of Lordstown Motors (RIDE.O), which last year issued a going-concern notice that resulted in the departure of its top executives, has been reduced.
To the tech juggernaut Foxconn (2327. TW), the truck manufacturer sold a fifth of itself this month. It had to make a deal with a Taiwanese company last year because it needed the money to start making its Endurance pickup trucks.
Analysts noted that limiting production could jeopardize the company’s potential to become profitable because more volume would ultimately lower the cost per car.
Some of these businesses are more likely to survive than others.
Just at end of September, Rivian, which is backed by Ford Motor (F.N) and Amazon.com (AMZN.O), had $13.8 billion in cash on hand. Additionally, it has an agreement with Amazon to provide 100,000 electric delivery vans. However, CFRA calculated that its cost of goods sold was approximately $220,000 for each car as contrasted to an average sale price of $81,000 in the quarter.
Gianarikas of Canaccord suggested that the dotcom bubble of the 1990s might offer some lessons here: The business with the best business strategy didn’t always succeed. The corporation in question had the strongest balance sheet.