R1T trucks on the assembly line at the Rivian electric vehicle plant in Normal on April 11, 2022.
Brian Cassella | Tribune News Service | Getty Images
Once-popular electric vehicle startups — fueled years ago by low interest rates, free cash and Wall Street optimism — are now struggling to prove they can survive in tougher market conditions. Assuming they aren’t already bankrupt.
Their main topic of conversation: cash.
Managers of Rivian Automotive, Lucid Group And Nikola Corp. This week they each unveiled detailed plans to cut costs while trying to expand operations and start turning a profit. These efforts ranged from job cuts and production changes to supplier restructuring and shifting priorities.
The scramble comes as electric vehicle adoption is slower than many expected and after companies have spent billions rushing vehicles to market to gain first-mover advantages in white space segments.
Of these three automakers, Rivian has the strongest cash position as electric vehicle adoption struggles. The company says it has enough cash to get through the big R2 launch in early 2026.
The slowdown and increasing competition have even impacted the U.S. electric vehicle market leader Teslawhich is in the midst of a global restructuring that includes laying off about 10% of its workforce.
Wall Street analysts have called the current state of the electric vehicle market an “EV winter,” an end to the so-called EV euphoria or, more optimistically, a temporary decline that automakers must overcome to achieve long-term profits.
“Electric vehicle adoption in the U.S. has likely stalled after reaching early adopters and certain regions,” Citi analyst Itay Michaeli wrote in an investor note Thursday. “The situation will not change overnight, but we see reasons for optimism over the next 12 to 18 months.”
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Performance of Rivian, Lucid and Nikola stocks over the past year.
Rivian has been on a cost-cutting mission for months. The company has cut staff, retooled its Illinois plant to increase efficiency and paused construction of a new multibillion-dollar factory in Georgia. This latest move is expected to save more than $2.25 billion in capital expenditures, including the impact of starting production of Rivian’s next-generation R2 vehicle at its current plant in Normal, Illinois.
Rivian reported $7.86 billion in cash, cash equivalents and short-term investments as of the end of March, with total liquidity of more than $9 billion.
For its part, Lucid ended the first quarter with about $4.6 billion in cash, cash equivalents and investments, with total liquidity of about $5.03 billion.
Lucid CEO Peter Rawlinson said he has never been more “optimistic” about the startup’s future, despite significant demand issues, significant losses and capital needs. The company raised $1 billion from an affiliate of Saudi Arabia’s Public Investment Fund, its largest shareholder.
“We have identified additional opportunities in cost of goods sold and will continue to focus on execution and other areas of cost reduction. “Longer term, our technology will be the key driver of our gross margin,” Rawlinson told investors on Monday. “I believe you will achieve strong gross margins with scale, with efficiency being the key factor.”
Rawlinson said the $1 billion shows the “continued confidence and unwavering support” of the Public Investment Fund, which owns about 60% of the company, according to FactSet.
Rivian and Lucid reported larger losses in the first quarter than Wall Street expected, according to LSEG estimates.
With a loss of 9 cents per share in the first three months of the year, Nikola actually slightly outperformed the stock market, but its revenue of $7.5 million was less than half of what analysts compiled by LSEG had expected.
Unlike Rivian and Lucid, Nikola focuses exclusively on commercial vehicles and not those for private customers. Thomas Okray, Nikola’s CFO, said the company needs to cut costs while continuing to grow revenue, including potentially reducing prices for major customers, to expand its scale.
“We absolutely have to optimize our cost structure. No question about it,” Okray told investors on Tuesday.
Nikola’s cash reserves are far less than those of Lucid and Rivian. The company’s assets at the end of the first quarter were $469.3 million, consisting primarily of cash and cash equivalents of $345.6 million and truck inventory of $61.3 million -dollars together.
Peter Rawlinson, CEO of Lucid Group, and Derek Jenkins, senior vice president of design and brand at Lucid Motors, sit on the trunk of Lucid’s Gravity electric SUV during the press preview of the Los Angeles Auto Show on November 16, 2023 in Los Angeles , California, USA.
David Swanson | Reuters
Shares of Rivian, Lucid and Nikola are all trading near 52-week or all-time lows, with Nikola’s shares – once again valued Ford engine – Trading for less than $1 per share. That puts the company at risk of being delisted from the Nasdaq, which executives are trying to prevent through a reverse stock split that must be approved by shareholders.
Rivian shares have fallen about 56% this year but remain the healthiest among high-profile EV startups, most of which (except Rivian) have raised special purpose acquisition companies (SPACs) in the past five years the stock market went.
Lucid shares have traded below $8 for much of the past year. Shares closed at $2.70 on Thursday, down more than 60% in the last 12 months.
Other EV startups like Lordstown Motors and Electric Last Mile Solutions have gone bankrupt, while Fisker is on the verge of bankruptcy and has stopped vehicle production.
Less popular canoe is expected to report its first-quarter results on Tuesday. Canoo CEO and Chairman Tony Aquila said during the company’s fourth-quarter investor call last month that the company needs to continue to raise capital and cut costs.
“We saw a very difficult market. We have adjusted our disciplined capital deployment approach by raising only the amounts of capital we need for each milestone, and we will continue to do so,” he said.
— CNBC’s Michael Bloom contributed to this article.
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2024-05-11 20:51:31
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