EV Startups Are Torching Cash to Keep Up With Rising Costs and Inflation
Startup electric automakers are facing a series of crises that could cripple them financially and make it hard to grow in any meaningful way in the future. Inflation and incredible jumps in raw materials costs have led companies like Rivian and Lucid to lose staggering sums of money over the last year.
Reuters reported that some companies are losing money on every vehicle they sell. Lucid’s costs climbed by hundreds of millions of dollars, and some customers have canceled orders over long wait times and delays. The company’s market value has plummeted as a result, but it says it can continue operating through the end of 2023 at least.
Tesla had similar issues when ramping up production of the Model 3, but as Reuters points out, the company didn’t have to face those challenges while competing against several other automakers. Now, Rivian and Lucid have Tesla and several legacy automakers like Ford and General Motors to contend with while also working to shore up spending. At least Rivian has big-name backing from Amazon and Ford, and it’s well-positioned to ride out the rough weather with plenty of cash on hand.
Automakers are cutting costs where possible to weather the storm and survive the approaching harsh economic conditions. Rivian is moving more of its shipping operations to rail, while Lordstown Motors has sold half of itself to Foxconn and slashed output to cut spending.
[Image: Rivian]
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Chris grew up in, under, and around cars, but took the long way around to becoming an automotive writer. After a career in technology consulting and a trip through business school, Chris began writing about the automotive industry as a way to reconnect with his passion and get behind the wheel of a new car every week. He focuses on taking complex industry stories and making them digestible by any reader. Just don’t expect him to stay away from high-mileage Porsches.
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Whiney, capitalist EV welfare queens. Ooooh, life is hard, we need more government handouts and Saudi cash injections. Our stock valuation is sinking. The bad Dems are eroding our wealth with inflation and deficits, by spending on the old, infirm and needy. Well, suck it up. EV startups are not the only one who need money.
And for the record, ALEC, the GOP record since 1981 is particularly awful. Saint Reagan, Bush 1 (I can never forget him vomiting on the Japanese PM), Bush 2 and Trump all increased the deficit (fiscal responsibility my a$$), while Clinton and Obama lowered it. https://amarkfoundation.org/us-federal-deficits/. Which is doubly ironic because it is the liberal states (mostly NY, MA and CA) that fund the conservative states' spending spree.
https://federalism.us/2021/03/giving-or-getting-what-is-each-states-balance-of-payments-with-the-federal-government/
It is conceptually easy to reduce the national deficit, either raise taxes or lower funding for the military, social security, and starve the poor, and hey presto austerity. Voters hate it; see Brownback's Kansas, or the UK now. But more importantly, the deficits do not matter, and never have. The fed is not like you or me. The deficit is not like a mortgage. The US cannot run out of money. The deficit erodes over time, and is mostly money the US owes to itself.
But this is a car site, so is inflation hurting EV startups? I don't think inflation is that selective, and I have yet to read a press release where the CEOs admits to their own incompetence.
I don't think demand for EVs will be sustained beyond early adopters. Prices continue to increase relative to ICE cars, and the charging infrastructure will continue to be limited for some time.
I thought government cars were profitable. Weird how the facts are the complete opposite.
As with ICE Carmakers in the 1900s, many of today;s BEV startups will end bankrupt or bought out by the stronger makers, and this is absolutely fine with me and should be fine with anybody else.
Demand for BEVs is hugely reinforced by Government Policies that spend hundreds of billions of tsxpayer money (this is worse than spending like a "Drunken Sailor". If you think about it, the Sailor spends HIS OWN MONEY, he does NOT Steal mine.)
Beyond the early adapters, for BEV market share to grow well beyond its past 1, 2 and 4% to serious percentages, much less the 50% many fairy tale tellers envision, a TON of things have to happen, above all the AFFORDABILITY, $50,000 BEVs, even with today's worthless dollar, are still too expensive for the AVERAGE family, plus infrastructure, range etc improvements.