On April 11, 2022 in Normal, the assembly line of Rivian electric vehicle factory had R1T trucks.
A few years ago, electric vehicle startups that were hot at that time are now trying to show they can survive a tougher market situation and scramble for survival fueled by low interest rates, free cash and Wall Street’s bullish sentiment. That is if they haven’t gone bankrupt yet.
However, it has happened so far this week that senior executives from both Rivian, Nikola Corporation and Sober Group presented respective plans towards reducing their costs as well as growing their operations further to achieve first time profits. These have varied from job terminations and production re-arrangements to changing suppliers and altering priorities.
This scramble comes after slower than expected adoption of EVs coupled with firms spending billions attempting to deploy vehicles into market for purposes of being ahead of others within white space.
Tesla in midst of global reorganization including cutting about its workforce by 10%, even the U.S. EV leaders are feeling the pinch due to slowing economy and increased competition.
The current state of the EV market on Wall Street has been described as an “EV winter” by some analysts while others have called it the end of an “EV craze” or a temporary pullback needed for automakers before long term gains will be fully realized.
“After initially capturing adopters through specific geographies US EV adoption will probably stall,” wrote Itay Michaeli who is a Citi analyst on Thursday in his investor notes. “But things won’t change overnight; however we see reasons for optimism over next 12-to-18 months.”
Over the past year, how have Rivian, Lucid & Nikola stocks performed?
For several months now Rivian has been on mission-cutting costs; this included laying off workers, rearranging its Illinois factory for better efficiency and halting production at its new multibillion-dollar plant located in Georgia. According to the company, this latter measure is expected to save over $2.25 billion in capital expenditures net of the impact on starting production of the next generation R2 vehicle in its current plant located in Normal, Illinois.
As of the end of March, Rivian had $7.86bn in cash, cash equivalents and short-term investments, with total liquidity above $9bn.
By March ending Lucid had about $4.6bn worth of its namesake as well as investment securities and total liquidity amounting to approximately$5.03 bn.
According to Rawlinson, despite clear demand issues and significant losses as well as needing more capital than ever before have made him feel “more optimistic” about his startup’s future; this comes after the firm raised US$1bn from an entity controlled by its largest shareholder, Saudi Arabia’s Public Investment Fund.
“In cost of sales we have found additional opportunities and will be focusing on these for further implementation and cost reduction,” said Rawlinson during Monday’s investor meeting. “Long term our technology leads to gross margin expansion.” “I think that when you gain scale there can be strong gross margins with efficiency being key.”
FactSet data shows that according to Rawlinson that money signifies “ongoing confidence and unwavering support” from Public Investments Fund which owns nearly 60% as per Factset data.
Estimates compiled by London Stock Exchange Group (LSEG) show that both Rivian & Lucid reported first-quarter losses surpassing Wall Street expectations.
However, Nikola slightly exceeded analysts’ projection by losing 9 cents a share in Q1 while having revenues at just under half what LSEG analysts anticipated or nearly $7.5 million.
In contrast to Rivian and Lucid, Nikola is focused on commercial automobiles, rather than making cars for retail customers. As stated by Nikola Chief Financial Officer Thomas Okray, the company will need to cut costs as it grows sales, which may involve lowering prices for larger customers in order to increase scale.
“We have to optimize our cost structure. There’s no doubt about that,” Oakley told investors on Tuesday.
Lucid and Rivian are much better funded than Nikola, which started the year with $469.3m of assets consisting mainly of $345.6m cash and equivalents plus a $61.3m truck inventory.
Lucid Motors CEO Peter Rawlinson and Derek Jenkins, SVP Design & Brand at Lucid Motors sat on the rear trunk of Lucid Gravity electric SUV during a press conference at Los Angeles Auto Show held in Los Angeles, California, U.S.A., on November 16th 2023.
Rivian stock is near a new 52-week low ($7) or all-time low ($8), while Nikola shares are trading below that level at less than $1 each – prices worse off than Ford’s stock. Executives fear Nasdaq may delist them and resort to reverse stock split subject to shareholder approval to prevent it.
Though down roughly 56% this year alone, Rivian has done the best out of EV startups that have gone public via SPACs in the last five years (most excluding Rivian).
Lucid’s stock has mostly traded below $8 over the past year; thus closing Thursday at $2.70 after dropping more than 60% in 12 months.
Other EV startups such as Lordstown Motors and Electric Last Mile Solutions Already bankrupt; Fisker going under soon shutting down car production.
Kanu little known First-quarter results will be released on Tuesday. According to Tony Aquila Canoo Chief Executive and Executive Chairman, the Company will continue to raise capital and reduce costs during their 4Q investor call last month.
“It’s been a very tough market. We have taken a disciplined approach to capital deployment, raising only what is required at each milestone, and we’re going to keep doing that,” he noted.
