Electric vehicle makers are burning cash, slammed by exorbitant costs

Nov 14 (Reuters) – Every time Lucid Group Inc (LCID.O) or Rivian Automotive Inc (RIVN.O) sells an electric car, they lose hundreds of thousands of dollars due to astronomical raw material and production costs , their latest income statements showed.

Quarterly reports from electric vehicle (EV) makers for the past two weeks show they are struggling to meet delivery targets and are burning through cash fast.

Lucid’s cost of revenue jumped to $492.5 million in the July-September quarter from $3.3 million a year earlier, and its losses widened as customers canceled orders fearing long waiting times.

The company, which went public just over a year ago and is backed by Saudi Arabia’s Public Investment Fund, has seen its market value shrink by two-thirds this year to around $20 billion. , down from $95 billion at its peak in November 2021.

The company said it has enough cash to sustain itself at least through the fourth quarter of next year and is looking to raise about $1.5 billion through a stock sale. Its share price fell 17% after the results and recouped some losses in the next two sessions to end Friday down 4.4% from before its report.

As macroeconomic effects weigh on electric vehicle companies, shares of these startups fall

U.S.-listed British firm Arrival SA warned last week that it may not have enough cash to continue operations by the end of next year and would have to cut jobs . It has not started mass production yet.

“I’m not going to sit here and tell you it’s not a difficult time,” Avinash Rugoobur, chairman of Britain’s Arrival SA, told Reuters on Friday.

“It’s hard, we are there every day, every night, working on technologies, vehicles and also fundraising.”

Canoo Inc (GOEV.O) said in May that it had “substantial doubt” whether it would continue to operate. At the end of September, he had $6.8 million in cash and cash equivalents, down sharply from $415 million a year earlier.

MONEY IS KING

Many electric vehicle startups posted huge losses in the September quarter and warned that high costs were here to stay due to soaring inflation and a global supply chain crisis . Just a year earlier, many listed their shares at exhilarating valuations, lured by the success of Tesla (TSLA.O), now the world’s most valuable automaker.

Tesla survived what its boss Elon Musk then called “production hell”, overcoming supply bottlenecks with battery deals with key suppliers and ramping up production of the hit Model 3 .

However, the company faced these challenges in another era, when it was almost the only pure electric vehicle maker and competition from traditional automakers including General Motors (GM.N) and Volkswagen (VOWG_p. DE), was nascent.

Last quarter, Tesla reported a profit of $3.3 billion.

β€œIn the electric vehicle business … being early stage is a money-burning exercise, it’s hard to get over the edge,” said Canaccord Genuity analyst George Gianarikas.

Analysts said these companies need to find ways to save money if they want to survive a bad economy. Companies have taken different approaches.

Rivian is shifting more car deliveries across the United States to rail freight, while Lucid is considering it as an option.

Lordstown Motors (RIDE.O), which issued a going concern notice last year that led to the departure of its top bosses, has cut production.

The truckmaker sold a fifth of itself to tech giant Foxconn (2327.TW) this month. Last year, it sold its Ohio factory to the Taiwanese firm, a deal forced by the need for funds to start production of its Endurance pickups.

Still, higher production would ultimately lower the cost per car and limiting production may threaten the path to profitability, analysts said.

Some of these companies are better positioned to survive.

Rivian, backed by Amazon.com (AMZN.O) and Ford Motor (FN), had $13.8 billion in cash at the end of September. It also has a contract to supply 100,000 electric delivery vans to Amazon. But its cost of goods sold was about $220,000 per car versus an average selling price of $81,000 in the quarter, CFRA estimated.

Canaccord’s Gianarikas said there could be lessons here from the dotcom bubble of the 90s: “It’s not always the company with the best business plan that’s been successful. It’s the company with best score.”

Reporting by Akash Sriram in Bengaluru; Written by Aditya Soni; Editing by Sayantani Ghosh and David Gregory

Our standards: The Thomson Reuters Trust Principles.

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