R1T trucks on the assembly line at Rivian's 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 money and Wall Street bullishness — are now trying to prove they can survive in tougher market conditions. That is, if they haven't gone bankrupt yet.
Chief among their topics of conversation: cash.
Executives of Rivian automobile, Clear group And Nikola Corp. this week they all made detailed plans to reduce costs while trying to grow their business and make their first profits. These efforts ranged from job cuts and production changes to supplier realignments and shifting priorities.
The battle comes as electric car adoption is taking off more slowly than many expected and after companies have spent billions trying to rush cars to market to gain first-mover advantage in white space segments.
The slowdown and increased competition have even affected the US EV leader Teslawhich is in the midst of a global restructuring, with approximately 10% of its workforce being laid off.
Wall Street analysts have described the current state of the electric vehicle market as an “EV winter,” an end to the so-called “EV euphoria” or, more optimistically, a temporary setback that automakers will have to overcome for long-term profits term. .
“U.S. electric vehicle adoption likely entered a bubble after penetrating early adopters and specific regions,” Citi analyst Itay Michaeli wrote in an investor note Thursday. “The situation will not change overnight, but we see reason for optimism over the next 12 to 18 months.”
Performance of Rivian, Lucid, and Nikola Stocks Over the Last Year.
Rivian has been on a cost-cutting mission for months. It has cut its workforce, retooled its Illinois plant to increase efficiency and halted production at a new multibillion-dollar plant in Georgia. The latter measure 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 factory in Normal, Illinois.
Rivian reported $7.86 billion in cash, cash equivalents and short-term investments at the end of March, with total liquidity of more than $9 billion.
Lucid, for its part, ended the first quarter with approximately $4.6 billion in cash, cash equivalents and investments, with total liquidity of approximately $5.03 billion.
Lucid CEO Peter Rawlinson said he has never been “more optimistic” about the startup's future, despite notable 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 the cost of goods sold area, and we will continue to focus on implementation and further cost savings. Longer term, our technology will be the key driver of our gross margin,” Rawlinson told investors on Monday. “With scale, I think you'll see strong gross margins, with efficiency being the key factor.”
Rawlinson said the $1 billion illustrated the “continued confidence and steadfast support” of the Public Investment Fund, which owns about 60% of the company, according to FactSet.
Rivian and Lucid both reported bigger first-quarter losses than Wall Street expected, according to LSEG estimates.
Nikola even slightly beat the Street with a loss of 9 cents per share through the first three months of the year, but its $7.5 million in revenue was less than half of what analysts compiled by LSEG expected.
Unlike Rivian and Lucid, Nikola focuses exclusively on commercial vehicles and not on vehicles for private customers. Nikola CFO Thomas Okray said the company must reduce costs while continuing to grow revenue, including possibly lowering prices for large customers to build scale.
“We absolutely need to optimize our cost structure. There's no doubt about that,” Okray told investors on Tuesday.
Nikola's cash reserves are much lower than those of Lucid and Rivian. The company's assets included $469.3 million at the end of the first quarter, primarily consisting of cash and cash equivalents of $345.6 million and truck inventory of $61.3 million.
Lucid Group CEO Peter Rawlinson and Derek Jenkins, senior vice president of design and brand at Lucid Motors, sit on the edge of Lucid's Gravity electric SUV during the Los Angeles Auto Show press day preview in Los Angeles, California, U.S., November 16, 2023.
David Swanson | Reuters
Shares of Rivian, Lucid and Nikola are all trading at 52-week lows or all-time lows, while shares of Nikola – once more than 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 avoid through a reverse stock split that must be approved by shareholders.
Rivian shares are down about 56% this year but remain the healthiest of the high-profile EV startups, most of which (except Rivian) have gone public through special purpose acquisition companies (SPACs) in the past five years.
Lucid's stock has traded below $8 for most of the past year. Shares closed Thursday at $2.70, down more than 60% in the past 12 months.
Other EV startups such as Lordstown Motors and Electric Last Mile Solutions have gone bankrupt, while Fisker is on the verge of filing for bankruptcy and has halted car production.
Less known Canoe will announce first-quarter results on Tuesday. Tony Aquila, CEO and executive chairman of Canoo, said last month during the company's fourth-quarter investor call that the company must continue to raise capital and cut costs.
“We have seen a very difficult market. We have adapted our disciplined approach to capital deployment by raising only the amounts of capital we need for each milestone, and we will continue to do so,” he said.
-CNBCs Michael Bloom contributed to this article.