The electric car price war started by market leader Tesla has become very difficult for US start-ups like loss-making Rivian. automaticmotive Inc and Lucid Group Inc are looking to gain share in an industry competing for shrinking consumer wallets.
Tesla’s move to cut EV prices globally by as much as 20% last week may attract new buyers to the industry’s electric vehicles, but it will also force other sales. automaticAnalysts and investors say manufacturers risk being left behind if they don’t respond by cutting prices.
Some start-ups struggle with staggering raw material and production costs, coupled with much lower production volumes than Elon Musk-led Tesla, which delivered more than 1.3 million cars last year, making low prices unlikely. There is a nature.
Tesla’s move ‘will strengthen their … competitive advantage over others’ automaticmanufacturers,” said CFRA Research analyst Garrett Nelson.
The struggles of most startups are a far cry from the initial public offerings of the past few years, when investors believed these companies would take over the EV market and reflect the fierce valuations Tesla has flaunted in the past.
‘Game of Thrones’ for EV startups
Rivian and Lucid are not yet profitable. Last year, the two companies combined, he delivered more than 24,000 vehicles. Rivian spent more on building each car than it sold for.
The company’s cost of sales was approximately 2.7 times sales in the last reported quarter, while Lucid’s cost of sales was approximately 2.5 times sales.
Still, Rivian had $13.8 billion in cash at the end of the third quarter, making it the largest US EV startup. Lucid has his second-highest cash reserve at $1.26 billion and raised another $1.52 billion in the fourth quarter.
That has prompted Faraday Future and British EV startup Arrival, which are seeking funding, to warn they may not be able to sustain operations until 2023.
Wedbush Securities analyst Daniel Ives said: “This is a game of thrones battle for EV startups, and if they don’t hit their financial targets, they’ll lose a few more over the next 12 to 18 months. Faced with one dire choice: “We expect some losers to face the prospect of consolidation, or possibly even worse on the horizon.”
A clearer picture of their balance sheets is expected when these companies report fourth-quarter earnings.
Rivian declined to comment, but Lucid did not respond to a request for comment.
Aiming to target the luxury and sport luxury sedan segments of the EV market, the Lucid starts at over $87,000, $8,000 less than the base version of Tesla’s Model S sedan after January discounts.
Led by former Tesla executive Peter Rawlinson, Lucid has not announced plans for mass-market vehicles to rival Tesla’s Model 3 and Model Y, starting at around $44,000 and $53,000, respectively.
Rivian sells the R1T pickup truck starting at $73,000 and the R1S SUV starting at $78,000.
The company, whose largest shareholder is Amazon.com Inc., has no plans to sell a cheap car built on its next-generation R2 platform before 2026. This platform will support more volume and be cheaper than vehicles built with R1. Platform, Rivian says.
Analysts say Tesla’s price cut comes just months after contract manufacturer Magna Steyr began production of Fisker’s Ocean SUV.
Fisker declined to comment.
Lordstown Motors raised money in May by selling a significant portion of its assets to contract manufacturer Foxconn, but said the Endurance Pickup is intended only for the commercial fleet market.
(Reporting by Akash Sriram, Bangalore; Writing by Aditya Soni; Editing by Ben Klayman and Matthew Lewis)
