Electric vehicle makers burning cash, slammed by sky-high costs

Electric Last Mile Solutions

14/11/2022 11:00

By Akash Sriram
       Nov 14 (Reuters) - Every time Lucid Group Inc  LCID.O 
or Rivian Automotive Inc  RIVN.O  sells an electric car, they
are losing hundreds of thousands of dollars due to staggering
raw material and production costs, their latest earnings
statements showed.
    Quarterly reports from electric vehicle (EV) makers from the
past two weeks show them struggling to hit delivery targets and
rapidly burning through cash.
    Lucid's cost of revenue surged 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 wait
times.
    The company, which went public a little over a year ago and
is backed by Saudi Arabia's Public Investment Fund, saw its
market value shrivel by two-thirds this year to about $20
billion from $95 billion at its peak in November 2021.
    The company said it had enough cash to sustain itself at
least into the fourth quarter of next year and is looking to
raise about $1.5 billion through a stock sale. Its stock price
slumped 17% after results, and clawed back some losses in the
next two sessions to finish on Friday down 4.4% from before it
reported.
        U.S.-listed British firm Arrival SA  ARVL.O  
    warned
     last week it may not have enough cash to keep its business
going toward the end of next year, and would have to cut jobs.
It has yet to start mass production.
  
    "I'm not going to sit here and tell you it's not a difficult
time," Avinash Rugoobur, president of Britain's Arrival SA
 ARVL.O  told Reuters on Friday. 
    "It's tough, we are there every day, every night, working on
technologies, the vehicles and also the capital raising."
    Canoo Inc  GOEV.O  said in May it had "substantial doubt"
about remaining a going concern. At the end of September, it had
$6.8 million in cash and equivalents, down sharply from $415
million a year earlier.
    CASH IS KING
    Many EV startups recorded huge losses in the September
quarter and warned that high costs were here to stay due to
surging inflation and a global supply chain crisis. Just a year
earlier, several listed their stocks at heady 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 production for the smash
hit Model 3.
    The company, however, faced those challenges in a different
time when it was nearly the only pure play EV maker and
competition from legacy automakers including General Motors
 GM.N  and Volkswagen  VOWG_p.DE  was nascent.
        In the latest quarter, Tesla reported earnings of $3.3
billion.
  
    "In the EV business ... being early stage is a money-burning
exercise, it's difficult to get over the hump," said Canaccord
Genuity analyst George Gianarikas.
    Analysts said these companies must find ways to save money
if they want to outlast a bad economy. Firms 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 exits of its top bosses, has
curtailed output. 
    The truck maker sold a fifth of itself to tech giant Foxconn
 2327.TW  this month. Last year, it sold its Ohio plant to the
Taiwanese firm, a deal forced by the need for funds to start
production of its Endurance pickups.
    Still, higher output would ultimately reduce the cost per
car and limiting production can threaten the path to
profitability, analysts said.
    Some among these companies are better positioned to survive.
    Rivian, backed by Amazon.com  AMZN.O  and Ford Motor  F.N ,
had $13.8 billion cash on hand 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 '90s dotcom bubble: "It wasn't always the company with the
best business plan that made it. It was the company with the
best balance sheet."
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EV stocks slump on production pushouts, deep losses, cash burn  
 https://tmsnrt.rs/3towMio
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 (Reporting by Akash Sriram in Bengaluru; Writing by Aditya
Soni; Editing by Sayantani Ghosh and David Gregorio)
 ((Akash.Sriram@thomsonreuters.com; https://twitter.com/hoodieonveshti;))