Preview: U.S. electric-vehicle startups set for another quarter of steep cash burn

Nu Ride

05/05/2023 18:25

By Akash Sriram
       May 5 (Reuters) - U.S. electric-vehicle startups are
expected to report another quarter of dwindling cash reserves
next week, piling pressure on a group of companies that are
struggling to ramp up production and have few options for
funding in a turbulent economy.
    Having gone public with hopes of shaking up the automobile
industry, these companies have seen their market valuations
evaporate in the past few months as EV demand slows and market
leader Tesla Inc  TSLA.O  cuts prices to stoke orders.
        Lucid Group  LCID.O  kicks off first-quarter earnings
for the group on Monday, with the company expected to report a
36% sequential slide in cash reserves, according to Visible
Alpha.
  
        Rivian Automotive  RIVN.O , meanwhile, will likely
report on Tuesday that its cash balance fell by 6.8% to $10.78
billion from the preceding quarter, per a Visible Alpha
estimate.
  
        The Amazon.com Inc-backed  AMZN.O  firm, whose shares
have declined by nearly a quarter this year, is also expected to
report a larger loss of $1.75 billion as both deliveries and
production fell in the period. It posted a $1.59 billion loss a
year ago.
        Fisker Inc  FSR.N  and Nikola  NKLA.O , both of which
report earnings on Tuesday, are expected to see their cash
reserves decline by 5% and 15%, respectively, according to
Visible Alpha. 
  
    "Any company that's losing money with a low valuation is
toast and EVs are no exception. I think it is just a slow bleed.
Maybe they'll get lucky and some of their technologies maybe
bought by bigger players," said Thomas Hayes, chairman of hedge
fund Great Hill Capital.
    A drop in valuations of companies has rendered selling
equity for precious cash more ineffective and investors are
becoming increasingly unhappy with their stake being diluted as
several startups are yet to recognize revenue from operations.
    British EV startup Arrival SA  ARVL.O  and Nikola have
issued going-concern warnings in the past few months, with the
former set to merge with blank-check firm Kensington Capital
Acquisition Corp  KCGI.N  in a bid to raise cash.
    Lordstown Motors  RIDE.O  said this week it could be forced
to file for bankruptcy due to uncertainty over a funding deal
with major shareholder Foxconn  2317.TW . Its earnings in an
unscheduled release on Thursday showed Lordstown's cash balance
fell 11% sequentially.
    Some of the companies including Lucid and Rivian have also
said they would not provide data on reservation numbers going
forward, sparking some concern among investors. 
    It is a "disturbing development," CFRA Research analyst
Garrett Nelson said. "What we've seen is a trend of less
transparency in the reservation count, but overall competition
is a big problem," he added. 

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Electric vehicle startups burn through cash    https://tmsnrt.rs/41oF8p3
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 (Reporting by Akash Sriram in Bengaluru; Editing by Aditya Soni
and Maju Samuel)
 ((Akash.Sriram@thomsonreuters.com; @HoodieOnVeshti on Twitter;
+91-74116-87774;))