Why America’s EV Startups Are On The Brink Of Disaster

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Electric vehicle startups are about to face even greater pressure in an increasingly difficult marketplace, which could see some companies head for trouble as they continue to burn through cash. That’s according to a new report, which cites several once-promising offerings, including Lucid and Rivian, being in for a bumpy ride as the economy gets choppy.

It would appear that EV demand has slowed down, as evidenced by Tesla’s deep cuts made throughout the first few months of the year to drum up demand and continue growth. Meanwhile, many EV startups that had gone public with much fanfare have seen share prices tumble as the market becomes more circumspect of their long-term chances.

According to Visible Alpha, via Reuters, the Lucid Group is, on Monday, expected to report a 36 percent slide in cash reserves. The story isn’t much different at Amazon-backed Rivian Automotive. Its share price has shrunk by nearly 25 percent and is expected to post a loss of $1.75 billion – higher than 2022’s loss of $1.59 billion. Visible Alpha expects Rivian’s cash balance to have fallen by 6.8 percent to $10.78 billion from the last quarter of 2022.

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This is one of a few reasons for concern for investors. Deliveries and production fell for the first quarter, while both Rivian and Lucid have announced that they will no longer be making their reservation numbers public. The lack of transparency is an alarm bell in itself and, according to CFRA Research analyst Garrett Nelson, is a “disturbing development.”

Things could be worse, though. Lordstown Motors has issued a statement warning that it could be forced to file for bankruptcy as it continues its dispute with investor Foxconn. Production of Lordstown Motor’s Endurance may be halted, stating to the U.S. Securities and Exchange Commission that the company requires “significant additional funding to execute our business plan.”

They’re not alone, with embattled Nikola also having issued going-concern warnings and British EV startup Arrival SA set to merge with Kensington Capital Acquisition Corp to raise much-needed cash. If a turnaround doesn’t occur soon, could Lucid and Rivian be headed for a similar fate?