Cash burn increases for EV startups due to declining demand

Cash burn increases for EV startups due to declining demand

U.S. Electric Vehicle Startups Face Challenges Amid Tesla’s Price War

Tesla Charging Station

The electric vehicle (EV) market is experiencing a shakeup as U.S. startups prepare to report quarterly results. Investors are eagerly awaiting details on how these companies are navigating a funding drought and managing their cash flow. With Tesla’s aggressive pricing strategy impacting the market, traditional automakers like Ford Motor are also grappling with financial challenges in the EV space. Furthermore, electric truck manufacturer Lordstown Motors recently filed for bankruptcy. Against this backdrop, industry experts are closely observing the performances of companies such as Lucid, Nikola, Rivian Automotive, and Fisker.

Lucid Faces Supply-Chain Woes and Deeper Losses

Lucid, majority-owned by Saudi Arabia’s Public Investment Fund, is expected to report deepening losses following a decline in production during April-June due to supply-chain problems. However, the company has seen its cash balance improve significantly, reaching $2.76 billion for the April-June period, up from $900 million in the previous quarter. Lucid announced a successful fundraise of approximately $3 billion, which has had a significant impact on its financials.

Nikola Struggles to Curb Losses

Nikola, which issued a going-concern warning in May, is anticipated to report a 15% decline in revenue and widening losses. In its efforts to mitigate cash burn, the company has implemented layoffs and liquidated a recently acquired battery business. However, analysts are skeptical that these measures will be enough to meet Nikola’s funding needs. The market has responded positively, with share prices rallying nearly 40% this year, but uncertainties remain.

Rivian Shines as a Demand Creator

In contrast to its counterparts, Amazon-backed Rivian Automotive appears to be thriving. Analysts predict a three-fold surge in revenue to $983.1 million for the April-June quarter. The company’s cash outflow is projected to have slowed to $1.19 billion in the second quarter—a significant improvement of approximately $600 million compared to the January-March period. Additionally, gross margins are expected to show positive growth, with an improvement from negative 58.6% to negative 51.3%. Rivian’s success can be attributed to its competitive advantages, particularly its appeal to a new segment of buyers who have never previously purchased a pickup truck.

Needham analyst Chris Pierce commented, “Rivian’s competitive advantages are shining brighter, with the company emerging as a demand creator when considering that the majority of its buyers have never previously purchased a pickup truck.” This positive outlook has prompted at least eight analysts to raise their price targets for Rivian’s stock, which has gained about 40% year-to-date.

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Fisker Aims for Profitability Amid Parts Shortage

With healthy cash reserves and an aggressive profitability goal, Fisker is confident that it can weather the storm. The company is expected to report its first revenue from vehicle sales, following the delivery of its Ocean SUVs in the June quarter. However, Fisker experienced challenges in meeting its production target due to a shortage of parts. One key aspect that investors will be closely monitoring is Fisker’s reservation numbers, as their Ocean SUVs do not qualify for the $7,500 federal tax credit.

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In conclusion, the U.S. EV market is currently undergoing significant changes, driven by Tesla’s price war and funding challenges faced by new entrants. Lucid, Nikola, Rivian, and Fisker represent a diverse range of performances within this landscape. While Lucid and Nikola are grappling with their financials, Rivian is emerging as a beacon of hope, showcasing strong revenue growth and improved cash outflows. Fisker, on the other hand, faces a hurdle in terms of missing production targets but remains optimistic about its profitability goals. As the EV industry evolves, these quarterly results will provide valuable insights into the market’s dynamics and the prospects for these companies in their pursuit of both financial success and environmental sustainability.

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