Electric vehicle makers burn cash as cost spikes hit

Each time Lucid Group or Rivian sells an electric car, they lose hundreds of thousands of dollars due to production and raw material costs, according to their most recent financial statements.

Quarterly results from electric vehicle makers released over the past two weeks showed companies struggling to meet delivery targets and burning cash quickly.

Lucid’s cost of revenue soared to $492.5 million from July through September from $3.3 million in the same period a year earlier, while its loss rose as customers canceled orders fearful of long lead times. wait.

The company, which went public just over a year ago and has the Public Investment Fund of Saudi Arabia as a shareholder, saw its market value shrink by two-thirds in 2022, to around US$ 20 billion, against US$ 95 billion in the previous year. peak in November 2021.

The automaker said it had enough cash to sustain itself through at least the fourth quarter of next year and expects to raise about $1.5 billion through equity sales.

British company Arrival, listed in the United States, warned last week that it may not have enough cash to sustain its business at the end of next year and would have to carry out layoffs. The company has not yet entered the mass production phase.

“I’m not going to sit here and say this is not a difficult time,” Avinash Rugoobur, chairman of British Arrival, told Reuters on Friday.

“It is difficult, we are there every day, every night, working on technologies, on vehicles and also on fundraising.”

Canoo said in May that it had “substantial doubts” about continuing to operate. At the end of September, the company had $6.8 million in cash and equivalents, down from $415 million a year earlier.

money is king

Many EV startups posted big losses in the third quarter and warned that high costs were here to stay due to rising inflation and the global supply chain crisis.

Just a year earlier, several of these companies listed at high valuations on the stock exchange, lured by the success of Tesla, now the world’s most valuable automaker.

In the last quarter, Tesla posted a profit of $3.3 billion.

“In the electric vehicle business… being in the early stages is a cash-burning exercise, it’s hard 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 survive a bad economic climate.

Rivian is shifting more US car deliveries to the rail freight model, while Lucid is considering this as an option.

Rivian, which has Amazon.com and Ford as shareholders, had $13.8 billion in cash at the end of September. The company also has a contract to supply 100,000 electric delivery vans to Amazon. However, cost of goods sold was about $220,000 per car versus an average selling price of $81,000 for the quarter, research firm CFRA estimated.