This week’s earnings reports made two things clear about the viability of electric vehicles’ future: BEV companies continue to struggle and lose significant amounts of money, and wealthy investors are willing to pour money into loss-making businesses, This is the difference between survival and bankruptcy.
Rivian and Lucid, two large pure electric vehicle companies in the United States, announced their second-quarter earnings this week. You see, there’s also a lot of Red ink spilled.
Lucid reported a net loss of $643 million in the second quarter, a slight improvement from a loss of $764 million in the second quarter of 2023.
You see, there’s also a lot of spilled red ink
Fortunately, both companies have the backing of wealthy friends who are willing to help tide them over until their balance sheets become more balanced. Rivian, which owns Volkswagen AG, recently announced its intention to invest up to $5 billion in the adventure-themed electric vehicle company. Lucid is majority owned by Saudi Arabia’s Public Investment Fund, which said it would inject an additional $1.5 billion into the luxury electric car company to help extend its life.
We should also take a closer look at the earnings of Fisker, another all-electric car company that declared bankruptcy in June. Unlike Rivian and Lucid, Fisker doesn’t have wealthy backers to shore up its finances—but it’s not for lack of trying.
These circumstances help underscore the stark reality facing these so-called “pure-play” EV companies. With no gasoline or hybrid car sales to fall back on, Rivian and Lucid are feeling the pinch from cooling demand for electric vehicles more than any rival in the traditional auto industry. They’re racing to add new vehicles to their lineups — Lucid’s Gravity SUV, Rivian’s R2. But they need to spend a lot of money on engineering, factory space, parts, labor, etc. to achieve this goal.
They are racing to add new vehicles to their lineups
Once they do that, they can theoretically attract new customers with more models and better prices. But until then, they remain stuck in what’s known as the “valley of death for electric vehicles,” where they scale up production without bringing in enough revenue to cover operating costs. Coupled with lower-than-expected demand for electric vehicle sales, Rivian and Lucid still face a severe situation.
Lucid said it expects to sell 9,000 Air sedans this year and “will continue to carefully manage and adjust production to meet sales and delivery needs.” Rivian said it expects to produce 57,000 vehicles this year, roughly the same number as in 2023, and It expects to achieve “modest gross profit” in the fourth quarter.
Both Lucid and Rivian are cutting costs as they grow rapidly. Rivian has released updated versions of its R1T truck and R1S SUV that are simpler and cheaper to build. Lucid laid off about 400 employees, accounting for 6% of its total workforce.
But both companies have been able to avoid some of the more dire cost-cutting measures taken by other BEV companies because of their ability to attract big investors. Rivian has received $1 billion in funding from Volkswagen and is expected to receive another $4 billion if the two companies can close the deal before the end of the year. Affiliates of Saudi Arabia’s Public Investment Fund have committed to buying $2.5 billion worth of Lucid shares this year.
Lucid and Rivian are both cutting costs as they move forward quickly
During earnings calls this week, both companies revealed the role of outside investors.
Rivian CEO RJ Scaringe said of the Volkswagen deal: “What’s very important about this deal for us is that it really removes a lot of the risk that was present in our balance sheet and allows us to focus on launching the R2 Still in Teachers College, still using the facilities of our Teachers College.
Lucid CEO Peter Rawlinson was more blunt in answering questions about overreliance on the generosity of the company’s largest shareholder.
“It’s often portrayed. How long will it take for Saudi Arabia to get tired of Peter playing with his car?” Rawlinson said during the call. “That’s not to say. We have regular conversations.
