{"id":12007,"date":"2023-05-22T07:31:51","date_gmt":"2023-05-22T11:31:51","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/there-surely-will-be-failures-as-competition-builds-some-ev-startups-may-fall-by-the-wayside\/"},"modified":"2023-05-22T07:31:52","modified_gmt":"2023-05-22T11:31:52","slug":"there-surely-will-be-failures-as-competition-builds-some-ev-startups-may-fall-by-the-wayside","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=12007","title":{"rendered":"\u2018There surely will be failures.\u2019 As competition builds, some EV startups may fall by the wayside."},"content":{"rendered":"
\n

Fisker. Lucid. Faraday Future. Nikola
\n NKLA,
\n +2.65%<\/bg-quote>.<\/span>
\n Rivian.<\/p>\n

Chances are good you\u2019ve never heard of some of these automakers. Chances are good you\u2019ve never seen one of their cars on the road.<\/p>\n

But an American driver in the early days of motoring might not have seen a Davis, a Cord, a Ford
\n F,
\n +0.09%<\/bg-quote>,<\/span>
\n a Buick, or a Coey-Mitchell, either. They would have had no way of knowing which of those companies would still be building cars in our time.<\/p>\n

\n

The electrification of the automotive industry has seen a bevy of new startups launch, each hoping to become the established automakers of a century from now. If history is any guide, most of them will fail. But a few will hang on.<\/p>\n

\u201cIt should not be surprising these companies are burning through cash and piling up losses,\u201d he Washington Post says.<\/p>\n

Electric vehicle startups Fisker
\n FSR,
\n -1.28%<\/bg-quote>,<\/span>
\n Lucid
\n LCID,
\n -1.51%<\/bg-quote>,<\/span>
\n and Rivian
\n RIVN,
\n -0.52%<\/bg-quote>
\n have each watched their market values deflate significantly by mid-May.<\/p>\n

Automakers must lose money for years to make money<\/strong><\/h2>\n

The automotive industry is one of the hardest businesses to break into because of the huge capital expenditures required to reach critical mass. Starting up a new automaker requires outsized outlays of cash and years of losses. If it works, it can result in outsized profits.<\/p>\n

Tesla
\n TSLA,
\n +1.84%<\/bg-quote>
\n is today the world\u2019s most profitable automaker and America\u2019s best-selling luxury car brand. But the company saw its first profitable quarter selling cars\u00a018 years after its founding.<\/em><\/p>\n

The company had sustained itself in the meantime by selling regulatory credits to other automakers. But that option isn\u2019t available to newer rivals. Now that almost every company builds an EV, traditional automakers no longer buy credits.\u00a0<\/p>\n

Michelle Krebs, executive analyst at Kelley Blue Book parent company Cox Automotive, compares it to the early days of the automotive industry. \u201cThere was a shakeout of just a few players,\u201d she says, with companies like Ford and General Motors surviving and others, like Davis and Eldridge, disappearing. There will be a similar shakeout of EV builders.<\/p>\n

Read more: <\/strong>A Successful EV Start-Up Needs Cars, Capacity, and Cash<\/p>\n

EV transition creating opportunities<\/strong><\/h2>\n

EV startups have certain advantages the earliest automakers didn\u2019t have.<\/p>\n

Today\u2019s EVs are often built on so-called skateboard platforms \u2013 flat combinations of batteries, electric motors, steering, and suspension components that can be scaled up or down to build many different types of vehicles.<\/p>\n

For instance, General Motors\u2019
\n GM,
\n -0.73%<\/bg-quote>
\n new Ultium platform underlies everything from compact SUVs (like the\u00a0Chevy Equinox EV) to full-size pickups (the\u00a0Silverado EV). Within a few years, GM vehicles with prices ranging from $30,000 (the Equinox again) to $300,000 (the\u00a0Cadillac Celestiq) will use many common parts.<\/p>\n

That technology means a startup automaker can design and use one platform to power vehicles in many segments.<\/p>\n

Startups can also skip the process of building a dealership network and just\u00a0sell cars directly to consumers, Tesla-style.<\/p>\n

But the cost of entry remains punishingly high. \u201cWith capital significantly more expensive today [and] an interest rate environment moving up, we\u2019re seeing more EV players squeezed,\u201d says Wedbush analyst Dan Ives.<\/p>\n

A good product isn\u2019t enough<\/strong><\/h2>\n

Successful design isn\u2019t enough. The Endurance pickup from startup Lordstown Motors\u00a0
\n RIDE,
\n -9.37%<\/bg-quote>
\n was a finalist in the 2023 North American Car of the Year awards\u00a0in the truck category. The company still\u00a0warned investors recently that it may close its doors soon.<\/p>\n

Lucid\u2019s Air sedan\u00a0has won rave reviews and holds the title of longest-range EV (it\u2019s EPA-certified for up to 520 miles depending on configuration). Last week the company reported a first-quarter loss of nearly $780 million. The company said it ended the quarter with about $4.1 billion in total liquidity, which it expects to provide funding \u201cat least into the second quarter of 2024.\u201d<\/p>\n

See also:<\/strong>\u00a0Fisker cuts production guidance, posts wider loss than expected<\/p>\n

Rivian is in better shape temporarily, ending the quarter with about $11.2 billion in cash and equivalents. But the company reported losses of $1.3 billion last quarter. <\/p>\n

Cox Automotive, parent company of Kelley Blue Book and Autotrader, is a minority investor in Rivian.<\/p>\n

\u201cNew players always underestimate how much it costs to start a car company,\u201d Krebs says. \u201cThere surely will be failures because so many have started up, and the times have drastically changed.\u201d<\/p>\n

This story originally ran on\u00a0<\/em>KBB.com.<\/em>\u00a0<\/em><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Fisker. Lucid. Faraday Future. Nikola NKLA, +2.65%. Rivian. Chances are good you\u2019ve never heard of some of these automakers. Chances are good you\u2019ve never seen one of their cars on the road. But an American driver in the early days of motoring might not have seen a Davis, a Cord, a Ford F, +0.09%, a […]<\/p>\n","protected":false},"author":1,"featured_media":12008,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-12007","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n\u2018There surely will be failures.\u2019 As competition builds, some EV startups may fall by the wayside. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Fisker. Lucid. Faraday Future. Nikola NKLA, +2.65%. Rivian. 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