Despite the ongoing rush to swap out fossil fuel-guzzling vehicles for greener rechargeable electric vehicles (EVs), EV manufacturers find themselves losing more money faster than they can earn it.
Third-quarter reports for companies like the Lucid Group and Rivian Automotive show that manufacturers suffer from substantial losses due to rising costs for raw materials and overall production. In addition, present circumstances have kept numerous companies from meeting their delivery targets, and the delays are making significant cuts to their earnings.
Lucid, in particular, saw its cost of revenue rise to around $492.5 million in Q3 compared to $3.3 million at the same time last year. The company also reported more significant losses due to order cancellations as customers are uncomfortable with the idea of extended waiting for their EVs.
While the company presently has resources to keep operating well into Q4-2023, its stock price plunged by 17% following its earnings report and ended last week with a further decrease of 4.4% in value. Lucid’s market value has also been reduced by around two-thirds, dropping from $95 billion to just $20 billion compared to its peak in November last year.
Nevertheless, the company remains backed by the Public Investment Fund of Saudi Arabia and seeks to raise $1.5 billion by selling some of its stocks.
Not the Only One
But Lucid is far from the only EV production firm feeling a financial crunch.
Just last week, UK firm Arrival SA announced that it may not have enough money to keep operating well into 2023 and may need to cut down its workforce even before it gets mass production up and running.
Arrival president Avinash Rugoobur remarked that, even as his company works tirelessly on innovative technologies, the prognosis for its business continuity is becoming bleaker by the day.
Another firm, Canoo Inc., also expressed doubts about its continued operations. Canoo ended the third quarter with $6.8 million in cash and other assets, a massive plunge from the $415 million it reported last year.
Many of the firms that hopped aboard the EV bandwagon were drawn to it by the success of Tesla, which remains the leader in the industry.
However, many of these startups suffered from significant losses throughout the third quarter, and it is unlikely that some will remain open as the year draws to a close.
Indeed, given how surging inflation has driven up the cost of production and ongoing supply chain issues continue to spark production delays, it is likely that the industry will find itself several players short as 2023 rolls in.