Cheap Tesla will create a series of startup bankruptcies
2023.01.20 08:46
Cheap Tesla will create a series of startup bankruptcies
By Ray Johnson
Budrigannews.com – Tesla, the market leader, initiated a price war for electric vehicles (NASDAQ:). Inc has made it much harder for U.S. startups that are losing money, like Rivian Automotive Inc. and Lucid Group Inc., to get a share of an industry where competitors are competing for smaller consumer wallets.
Analysts and investors stated that while Tesla’s decision last week to reduce the global price of its electric vehicles by as much as 20% has the potential to attract new customers to the sector, it will also force other automakers to respond with lower prices or risk being left behind.
Due to their staggering raw material and production costs and significantly lower output than Tesla, led by Elon Musk, which delivered more than 1.3 million vehicles last year, some startups may not be able to afford lower prices.
According to CFRA Research analyst Garrett Nelson, Tesla’s move will “strengthen their… competitive advantage over other automakers.”
Compared to their initial public offerings over the past few years, when investors believed these companies would take over the EV market and echo the exorbitant valuation Tesla has sported in the past, the difficulties faced by the majority of startups are very different.
Lucid and Rivian have yet to make a profit. Rivian spent more money making each car than the vehicle’s selling price last year, delivering over 24,000 vehicles together.
In the most recent quarter that was reported, the company’s cost of goods sold was approximately 2.7 times its revenue, whereas Lucid’s cost of revenue was approximately 2.5 times its sales.
Still, Rivian had the most cash at the end of the third quarter—$13.8 billion—of any EV startup in the United States. With $1.26 billion in cash reserves, Lucid ranked second, and it raised an additional $1.52 billion in the fourth quarter.
That provides the businesses with a significant production runway at a time when rivals Faraday Future and Arrival, a British electric vehicle startup, have been seeking funding and warned that they may not be able to continue operating until 2023.
Wedbush Securities analyst Daniel Ives stated, “It’s a ‘Game of Thrones’ battle for EV startups, and they face some dire options over the next 12 to 18 months if they do not succeed in their financial targets.” We would anticipate some… losers who may face consolidation or worse in the future.
When these businesses report their fourth-quarter earnings, it is anticipated that their balance sheets will present a more concise picture.
Lucid’s cars start at over $87,000, which is $8,000 less than the base Model S sedan from Tesla after the January discounts. Its goal is the luxury and sport-luxury sedan segment of the EV market.
Lucid, led by Peter Rawlinson, a former executive at Tesla, has not revealed any plans for a mass-market vehicle to compete with Tesla’s Model 3 and Model Y, which start at approximately $44,000 and $53,000, respectively.
The R1T pickup truck, which Rivian sells, starts at $73,000, while the R1S SUV, which Rivian sells, starts at $78,000.
Amazon.com Inc., the company’s largest shareholder (NASDAQ:), does not intend to produce cheaper automobiles before 2026 and build them on a next-generation R2 platform. Rivian claims that the platform will support higher volumes and be less expensive than vehicles constructed on the R1 platform.
Analysts stated that Fisker’s Ocean SUV’s starting price of $37,499 makes it more vulnerable, and Tesla’s price cuts come just a few months after contract manufacturer Magna Steyr began production.
In order to raise funds, Lordstown Motors sold a significant portion of its assets to contract manufacturer Foxconn in May. The company stated that the Endurance pickup is only intended for the commercial fleet market.
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