May 10, 2022 - Economy & Business

EV startup stocks Rivian, Lordstown plunge as Ford F-150 Lightning nears

Illustration of a very large truck and a very tiny truck side by side, as if about to race.
Illustration: Aïda Amer/Axios

Startup electric vehicle makers are watching their stocks plunge as they grapple with the same market challenges that established automakers may be better positioned to handle.

Why it matters: A bevy of startups like Rivian, Lucid, Faraday Future and Lordstown have attempted to follow the Tesla path of disrupting the traditional automotive industry, making bold promises about their production plans and financial prospects.

Driving the news: Ford is reportedly selling 8 million shares of its Rivian stock, plunging the startup's stock to new lows this week. Shares of Rivian, which reports earnings Wednesday, have fallen by more than 20% to less than $23 since the Ford news broke over the weekend.

  • A lockup preventing insiders and early investors from selling Rivian stock since the company's November IPO expired on Sunday, opening the door for an exodus in shareholders. Rivian's stock is down from its 52-week high of $179.47.
  • Meanwhile, Lordstown Motors faces a crucial deadline in its attempt to sell its Ohio factory to iPhone maker Foxconn, which would then manufacture Lordstown’s Endurance EV pickup on a contractual basis. Lordstown's shares are trading at less than $2, well below their 52-week high of $15.80.
  • And beleaguered startup Faraday Future has watched its shares lose more than half of their value over the last month, plunging to less than $2.

The big picture: EV startups are dealing with all the same issues as established automakers, such as supply chain problems, materials inflation, intense competition and the stock market's intense volatility of late.

  • But when you’re starting from scratch, those issues are amplified — such as suppliers that decide to prioritize their bigger, more established customers first.
  • “Compared to those things, making a prototype or a small production run of really advanced electric vehicles is easy — and I think people are starting to realize that,” Karl Brauer, executive analyst at iSeeCars.com, tells Axios.

Of note: EV startups are facing an onslaught of competitive vehicles made by established automakers with massive production capacity, such as the imminent Ford F-150 Lightning pickup, which has exceeded expectations in advance orders.

  • “There was a collective, ‘Oh darn’ — or maybe a stronger word — from all the non-Ford truck makers when that vehicle was released,” Brauer says.
  • "My honest view is there are too many startups around, and not all of them will make it because at the end of the day it's a very hard job," Faraday Future CEO Carsten Breitfeld tells Axios.

Yes, but: EV startups still have the advantage of nimbleness and a lack of reliance on technologies that will eventually be phased out, such as gasoline engines.

  • That's how Tesla seized the EV crown — and it's why some investors remain hopeful that startups can follow the same path.
  • Faraday's Breitfeld said he believes the company's plan to start with a few hundred units of its FF 91 ultra-luxury EV in the third quarter of 2022 will be key to its success, despite years of questions about the company's viability.

Our thought bubble: Rivian is in much better shape than Lordstown and Faraday Future, having already produced and sold vehicles and sealed a deal to supply EV vans to Amazon, one of its biggest investors.

  • Yet even that Amazon partnership suddenly doesn’t look as lucrative, as Stellantis — the automaker that owns the Ram, Jeep and Chrysler brands — is poised to deliver EV vans to Amazon before Rivian.
  • Rivian, which did not respond to a request seeking comment, is burning about $750,000 in cash per vehicle, estimates Morgan Stanley analyst Adam Jonas.
  • "This is highly capital intensive stuff that many Rivian investors may not be ready for," Jonas said in a research note.

The bottom line: Like Tesla CEO Elon Musk has often said, succeeding as a startup automaker is exceedingly difficult due to the complexity of the industry and the mammoth amount of capital needed to proceed.

  • “The history of car company start ups is horrific, they have almost all gone bankrupt," Musk said Tuesday at a Financial Times event.
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