Electric vehicle (EV) startups, including Rivian Automotive, Lucid Group, Nikola, and Faraday Future, are struggling with cash burn and are seeking new ways to cut costs. A recent analysis of Securities and Exchange Commission filings revealed that these companies had fewer months of cash on hand in Q1 2023 than they did at the end of 2022, with some indicating that they may have to file for bankruptcy. Fisker has seen a boost of about four additional months of cash to cover expenses, while Lordstown Motors Corp has about two months more cash than it did in Q4 2022, but still issued a warning that it may have to file for bankruptcy.
Jeff Osborne, an analyst at TD Cowen, stated that cash “really just means how long you can survive without a strategy pivot.” Indeed, Fisker has announced a new strategy to move its flagship vehicle, the Ocean, into a new market segment with few direct EV competitors at its price point and revealed a lower production forecast for the year. The company has nearly 24 months of available cash left and has delayed its second vehicle, the Pear.
Michael Lohscheller, CEO of Nikola, also described a “new and refocused” company on a similar call last week. The zero-emission heavy-truck manufacturer paused production of its battery-electric vehicle to focus on its hydrogen truck and is selling its stake in a European joint venture to its partner, commercial vehicle manufacturer Iveco. Nikola had roughly three months of cash on hand at the end of Q1 2023.
Lucid, with a little more than three months of cash to cover operating expenses, cut its production forecast from an estimate of 10,000 to 14,000 to “over 10,000.” And Lordstown, which has about nine months of cash on hand, said in its first-quarter filing that it is in danger of having to file for bankruptcy. The company is feuding with partner Foxconn over funding support tied to the automaker’s share price and is running into issues producing its Endurance electric pickup.
Faraday Future saw its cash troubles continue to grow in Q1 2023, with the company having about one month of cash left compared with a little more than three months’ worth at the end of last year. Other startups facing cash woes include Canoo, which had about two months of cash on hand at the end of 2022, and Workhorse Group, which had over a year’s worth.
These EV startups arose out of a pandemic-era base flush with cash provided by investors eager to bet on the next Tesla. However, the companies have since been dogged by high costs, an oft-speculated recession spooking investors, and for some, government probes and lawsuits. Falling vehicle prices have also added to their woes, with manufacturers cutting prices to generate sales. According to Osborne, price declines constitute a “major difference” in 2023. “Mature OEM price cuts put pressure on startups as they ramp up,” he said.
In conclusion, EV startups are struggling to survive due to cash burn and other issues, including falling vehicle prices and government probes. Many of these companies are seeking new ways to cut costs and pivot their strategies to stay afloat.
