A price war by electric car leader Tesla (TSLA-US) is making it harder for money-losing U.S. startups such as Rivian Automotive Inc (RIVN-US) and Lucid Group Inc (LCID-US) to compete in shrinking consumer spending. gain the upper hand in the battle for wallets.
Tesla’s move last week to slash the price of its global electric vehicles by as much as 20 percent may attract new buyers of electric vehicles but also force other automakers to pay less, analysts and investors said. prices to respond, or risk being left behind.
Some startups may not be able to afford lower prices as they grapple with staggering raw material and production costs, combined with far lower production than Musk-led Tesla; Tesla delivered more than 1.3 million vehicles last year .
CFRA Research analyst Garrett Nelson said Tesla’s move would “strengthen their competitive advantage over other automakers.”
The plight of most startups is a far cry from the IPOs of the past few years, when investors believed they would dominate the electric-vehicle market and rival Tesla’s past high valuations.
Neither Rivian nor Lucid has turned a profit yet. Together, they delivered more than 24,000 vehicles last year, and Rivian costs more to build each vehicle than it sells for.
The company’s cost of sales last quarter was about 2.7 times its revenue; Lucid’s cost of revenue was about 2.5 times its sales.
Even so, Rivian still had $13.8 billion in cash at the end of the third quarter, the most of any U.S. EV startup. Lucid has the second-highest cash pile at $1.26 billion and raised an additional $1.52 billion in the fourth quarter.
That has provided a considerable lifeline for the two companies, while peers such as Faraday Future (FFIE-US) and British electric vehicle startup Arrival have been seeking funding and warning that they may not be able to operate until the end of 2023.
“It’s a ‘Game of Thrones’ battle for EV startups, and if they fail to meet their financial targets, it will be over the next 12 to 18 months,” said Wedbush Securities analyst Daniel Ives. Facing some dire choices.” “We expect some players to be consolidated or possibly worse.”
When the companies report fourth-quarter earnings, expect more clarity on their balance sheets.
Lucid is targeting the luxury sedan and luxury SUV segments of the electric vehicle market, with cars starting at more than $87,000, $8,000 less than the base Tesla Model S sedan after discounts in January.
Lucid, led by former Tesla executive Peter Rawlinson, has yet to announce its intentions to launch mass-market vehicles to compete with Tesla’s Model 3 and Model Y, which start at about $44,000 and $53,000, respectively.
Rivian’s R1T pickup starts at $73,000, while the R1S SUV starts at $78,000.
Rivian, whose largest shareholder is Amazon (AMZN-US), has no intention of selling a cheaper model built on the next-generation R2 platform until 2026. The platform will support production models and will be cheaper than vehicles built on the R1 platform.
Magna Steyr, Tesla’s contract manufacturer, started producing Fisker’s Ocean SUV a few months ago; the SUV, which starts at $37,499, is more vulnerable to Tesla’s price cuts.
Lordstown Motors (RIDE-US), which sold most of its assets to contract manufacturer Foxconn in May to raise funds, said its Endurance pickups are only aimed at the commercial fleet market.