American electric vehicle startups, which once attracted investors’ attention as rivals to Tesla, are struggling with a sudden drop in performance. According to the Wall Street Journal (WSJ) on the 25th, last week, electric sports utility vehicle (SUV) and pickup truck manufacturer Rivian closed trading at $10.06 per share, a 38% drop from the previous week. Lucid, a company that makes luxury sedan electric vehicles, also saw its stock price fall 19% during the same period.
In their recently released fourth-quarter performance reports for last year, the two companies presented a bleak performance outlook that this year’s production would remain at last year’s level or only increase slightly. This is because demand for electric vehicles has slowed due to high interest rates and economic uncertainty.
“We are focused on increasing demand to meet our 2024 delivery target,” said Rivian CEO RJ Scaringe. He explained that the increased burden of monthly car installments due to interest rate increases appears to have had some impact. Peter Rawlinson, CEO of Lucid, also said, “The important thing to see here is that there are no restrictions on production, (what is limited) is sales and delivery,” and said that the company will put more effort into sales activities to find potential customers this year.
WSJ pointed out that this situation contrasts with the plan to further increase production to satisfy the demands of customers waiting for vehicle delivery until last summer. Investors poured billions of dollars into Rivian and Lucid, believing they were innovative companies with the potential to surpass traditional automakers in the electric vehicle market. However, the WSJ pointed out that these companies, which overcame initial trial and error and succeeded in developing luxurious, high-performance electric vehicles, faced a new problem in that there were not as many consumers willing to open their wallets as expected.
This is because each country is competitively raising trade barriers, and the outlook for the electric vehicle market has become uncertain because of increased uncertainty in the international situation, such as high interest rates, the global economic slump, the Ukraine war, and the Israel-Hamas war.
The automobile industry is already showing signs of lowering the price of electric vehicles or being reluctant to make related investments. WSJ said, “Startups are more exposed to the sudden cooling of the electric vehicle market than established automakers,” and “This is because there is no profitable (other) business to withstand the slowdown in (electric vehicle) sales.” In fact, Rivian’s cash reserves were $7.9 billion at the end of December last year, a significant decrease from a year ago.
Lucid’s cash and cash equivalent assets amounted to $1.4 billion, down $365 million from the previous year. However, the WSJ reported that both companies emphasized that the cash they currently have is available until 2025.