Written by / Zhang Ou
Edited / Meng for
Design / Shi Yuchao
Source/CNBC By Ari Levy
For those new American car-making forces that will receive investment in the capital market in 2021, in 2022, their lives will be more like walking on thin ice. Because, according to their previous commitments, delivery will be the biggest challenge in the new year.
This year, investors poured large sums of money into Rivian and Lucid, two electric vehicle companies valued at $150 billion together. Yet they have not yet generated meaningful revenue, and they are only just beginning to go into production, just ready to hand over the keys to consumers.
Several other electric car makers, including Canoo, Lordstown and Fisker, have also entered the open market over the past year or so, with much lower valuations but similarly promising to start delivering vehicles in 2022 or 2023.
Just this past week, Harley-Davidson even said it would spin off its nascent electric motorcycle division, Livewire, and would open an SPAC listing at $1.8 billion.
While many people still find it ridiculous that these "inactive" companies can enjoy high valuations, the logic and rules of capital markets are like this.
Weathervane Tesla with optimists
The only pure electric car company in the U.S. that has actually started its business is Tesla, whose market capitalization peaked at $1.2 trillion last month and then slipped about 19 percent.
In addition to Tesla's 4 models on the market, more and more electric vehicles are beginning to be selected by consumers.
These products include the Chevrolet Bolt, Nissan Leaf, Ford Mustang Mach-E, Mini Cooper SE and Porsche Taycan, which range in price from about $27,000 to more than $150,000 (170,000 yuan to 955,000 yuan).
Tesla's huge success and emerging market potential give investors confidence that from 2022 onwards, although these fledgling EV startups will have to deal with supply chain disruptions, labor market challenges, inflationary pressures, increasing competition, and the possibility of rising capital costs, more and more car companies are successfully overcoming difficulties that many people could not break through before – large-scale production is possible.
Vitaly Golomb, a banker at technology investment firm Drake Star Partners, said: "The key is who can go live on schedule and ultimately translate that focus and investment in the brand into delivery products that delight consumers." This is the right next stage. ”
This is also a step that these start-up car-making forces must take in their growth, that is, to prove that they have sufficient capabilities, products and business expectations to match the market value.
In the case of Rivians, their current challenge comes from delivery to expand their revenue streams.
Goron said he invested in Rivian almost a year ago while booking the R1T truck early. As of the 15th of this month, Rivian has received 71,000 orders for R1T trucks and R1S SUVs. At launch last month, Rivian said it would need to close existing orders by the end of 2023.
Rivian sold its first 11 vehicles in the third quarter with revenue of $1 million and said it expects to be "a few hundred" fewer than the production target of 1,200 vehicles set at the beginning of 2021 — it has completed 652 product deliveries since production in September.
In addition, Rivian lost $1.23 billion in the most recent quarter, which is a big number, but given that it raised $13.7 billion in its initial public offering, reaching its current market capitalization of $87 billion, this loss seems acceptable.
Rivian has also developed another revenue stream to supply vehicles to the company's delivery fleet. It will supply Amazon with 100,000 vans "designed to achieve a lower total cost of ownership while supporting carbon-neutral distribution." Amazon expects to deploy 10,000 vans by next year.
When it went public in November, Rivian's electric truck was parked near the NASDAQ building in New York's Times Square
Goron is very optimistic about Rivian because it has an excellent technical team and has enough emphasis on manufacturing itself.
At the same time, he also expressed optimism about the development prospects of another pure electric vehicle company, Lucid, which is aimed at a completely different market population.
Positioned as a luxury electric car, Lucid is taking orders for its Air Pure, starting at $77,400 (493,000 yuan) and is expected to exceed 400 miles (644 kilometers) per charge, according to the official website.
Another top-of-the-line Air Grand Touring starts at $139,000 (885,000 yuan) and can travel 516 miles (830 kilometers) per charge.
Lucid went public through SPAC in July and is now valued at nearly $64 billion. It officially delivered its first 520 Lucid Air Dream Editions on Oct. 30, and its third-quarter financial statements released last month show it has about $1.3 billion worth of bookings and $4.8 billion in cash after losing $1.5 billion in the first three quarters of the year.
Lucid Air Pure▼
An even bigger positive is that the United States is accelerating the construction of supporting infrastructure.
In November, the U.S. Congress passed Biden's Infrastructure Act, which also gave further impetus to the electric vehicle industry. The bill allocates $7.5 billion to build 500,000 charging stations nationwide by 2030. It also spurred a brief rally in shares at charging companies such as ChargePoint Holdings, Volta and EVgo.
On Sunday, Senator Joe Manchin of West Virginia, who held the key vote, publicly stated that he would not support Biden's bill, followed by a pullback in shares of companies including Tesla, Rivian and Lucid on Monday. The White House has also firmly stated that it will talk to Manchin.
Dan Pipitone, CEO of previous trading software company TradeZero, said that on his stock trading platform, the electric vehicle space is a popular choice for investors throughout the year, and charging providers have been significantly active in the past few months.
Pipitone said: "Everyone is talking about vehicle delivery, but after the production phase is over, charging stations are also essential. In the next few years, the number of charging stations will grow 5 times. ”
Infrastructure companies benefit no matter which EV consumer buys, so they are a potentially safer and more stable investment. However, this will be a highly competitive market, after all, there is no brand that can resonate widely with consumers at present.
Charging station deployment plan of U.S. charging company EVgo▼
Hype controversy and warnings
It also goes some way to explaining why companies like Rivian and Lucid are treated the same way as Tesla, more as a result of hype marketing than the basic principles of the deal.
However, one fact that cannot be ignored is that investor enthusiasm for the next batch of EV manufacturers, many of which are entering the market through SPAC, has declined.
The current state of Nikola and Lordstown cars is even more worrisome and a wake-up call.
After going public through SPAC last June, Nikola's stock price soared, with a market value of more than $30 billion, higher than Ford at the time. Subsequently, a federal jury charged Nicola founder Trevor Milton with three counts of criminal fraud, and the indictment showed he lied "in almost every aspect of the business" to inflate the stock price.
Although Milton denied the charges, Nikolai's stock price fell all the way back due to regulatory investigations.
And this week, Nikolai agreed to pay $125 million to the Securities and Exchange Commission to settle allegations of fraud by misleading investors about products, technical capabilities and business prospects.
Recently, however, Nikolai announced that the delivery of its first customer has been completed, indicating that more customers are coming. Subsequently, the stock price rose sharply by 18%.
Lordstown, on the other hand, soared after going public through SPAC in October 2020. But the stock fell 87% from its highs:
It is under investigation by the SEC and the Justice Department over statements by former management, including founder Steve Burns, who resigned in June, may have been false or misleading. An internal investigation found problems with Lordstown's reservation forms.
Nikolai Tre Truck▼
As the controversy continued, both Nikolai and Lordstown pushed back production plans.
In August, Nikolai adjusted its production guidance for the fourth quarter to 25 to 50 units, down from the previous estimate of 50 to 100 units. It is now committed to delivering 25 prefabricated Tre BEV trucks to dealers for demonstrations in the fourth quarter, providing public road freight services to customers.
Lordstown postponed the expected start of its commercial production from the second quarter to the third quarter of next year, in part due to supply chain issues. The company announced in September that it would sell its Ohio plant to Foxconn to offset high capital requirements.
Meanwhile, Carnu Has promised to develop a pickup truck, a delivery car and a futuristic seven-seater car, known as a lifestyle car, or "loft on wheels." The cars won't be released until the end of 2022 at the earliest, and customers will pay $100 at the time of booking.
Kanu was listed through SPAC at the end of 2020 and is now valued at $2 billion. Fisk began trading shortly before Kanu and is now worth $5 billion.
Fisker is receiving a $250 upfront payment for its SUV, called "Ocean," and plans to start production in November 2022.
Kanu lifestyle car▼
Ultimately, the new EV makers will have to prove that they can do more than just build beautiful websites, conduct demonstrations, and charge for reservations. They must start producing and shipping products and work to improve their own productivity at a time when other automotive markets are rapidly transitioning to electrification.
Consumers will have more options next year, and if production continues to be delayed, they may not hesitate to choose other products. Compared to consumers, investors have many ways to play with the market, and they will never have much patience.