Inside struggling electric vehicle makers Rivian, Lucid, Canoo and Xos

  • Electric vehicle startups are hammered by all sorts of challenges.
  • Budding businesses face supply issues and historical challengers.
  • Insiders and pundits have described it as “the perfect storm” and aren’t sure many startups can pull it off.

After Bloomberg broke the news that electric vehicle startup Rivian was laying off 6% of its workforce, its CEO, RJ Scaringe, called a company-wide meeting. Visibly shaken, he confirmed that hundreds of workers were losing their jobs.

“He used his bare hands the entire time with the camera to his face and was honest about where we came from, where we are now, why this had to happen and how sorry he was that it had to happen,” said a terminated employee.

It was a relatively minor blow for Rivian, which has $15 billion in the bank, counts Amazon and Ford as backers, and has produced thousands of vehicles. But the startup is far from off the hook, and the conditions that made the layoffs necessary are hitting less-established rivals with far worse results.

Canoo lifestyle vehicle

At companies like Canoo, some workers who hoped to help build the “next Tesla” have become fatalistic.

Canou



EV startups like Rivian, Lucid, Canoo, and many others are seeing various combinations of poor management, supply chain struggles, and the fundamental difficulty of mass production manifesting in dismal sales numbers and stock prices. plummeting stock markets. Now, incumbents like Ford and GM are putting their power to good use. Shareholders launch lawsuits, and once bullish investors lose patience.

Industry experts say this whirlwind of problems will sink many startups that enjoyed billion dollar valuations promising to remake the auto industry.

“It’s the perfect storm,” said Martin French, a Berylls consultant.

Within these startups, the mood isn’t much better, say former and current employees. Many of those who spoke with Insider for this story were granted anonymity, as they were not authorized to speak publicly about their businesses. Their identities are known to Insider.

For many of these workers, the hope of being part of the “next Tesla” has given way to fatalism.

“Tesla has carved out its market and will be here forever,” said a manager who has worked at several electric vehicle companies. “After that, it’s a total roll of the dice.”

A dark situation

Just a year ago, the future was bright for people like Rivian, Lucid, Canou, Faraday’s future, Xos Trucks, Arrival and others aimed at recreating Tesla’s success. A large number of these fledgling companies went public in 2020 or 2021. They delighted investors with heady statements about product plans, time limitand future market share. Their ranks swelled with automotive vets and young tech workers.

For most of these startups, 2022 was the year they planned to hit the road. Instead, most are far from meeting their production targets, even those they have scaled back in the face of supply chain constraints and logistical quagmires.

Like the young car manufacturers cash flow decreasesas are their stock prices.

No Musk Elon

Some of the blame for these plummeting numbers lies with bad luck, including the pandemic that continues to rumble through supply lines and macro conditions that are driving Wall Street bearish. But insiders and industry experts say mismanagement has made things much worse than necessary.

Nicholas, Lordstownand Faraday’s future have each experienced executive turnover for one reason or another.

Lucid struggled to master the logistics and production. “When you design a vehicle, it’s a one-way street,” said a former engineer. “But when you’re going to make it, it’s a totally different thing.” Lucid CEO Peter Rawlinson recently overhauled management and introduced new direction in hopes of moving the line forward.

Meanwhile, Xos Insiders say the startup’s executives are juggling too many products at once, a sign of inexperience, and as a result, it has had to lay off employees.

Former Canoo employees say CEO Tony Aquila’s goals were unrealistic (at the end of the second quarter, the company had yet to produce any of the 3,000 to 6,000 vehicles it had promised for the year ).

Last Mile Solutions Electric Saw executives more interested in buying company stock than moving the company into production, according to company releases of an internal investigation into executives getting shares at discounted prices from market value ahead of its SPAC.

And while launching the “next Tesla” pairs well with being the “next Elon Musk,” industry insiders have said their executives are missing what makes Tesla’s CEO a rare figure.

“Tesla has proven to be very resilient, thanks in part to the personal resilience, courage and determination of Elon Musk,” said a startup executive. Newcomers may have great ideas and may pack their C-suites with industry veterans, they said, “but they don’t necessarily have someone with this incredible level of guts and financial expertise to to be able to reach the spot markets, and despite the headwinds and problems, convince the big players to keep investing to get to the other side.”

Ford F-150 Lightning

Although they face challenges in their electrification, traditional automakers like Ford have a number of advantages over startups.

Ford



game of old

Industry giants like Ford and GM entered the electric vehicle space later and slower than startups, but the struggles of young people have allowed incumbents to make up for lost time. With Volkswagen, Stellantis and Toyota, Detroit players are all spending billions of dollars to go electric. Startups “don’t have the same stamina,” said an executive who has worked at several such companies.

It’s still not an easy transition. Ford F-150 Lightning price hike due to continued supply chain challenges, while GM, Toyota, Subaruand BMW had to recall waves of electric vehicles. But with established supplier relationshipsstrong balance sheets and profitable gas-powered vehicles for sale, incumbents can roll with the punches.

And they are starting to capture the market, while newcomers struggle to get their factories started and build brand awareness. Ford, for example, launched the lightning struck in a fraction of how long it took Rivian to start building his R1T microphone. Lucid may not be the pioneer of luxury electric SUVs it once thought, as challengers from Mercedes, BMW and Cadillac are “coming with full force,” said former GM executive Barry Engle.

“The production story at Rivian is so important,” Wedbush analyst Dan Ives wrote in an Aug. 10 note. “Especially as 2023 is set to be a major inflection year for the electric pickup market with the F-150 Lightning, GM’s Silverado and Cybertruck on the near-term map battling for consumers.”

Even if startups weren’t wasting their leads, in-place presence makes it even more difficult for them to get offers from suppliers. Vendors have a choice between long-time customers with deep cash reserves and guaranteed, high volume of business, and startups that may never be able to pay for their low-volume parts.

“Ford, GM and Tesla are going to be able to outsmart new startups,” said Bill Diehl, an automotive analyst.

The 2022 Rivian R1T.

Rivian may be in good shape to survive, but the failure of other startups “is almost inevitable,” an insider said.

Rivian



Closing window of opportunity

As the layoffs and cost cuts highlight the difficulty of recreating Tesla’s success under current conditions, investors are losing confidence.

“They just feel a little less confident that big-money-burning startups are going to be able to cross that chasm to profitability,” Quin Garcia, chief executive of AutoTech Ventures, told Insider. “With this lesser access to capital, there is an increase in existential risk for each of these companies.”

The consensus among people in the industry is that Rivian’s backing and targeted market give it the best chance of success in its class. Lucid’s abundant finances may make his journey easier, but he’ll have to go faster and expand beyond the luxury electric sedan to beat his rivals. For others who are struggling to come up with a sufficiently unique product and may not have the cash to scale, the outlook is bleak.

People inside the industry don’t feel much better than those watching. “A high percentage of failures,” said one executive, “is almost inevitable.”

Are you a current or former employee of an EV startup? Do you have a topical tip or opinion you would like to share? Contact this reporter at [email protected] from a non-business device.