In the world of startups, the electric vehicle (EV) sector is experiencing a rough ride. Despite rising sales, the market growth is slower than anticipated, leading to price cuts, increased incentives, and swelling inventories. It’s a recipe that could spell disaster for many fledgling EV manufacturers.
Former Ford CEO Mark Fields recently commented on the situation during CNBC’s Squawk on the Street. He pointed out that the “pace that all the automakers were expecting is not there.” This slowdown, he noted, has been due to the shift from early adopters, who are driven by innovation and environmental impact, to mainstream consumers who are more focused on cost, convenience, and practicality.
A Shift Towards Hybrid Vehicles
Fields also highlighted the soaring sales of hybrid vehicles, a significant advantage for companies like Toyota, the pioneers of hybrid technology. Toyota has long warned that the transition to EVs would be more prolonged than many predicted, a sentiment that appears to be coming true. Ford, too, has seen a surge in hybrid sales and plans to offer more such vehicles, even as it slows down its EV plans due to weaker-than-expected sales.
However, Fields remains firm in his belief that the transition to EVs is inevitable. He stated, “The transition will absolutely happen, but it’s going to take longer.” This extended timeline could spell trouble for EV makers, especially those that launched in recent years, anticipating a quicker EV adoption rate.
Financial Trouble Ahead for EV Startups
One company feeling the strain is Fisker, a Tesla competitor, who recently hired restructuring advisors following rumors of a possible bankruptcy filing. Following this news, Fisker’s shares plummeted by approximately 50%. The company’s market cap now stands at a meager $97 million, a steep fall from $4.1 billion in 2021. If this downward trend continues, Fisker could face delisting from the New York Stock Exchange.
Amazon-backed Rivian isn’t faring much better. The company recently announced that it would delay factory plans in Georgia to save billions of dollars. Tesla CEO Elon Musk even suggested that Rivian would only survive another six quarters unless they cut costs significantly. Rivian’s market cap has also taken a hit, tumbling from a 2021 peak of $153 billion to $10.8 billion today.
Meanwhile, Saudi-backed Lucid has seen its market cap plummet from a peak of $91.4 billion in 2001 to a mere $6.2 billion today. They also downscaled their production goals, expecting to build only about 9,000 EVs this year— a far cry from the 90,000 they predicted for 2024 just three years ago.
The Future of EVs
While the future may seem uncertain for these EV startups, experts agree that the transition to electric mobility is not a matter of if, but when. As stated by Forbes, it’s a “waiting game” for EV makers to figure out how to win over everyday consumers and overcome challenges such as charging time, inadequate charging infrastructure, repair costs, and resale value. Only time will tell how these startups navigate these challenges and whether they can weather the storm.
