When Elon Musk, the CEO of Tesla (TSLA) – Get Tesla Inc. Report, speaks concerning the atmosphere and the issues going through the car sector, trade actors pay attention.
For a few years, the billionaire labored laborious to persuade his friends, authorities and customers that electrical automobiles had been the long run. The activity was not straightforward as a result of skeptics concerning the trade had been double the variety of believers.
His guess even appeared misplaced when from 2017 to 2019 Tesla discovered itself on the point of chapter due to difficulties managing its ramp-up of manufacturing capability for the Model 3 sedan, its entry-level car.
“Closest we got was about a month. The Model 3 ramp was extreme stress & pain for a long time — from mid 2017 to mid 2019. Production & logistics hell,” Musk mentioned on Nov. 3, 2020.
The tech tycoon has twice recounted these difficulties this 12 months, in March to defend competitor Rivian and in April throughout a Ted Talk.
“That was mega pain,” Musk mentioned final March.
This tough interval in Tesla’s historical past is symbolized by the Joe Rogan podcast’s interview with Musk in September 2018. During this interview, Musk and his host smoked marijuana.
Today Tesla has turn into a juggernaut, the world’s sixth most respected firm with a market cap of $686.53 billion finally test.
The Austin auto group delivered almost one million automobiles in 2021 and expects greater than 1.5 million items in 2022 regardless of supply-chain disruptions, chip shortages and hovering raw-materials costs.
The billionaire says that to outlive, upstarts should reveal that they’ll overcome the identical difficulties as Tesla did.
Rivian (RIVN) – Get Rivian Automotive Inc. Report and Lucid (LCID) – Get Lucid Group Inc. Report, that are among the many most promising rivals, are going by way of difficulties, and Musk has simply opined on their future.
“The only American car companies that have not gone bankrupt are Tesla and Ford,” (F) – Get Ford Motor Company Report Musk mentioned throughout an interview with the Tesla fan membership Tesla Owners Silicon Valley. “And unless something changes significantly with Rivian and Lucid, they will both go bankrupt.
“I hope they can do one thing; however until they lower their prices dramatically they’re in serious trouble.”
GM (GM) – Get General Motors Company Report and Chrysler, now part of Stellantis (FCAU) – Get Stellantis N.V. Report, filed under the bankruptcy laws in 2009.
Lucid and Rivian May Have a Chance
The billionaire then affirmed his remarks by tweeting on June 14 that:
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“If they [Rivian and Lucid] lower their opex & cogs dramatically, then they’ve an opportunity, however that hasn’t occurred but,” Musk posted. He referred to operating expenses and cost of goods sold, or the direct costs involved in manufacturing cars.
A spokesman for Rivian declined remark. TheAvenue has contacted Lucid for remark as properly.
Elon Musk’s warning comes as Lucid and Rivian are having trouble handling increased production rates. The two automakers also are hampered by the industrywide supply-chain problems, but some of their difficulties are also unique to them.
As TheStreet’s Rob Lenihan wrote on June 14, Rivian, which went public in November, is delaying delivery of its long-awaited SUV, the R1S, by one to nine months.
“We’ve continued to navigate a good provide chain, we’ve needed to cut back complexity wherever potential, together with prioritizing sure construct combos over others,” the company said in a letter to customers posted on RivianForums.
Rivian was founded in 2009 and went public in 2021. The company produces three electric vehicles: the R1T pickup truck, the R1S SUV, and the RCV commercial van.
The company said during its first-quarter earnings that it had $17 billion in cash as of March 31. It added that will be enough to cover its spending through the launch of its next model, a lower-cost vehicle called R2, at a planned new factory in Georgia in 2025.
But the net loss was $1.6 billion in the first quarter. And Rivian expects to use $2.6 billion for capital expenditures in the second quarter ending this month.
As for Lucid, whose main shareholder is Saudi Arabia’s sovereign wealth fund Public Investment Fund — which owns 62% — the company said last month that it had enough cash on hand to finance its operations until 2023.
“We proceed to have a wholesome steadiness sheet, closing the quarter with almost $5.4 billion of money available, which we imagine is ample to fund the corporate properly into 2023,” said Sherry House, Lucid’s chief financial officer, during the first-quarter earnings call.
Lucid in February was forced to lower its 2022 production target to between 12,000 and 14,000 vehicles from 20,000, mainly because of global supply chain and logistics challenges.
Morgan Stanley analyst Adam Jonas is convinced that the group will have to find new injections of capital in 2023.
Jonas estimates $2 billion of new equity will be raised in fiscal 2023 and an additional $3 billion of capital (50/50 equity/debt) in 2024, as we wrote on May 7.
Lucid produces the Lucid Air Sedan which is available in a number of configurations, together with the Lucid Air Dream Edition, Lucid Air Pure, Lucid Air Grand Touring.