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2023 will make or break Tesla wannabes like Rivian and Lucid. Here’s what they need to do if they want to survive.

Rivian manufacturing in Normal, IllinoisStartups like Rivian are running out of room to make excuses for production woes.


  • Electric vehicle startups have a big year ahead after a challenging 2022.
  • Investors are expected to lose patience with ‘stupid mistakes.’
  • Startups have to make good this year on promises that won them lofty valuations.

After a challenging and humbling 2022 riddled with supply chain constraints, production hurdles, stock drops, and talent turnover, EV startups Rivian, Lucid, and more are staring down some big deadlines for success in 2023.

After these startups made promises that won them several-billion-dollar valuations, investors may lose patience with their struggles — especially as legacy players like Ford and GM crowd into the market.

“Excuses around the production of new vehicles will grow tired for startups in the coming year,” said Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions. 

“As the pressure on the supply chain eases, investors can point to a General Motors and say, ‘They’re building without a problem, why can’t you?'”  

A brutish 2022

Essentially all of today’s budding startups have blamed a majority of their troubles on broader industry disruptions in 2022.

Some of these problems included getting enough supply or the right supply for flagship vehicles, exacerbated by less-established supplier relationships for startups just getting their assembly factories on line. 

On top of that, the pending battery crisis also worried the younger carmakers even more than it did companies such as Ford, GM, Volkswagen and more. 

And the turn of the calendar won’t wipe away the problems. During quarterly earnings calls, executives at Rivian and Lucid cautioned investors of more trouble heading into 2023 as they raced to ramp up production and their logistics processes in hand. 

Rivian, for example, warned of a “significant discrepancy” in the number of vehicles it produced in Q4 versus deliveries as it grapples with changes to the production schedule, a shift to using shipping vehicles by rain instead of by truck, and an expected slowdown in demand during the holiday season.

Others fought just to start production. Both Canoo and Fisker began building vehicles on November 17, while Faraday continued to struggle and was not able to start its assembly line. 

Accordingly, stock prices have been sinking from blockbuster IPO and SPAC highs, with many EV startups’ shares down as much as 80% from earlier last year. As investors begin to shy away, a cash crunch is materializing. Reserves are shrinking as startups burn cash on the pricey proposition of manufacturing expansions. 

Ways to find success this year

There are some bright spots for startups this year, experts say — if these companies can nail down production and conserve cash.

Rivian reported Tuesday it fell a few hundred vehicles short of its goal to build 25,000 electric cars in 2022. The startup built 10,020 vehicles in the fourth quarter to finish the year at 24,337 for the full year. Lucid, which has not yet released its Q4 deliveries, dropped its production target twice and churned out 3,687 by that period — while only delivering about 66% of those.

If the startups want to succeed and regain investor faith, they have to get closer to meeting their numbers in 2023.

On the cash front, Morgan Stanley’s Adam Jonas said in a December 28 note that 2023 will be a “reset year” for the EV space — so long as they have the money to do so.

“We believe players that are self-funded (non-reliant on external capital funding) with demonstrated scale and cost leadership throughout the value chain,” Jonas wrote, “can be relative winners.”

Finally, investor patience for returns is going to wear thin this year as the economic landscape becomes tougher and interest rates make investing a more expensive proposition, said Fiorani.

“Investors are going to expect more for their money,” he said. “Making sure there aren’t any stupid errors going forward will be the bare minimum.”

Not everyone, however, is confident the startups can do this.

“After an extremely difficult year of equity performance for upstart EV manufacturers,” Garrett Nelson, senior equity analyst at CFRA Research, said in a late December note, “we see little reason for optimism when looking ahead to 2023.”

Read the original article on Business Insider
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