Reality Check! Is Anyone Actually Making Electric Vehicles?
It’s about time investors were hit with the reality about electric vehicle startups. But what do tanking shares mean for the much-hyped, cheap capital-sucking EV makers that took the market by storm last year?
Stocks of EV upstarts, from New York-listed, Chinese firms such as Nio Inc., Xpeng Inc. and Li Auto Inc. to their American peers Rivian Automotive Inc. and Lordstown Motors Corp., have lost their sheen in recent weeks, exacerbated by a broader turn in sentiment and rising rates. Turns out making fancy, future-forward cars is kind of hard.
It’s even tougher when costs to produce vehicles are surging. Manufacturers can’t get their hands on parts and sales have been underwhelming. Adding pressure, those Chinese companies that trade in the US are getting caught up in the regulatory tit-for-tat between Washington and Beijing.
Until now, raising capital had been the easy part. Investors rushed to check off their ESG-friendly holdings, happily backing anything that seemed tech-y and green. All the while they appeared to ignore the basic requirement of a manufacturing company: Can it actually make the product? And is it being produced at scale? How quickly will it go from prototype to mass production?
Many upstart EV makers boasted all sorts of artificial intelligence and smart-driving systems. Still, they needed to source integral parts from other firms, especially the core component — batteries. They put out big production forecasts, based on unlimited consumer demand and the inevitable need for companies to bow to regulatory pressure around emissions. Several even went with an asset-light model, contracting out the vehicle-making part.
Most investors loved the rhetoric. Now, pulling in cash is getting tougher as rates
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