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New electric models from Rivian Automotive Inc and Lucid Group Inc have won rave reviews, but you’ll have to be patient to drive one.
Since commencing production one year ago, the two companies have produced only around 10,000 vehicles altogether as of June 30. Compare that with Volkswagen AG, which manufactures twice that every day. As the startups are discovering, high-volume auto manufacturing is far more difficult than securing customer orders — and it’s causing them to burn through billions of dollars of investors’ cash. Recognising the need to be more frugal, Rivian announced a joint venture with Mercedes-Benz to produce electric vans together in Europe; the partners aim to share costs and cut factory spending by using an existing Mercedes site.
Rivian and Lucid’s struggles echo those of Tesla Inc in 2017-2018 during the ramp-up of the Model 3 sedan, an experience Elon Musk later compared to eating glass. The hope is they’ll be able to similarly overcome the obstacles and eventually get close to Tesla’s $889 billion valuation.
Producing cars is fraught with risk and remains a fantastic way to incinerate investor capital when things go awry.
Joint ventures are one way to limit those financial risks, but it’s also worth looking at the approach of cash-constrained new entrants such as Arrival Ltd, Fisker Inc and Polestar Automotive. They are wise to embrace other less expensive production methods, though these approaches aren’t without their own challenges.
Even experienced automakers have struggled this year with inflation and parts shortages, but the financial pain has been most acute for those launching vehicles in their own plants for the first time.
Lucid burned around $1.5 billion between January and June when its greenfield plant in Arizona churned out only 1,400 luxury saloons, an average of just 8 per day. It expects to produce around 6,500 cars in 2022, compared with an original target of 20,000, and blamed this meager haul on supply-chain and logistics challenges, plus the need to ensure vehicles meet quality standards.
Meanwhile, Rivian was often unable to operate a single shift without interruption in the first half of the year due to component shortages. But the Amazon.com Inc-backed company has made life harder for itself by trying to launch a pickup, SUV and commercial delivery van simultaneously.
—Bloomberg