Electric vehicle sales are strong, but EV startups are struggling
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It is not an easy time to be a startup in the electric vehicle industry. This week, Lordstown Motors — the electric truck manufacturer based in a former General Motors plant in Ohio — told investors it may shut down after one of its key investors said it would stop funding the company.
In a statement to Marketplace, Lordstown called the investor’s move unwarranted and said it would try to “find an amicable path forward.”
Meanwhile, another electric truck startup that had a flashy initial public offering a few years ago has lost most of its value. Rivian is now trading under $13 per share — about a tenth of its peak closing price in late 2021 — and Ford has pulled out as an investor.
So is there any room left for startups in the EV sector?
It is really expensive to start a car company from scratch. “It takes time and money to build up the production capacity,” said Stephanie Brinley, an associate director at S&P Global Mobility.
“It takes time and money to build up the distribution network. It takes time and money and patience to get on consumers’ radars,” she added.
But money is just not as easy to come by for EV startups as it was a few years ago. Interest rates are higher and recession fears are in the air. Plus, it’s not always easy to get the parts they need, according to Brian Moody, executive editor at Autotrader.
“There’s not an established supply chain, in some cases, for the components,” he said. “And if there is one, it’s expensive.”
Rivian, Lordstown and other startups are also competing with GM, Ford, Nissan and Toyota, which have all got into the EV game. And those legacy carmakers entered the EV market with a big advantage: decades or more of experience manufacturing cars, Moody pointed out.
“And they have a second advantage, which is that they can use the profits from those already being manufactured automobiles to pay for electric cars,” he said.
No such luck if your only products are electric vehicles, which still make up a small fraction of total sales. Smaller startups are also competing with Tesla, which has slashed prices. It dominates the EV market now, but it wasn’t always that way.
“We have to remember that even Tesla about a decade ago was kind of on the edge of collapsing,” said Gil Tal, director of the Electric Vehicle Research Center at the University of California, Davis.
Tesla’s success could be hard to replicate, Tal said — but not impossible. Thanks to government mandates, EVs are poised to grab an ever-larger share of the car market, he added.
“You have a secure, growing market for the next 20 years,” Tal said, “and that’s the main reason why EV startups have some chance.”
They might need to have patience too — if they can afford it.
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