Many EV Makers Face Financial Challenges

[OutdoorLover]

Originally Posted by OyCrumbler

Oh yea, they both have significant challenges for sure. I do think Rivian's currently at much steadier footing than Lucid is.



The banks care a lot about projections and it's a large factor in how things like loan terms are determined. They do indeed need to tell these things to the bank or other similar financial institutions as they raise funding. That's essentially their runway and the hope is that the runway they secure is enough to get the company up and working well at a profit while rewarding rewarding earlier investors. That's essentially how Tesla and a host of other successful automakers of the last few decades were able to go from hemorrhaging money during their ramp up to becoming comfortably profitable year after year.

Yes, for the startups, it's essentially a race to establish sufficient revenues and refine the business sufficiently to be profitable - before the early investors money runs out. And Ford and GM for example are not accidentally landing in their situation of having the ICE vehicle revenues subsidize the EV division until that can become profitable - that's their business model. A lot of environmentalists have thrown huge amounts of dung at them because they didn't just abandon ICE vehicles immediately and make EVs, but that would have been a disaster for them. You still need a workable business model.

I am in the drug development business - where it typically takes 10 years for a development program to begin commercial sales, and over 90% of programs fail. You really need well educated investors who are also true believers in the company, because even if you are good, and lucky as well, it will still take many years for the ideas to come to fruition, and for all those years, a startup is just spending investors' money, with no drug revenues. And if results in early clinical trials are promising, the stock price zooms up and you have more cash to keep developing, and can easily do another fund raise through the market if needed. But if early results are disappointing at any point, then the stock price plummets and even if you have another program(s). it's hard to get more money and you're looking at make or break next trials, which you may run out of money to actually conduct, and even though there are still real possibilities, the company is forced to close its doors without fully exploring it's R&D potential. Happens all the time.

[H8PJs]

If they've been focusing on the bad news, Rivian Automotive (RIVN 3.22%) investors might have missed that the company recently added the R1S to its leasing program, and it might be a bigger deal than they think.

Here's why leasing will be important for Rivian right now, and why adding the SUV specifically is good news.

https://www.fool.com/investing/2024/...ian-investors/

[OyCrumbler]

Originally Posted by H8PJs

https://www.fool.com/investing/2024/...ian-investors/

Yea, expanding their leasing programs to other vehicles and to make that available in more states is one of the demand levers they can still pull. They have several other demand levers they can and some of which they will be pulling fairly soon over the course of this year.

They're supposedly rolling out the pickup truck and SUV to Canada outside of just Vancouver area in the coming months. They're also looking to set up more of their Rivian spaces (sort of like company owned dealerships) outside of the seven states and one provinces where they currently have them. They also might be launching the basic trim versions of their pickup truck and SUV that are equipped with the LFP battery packs some time this year and that should be pretty smooth since the related electric delivery vehicles they've been cranking out is already using likely similar possibly near identical LFP battery packs. The majority of their 100K Amazon delivery vehicle order is still on the docket and Amazon's also given them their blessing to sell their delivery vehicles to other entities and one of the entities they're in talks with is AT&T. They also had earlier estimates of going up to 150K run rate at the Normal, IL plant they're operating out of and so it doesn't seem like they'll run out room there for a decent amount of time before they need to have their second plant up and running. There are still significant backlog of different trims / configurations for their vehicles it seems and so they seem to not be in a demand crunch for their consumer vehicles either, but if that does happen, they also still have the advertising and marketing demand lever they can pull.

So all in all, I think it's a pretty good position and their vehicles have been solid with good reviews in publications and pretty glowing feedback in the various forums. Even the reviews by drivers of the Amazon vehicles have been glowing, It seems like they're making good products and doing a good job of reducing costs will ramping up, so things look fairly promising. I think the only really large worry is if something crazy happens with the development of the second production plant that's based in the Atlanta, GA metropolitan area. Something crazy would be like if there's a large and successful politically motivated obstruction of the plant getting constructed which thus far have been too small and unsuccessful, but who knows where the political winds will turn.