Shulou(Shulou.com)11/24 Report--

A price war on electric cars launched by market leader Tesla has dealt a heavy blow to lossmaking US start-ups such as Rivian Automotive and Lucid Group, making it harder for them to grab market share in an industry where consumer wallets are shrinking.

Tesla's move to cut the price of his electric car by as much as 20 per cent worldwide last week could attract new buyers of electric cars in the industry, but it will also force other carmakers to respond at lower prices, according to several analysts and investors, otherwise there is a risk of falling behind.

Some start-ups may not be able to afford price cuts and are grappling with challenges such as rising raw materials and production costs and far lower car production than Tesla. Tesla delivered more than 1.3 million electric vehicles in 2022.

Garrett Nelson, an analyst at CFRA Research, a famous US investment bank, said Tesla's move would "strengthen their competitive advantage over other carmakers".

Today, most electric car startups are in a bad position, a far cry from the initial public offerings (IPO) of the past few years. At the time, investors thought these companies would get a piece of the electric car market and excitingly high valuations like Tesla.

However, neither Rivian Automotive nor Lucid Group is profitable. In total, the two companies delivered 24000 cars last year, and each of the Rivian Automotive's manufacturing costs exceeded the price of the car. The company's cost of selling goods in the last quarter was about 2.7 times its revenue, while Lucid Group's revenue cost was about 2.5 times its sales.

Still, Rivian Automotive had $13.8 billion in cash at the end of the third quarter, the largest amount of electric car startups in the United States. Lucid Group ranks second with $1.26 billion in cash reserves and raised another $1.52 billion in the fourth quarter.

This provides a considerable production runway for the two companies, while Faraday Future and Armining, a UK electric car start-up, have been seeking to raise money and warned that they may not be able to sustain operations until 2023.

"Electric car startups will face a 'Game of Thrones' battle and will face a severe test in the next 12 to 18 months if they fail to meet their financial targets," said Daniel Ives, an analyst at Wade Bush Securities. "in the face of M & A consolidation or worse, we expect some losers."

The balance sheets of these companies are expected to be clearer when they report fourth-quarter results.

Lucid Group, now run by Peter Rawlinson, a former Tesla executive, has not yet announced whether it plans to launch a Volkswagen version of the electric car to compete with Tesla's Model 3 and Model Y, which start at $44000 and $53000, respectively.

Rivian Automotive's R1T electric pickup starts at $73000, while the R1s SUV starts at $78000. Rivian Automotive's largest shareholder is Amazon, which does not plan to sell mass-market cars based on the next-generation R2 platform before 2026, which makes more spacious vehicles and lower production costs.

Analysts say Tesla's price cut comes just months after contract manufacturer Magna Steyr began producing Fisk's Ocean SUV, starting at $37499, making it more vulnerable to price cuts. Mr. Fisk declined to comment.

Lordstown Motors, which sold much of its assets to contract manufacturer Foxconn in May to raise money, said its electric pickup Endurance would be launched only for the commercial fleet market.

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