The companies have struggled to ramp up output of vehicles amid supply-chain woes just as investors grew leery of highly valued companies with no earnings.
Rising interest rates over the past year and fears of a recession have curbed investors’ risk appetite, causing them to flee unprofitable companies with high expected growth. Rivian is now worth $14.8 billion, while Lucid is valued at $13.7 billion. Even Tesla, which is profitable, plunged, casting a shadow over the rest of the industry.Sedans in 2022, a far cry from its projection of 20,000 vehicles at the beginning of that year, as it struggled with supply-chain snags and logistics problems.
Lucid, which had $3.3 billion of cash, said in November it could raise up to $1.5 billion in equity in subsequent months. For now, Rivian has no immediate need to tap capital markets —- the company had about $13.2 billion in cash as of Sept. 30, which it said is enough until 2025, though it’s been spending a lot to bring models to market and expand production.
The EV startups appear increasingly risky at a time when investors are looking for safe assets. Car manufacturing was already a capital-intensive, supply-chain-focused business. On top of that, the industry is highly sensitive to economic swings and climbing borrowing costs that drive up the cost of financing a car purchase. And as consumers tighten their purse strings, EVs that are typically more expensive than gasoline-powered vehicles are bound to take a harder hit.
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