The years go by and the story remains the same for Rivian and Lucid, the two EV upstarts considered serious competitors to Tesla.
Last year, the ramp up of their respective production proved to be a real nightmare for the two California-based automakers.
Not only is the ramp-up of production the most difficult step to take in the automotive industry, but Rivian (RIVN) and Lucid (LCID) were trying to increase their production volume at a time when the pandemic had greatly disrupted supply chains, causing costs to soar. As a result, the two disruptors were forced to scale back their ambitions significantly, including their production targets. They both lowered, at different times, the number of vehicles they each intended to manufacture last year. In the end, they more or less reached their annual goal.
Rivian, which manufactures the R1S SUV, the R1T pickup truck and the EDV van at its Normal, Ill., plant, had said that it would produce 25,000 vehicles, only to end up at 24,337.
"Supply chain continues to be the main limiting factor of our production," the company said in February in a letter to shareholders, explaining that during the 2022 fourth quarter it "encountered multiple days of lost production due to supplier shortages."
"As expected, during the fourth quarter of 2022, in-transit time from rail shipments combined with increased volumes from the ramp of our second shift towards the end of the quarter caused a larger discrepancy between production and deliveries," Rivian detailed.
Lucid Motors
Lucid Is Up But Rivian Is Down
Lucid, whose largest shareholder is the sovereign wealth fund of Saudi Arabia or Public Investment Fund (PIF), with an almost 61% stake as of December 30, 2022, is considered the Bentley of electric vehicles. The group produces the Air luxury sedan, which is available in different variants.
The Lucid Air comes in three variants -- Pure, Touring and Grand Touring. The base price of the Lucid Air Pure is $87,000, $107,400 for the Touring and $138,000 for the Grand Touring according to Lucid. The group plans to start production of its very first SUV, Gravity, from 2024.
The carmaker also seems to have a demand problem, even though it burns money very quickly. Lucid ended 2022 with about $4.4 billion in cash on hand, enough to last until the first quarter of 2024.
"As we produce vehicles at low volumes on production lines designed for higher volumes, we have and we will continue to experience negative gross profit related to labor and overhead costs,” CFO Sherry House said during Lucid’s fourth quarter earnings call on Feb. 22.
The production figures are alarming. Lucid says it produced 2,314 cars in the first three months of the year. By extrapolating this figure, we can estimate that the carmaker will manufacture 9,256 vehicles this year. This estimate is below the production target of 10,000 to 14,000 vehicles for 2023, announced in February by Lucid. Surprisingly, Lucid said it had "over 28,000" reservations for Lucid Air as of Feb. 21. The low production numbers suggest that customers may be canceling their reservations, or that Lucid is struggling to convince customers with a reservation to proceed with the purchase of the vehicle.
The difficulties of the two car manufacturers has greatly impacted their respective stock prices, causing heavy losses to shareholders: last year, Rivian's stock fell 82.2% and Lucid's 82%. By comparison, Tesla (TSLA) shares fell by 65% in the same year, but the stock of Elon Musk's group has rebounded by 51% this year. Conversely, Lucid shares are only up 21%, while Rivian shares are down 22%.
It is in this context that a Twitter account with which Elon Musk, the CEO and co-founder of Tesla, often interacts with, has posted critical comments from the CEO of Lucid against the billionaire, after the upstart announced disappointing delivery data.
"It’s not for me to criticize Tesla. But…there’s only 1 car company that has production hell," Peter Rawlinson, Lucid's CEO had said in 2020, the Twitter user posted, reminding people that, at the time, Lucid was projecting to deliver 49.000 vehicles in 2023.
"Production hell" is words Musk had used to describe the tough time Tesla went through, when producing Model 3, its entry-level sedan designed to appeal to the general public. The Model 3 was the first mass-produced model by the Austin, Texas-based automaker.
Lucid delivered 1,401 vehicles in the first quarter.
'Unfortunate'
Musk took advantage of this message to reiterate that significantly increasing production volumes and turning a profit were among the two most difficult things in the automotive industry.
"Reaching volume production & achieving positive cash flow is insanely hard," Musk commented on Apr. 13.
Hours later, Musk agreed with another Tesla fan and investor account that if Lucid and Rivian don't change things fast enough, they will not be able to survive.
"If Lucid and Rivian don’t change things as soon as possible they will go bankrupt. Getting volume production and profitability is insane to make happen. That’s why what Tesla did is 🤯🤯🤯 @elonmusk," the account posted on Apr. 14, with a video of an interview with Musk about how difficult it is to survive in the car industry.
"Unfortunate, but true," Musk agreed.
Rivian
Lucid, which cut 18% of its workforce last month, will publish its first quarter results on May 8 and will probably update investors on its strategy. Rivian will publish its results the next day, but the group has recently announced very aggressive goals.
The Irvine, Calif., automaker plans to deliver 85,000 units of its R1S SUV in 2024, which is far more than all the vehicles it delivered last year across all models - R1S, RT1 and EDV. In 2023, the target is 50,000.
Rivian is even more ambitious in 2026, when it should start producing the R2, a smaller and more affordable vehicle. It plans to produce 200,000 R2 units in 2026, and double that figure to 400,000 units beginning in 2027.
The base price of the R2 is expected to be around $40,000, which would allow Rivian to target a wider audience.
Currently, the base price of the 2023 model year RS1 is $79,800, while the base price of the R1T pickup is $74,800.
