{"id":40903,"date":"2023-01-21T12:06:09","date_gmt":"2023-01-21T17:06:09","guid":{"rendered":"http:\/\/autosector.com\/?p=40903"},"modified":"2023-01-21T12:06:09","modified_gmt":"2023-01-21T17:06:09","slug":"tesla-stock-price-lucid-rivian","status":"publish","type":"post","link":"http:\/\/autosector.com\/?p=40903","title":{"rendered":"Tesla stock-price rout grabs headlines from Rivian, Lucid collapses"},"content":{"rendered":"

While Tesla<\/a> Inc.\u2019s epic stock-price collapse dominated headlines over the past year, for some smaller electric-vehicle companies the rout has been even worse, a sign that investors see few attractive alternatives in the sector.<\/p>\n

Two of the most prominent new EV makers \u2014 Rivian<\/a> Automotive Inc. and Lucid<\/a> Group Inc. \u2014 have lost roughly 90% of their equity values from their bull-market peaks, compared with a 69% drop for Tesla. 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.<\/p>\n

\u201cTesla\u2019s stock performance has certainly had an impact on the group, and this group\u2019s own production issues have also weighed,\u201d said Canaccord Genuity analyst George Gianarikas.<\/p>\n

A Rivian representative declined to comment on the stock-price decline, while Lucid didn\u2019t reply to a request for comment. Both stocks were trading lower in New York on Thursday, Rivian slid as much as 3% and Lucid fell 3.4%.\u00a0<\/p>\n

The staggering 740<\/a>% climb for Tesla shares in 2020 helped spur investor euphoria around the sector. EV stocks of all kinds \u2014 whether the companies were making passenger cars, commercial vehicles<\/a>, buses or niche autos \u2014 exploded as well, with even the tiniest names commanding valuations of several billion dollars. Rivian and Lucid were touted as potential \u201cnext Teslas,\u201d with valuations bigger than century-old legacy car companies.\u00a0<\/p>\n

Lucid began trading in<\/a> July 2021 and its equity value topped out at $91 billion in November that year. Rivian shares peaked just days after its November 2021 initial public offering, valuing the company at $153 billion \u2014 more than Volkswagen<\/a> AG, despite Rivian having zero revenue at the time.\u00a0<\/p>\n

Rising interest rates over the past year and fears of a recession have curbed investors\u2019 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.<\/p>\n

Lucid built 7,180 Air<\/a> 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. Rivian also narrowly missed its annual production target of making 25,000 cars.\u00a0<\/p>\n

Their sinking share prices will raise the cost of equity financing for the carmakers, which are still investing heavily in their businesses.\u00a0<\/p>\n

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 \u2014- the company had about $13.2 billion in cash as of Sept. 30, which it said is enough until 2025, though it\u2019s been spending a lot to bring models to market and expand production. \u00a0<\/p>\n

\u201cPeople are worried that given the pace of production, they will not be able to make cars fast enough to reach that point where they will not need to raise cash anymore,\u201d Canaccord\u2019s Gianarikas said of Rivian. \u00a0<\/p>\n

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. \u00a0\u00a0<\/p>\n

\u201cMost unprofitable technology stocks got hard hit last year due to tightening Fed policies and commensurate impact on interest rates,\u201d said Ivana Delevska, chief investment officer at SPEAR Invest. \u201cBut in addition to that, fundamentals for EVs deteriorated in the fourth quarter as it became clear that too much supply was coming on the market.\u201d<\/p>\n

For Rivian, the selloff has been especially ugly. It has performed worse than Tesla and Lucid, as well as other EV makers such as Nikola Corp., Fisker<\/a> Inc., Polestar<\/a> Automotive Holding UK Plc, Workhorse Group Inc. and Lordstown<\/a> Motors Corp.\u00a0<\/p>\n

The disadvantages of being a smaller EV maker in these times became clearer last week when Tesla announced a price cut across its product lineup, a move that analysts said could come as a bigger blow to its competitors who will be forced to follow. On Friday\u2019s trading session after the cut was announced, Rivian and Lucid shares dropped more than Tesla\u2019s.\u00a0<\/p>\n

Shrunken equity values and price cuts aren\u2019t the only risks the startups face. The pace of EV sales also is expected be slower than previously expected. According to BloombergNEF, while the adoption of electric cars<\/a> will continue to rise in 2023, it will be at a more tepid pace than the last two years.\u00a0<\/p>\n

\u201cEven without a recession, the risk for the \u2018next Teslas\u2019 is elevated,\u201d SPEAR\u2019s Delevska said. \u201cTesla now has scale and profitability, and while we expect significant downside to that profitability, we don\u2019t think Tesla will go out of business. Many of the newcomers will.\u201d<\/p>\n

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