• Rivian and Nikola: Two struggling EV startups with big visions
• Rivian is on course for expansion in order to operate profitably from the end of 2024
• Nikola’s existence is at stake – cost savings urgently needed
There aren’t too many investors and pundits who remain optimistic about the future of the two EV startups after the huge price drops in Rivian and Nikola shares. Still, the two US companies are far from capitulating, despite falling investor popularity, rising costs and diminishing but still nagging supply chain issues. However, the differences in the turnaround strategies could hardly be any smaller: While Rivian relies on an offensive expansion policy, Nikola wants to shrink to a healthy size. It’s worth taking a closer look.
Rivian: Profitability should be achieved by the end of 2024
Rivian’s CEO Robert Scaringe is known as a man of big plans. With the electric pickups from Rivian, he wants to challenge Tesla for pole position in the EV market in the USA. This requires enormous investments, which is why Rivian – like Tesla in its early days – accumulates losses quarter after quarter. After all, the latest figures revealed that losses in the first quarter of 2023 fell from $1.593 billion to $1.349 billion. On the other hand, analysts had feared in the run-up to the book opening that Rivian’s losses would have even increased.
Another positive is that thanks to higher car sales, the EV startup’s sales are steadily increasing, by 95 million to 655.51 million US dollars in the last quarter. Nevertheless, it will still be a while before Rivian is able to operate profitably: according to its own plans, this should be the case for the first time at the end of 2024. In 2023 as a whole, losses are to be reduced from 5.2 to 4.2 billion US dollars. Investors have responded quite positively to the most recent quarters overall, but the recent rise in the Rivian share price has so far only been a drop in the ocean: at a current price of USD 15.14 per Rivian share (as of the closing price on 26 May 16, 2023) is still miles away from the record high of November 16, 2021 at $179.47.
New production facilities for Rivian’s rapid growth
In order to achieve this ambitious goal, Rivian must minimize fixed costs as well as production costs per unit, emphasizes Rivian CFO Claire McDonough. According to “Upwallstreet”, the introduction of production changes and the ramping up of production are essential for this. The company has expanded its production capacities significantly in recent months, for example new plants have been built in the US states of Georgia and Kentucky. With a planned production output of 50,000 cars this year, the extremely long waiting times for customers will be significantly reduced. In addition, Rivian plans to create a new production line for its battery technology, following the successful example set by Tesla.
The two big advantages of Rivian
In fact, Rivian has two significant advantages over other US EV startup competitors such as Lucid Motors, Lordstowns Motors or Arrival. Firstly, it knows about the support of the digital giant Amazon, which has a great interest in the well-being of Rivian both as an important client and as the owner of Rivian shares. Second, Rivian sits on a sizable cash cushion of nearly $12 billion, so financial survival should be assured at least for the coming quarters. Despite these positive factors, it remains questionable whether Rivian will really become the new Tesla and will deliver millions of cars around the world. At least stock market old masters George Soros is skeptical: he recently sold off his Rivian shares drastically. In the third quarter of 2022, the US electric car manufacturer was still the largest investment in Soros’ portfolio ever – as of March 31, the Rivian shares, which were worth around 50 million US dollars, made up only 0.85 percent of his portfolio and were thus sixth in his portfolio.
Nikola: Increasing losses with continued low sales
Nikola, on the other hand, is using exactly the opposite tactic: The manufacturer of emission-free electric trucks is planning a downsizing: by concentrating on profitable business activities, the exorbitant loss of the US company is to be reduced – with simultaneous profit growth. It is indeed extremely urgent to contain the losses. In the first quarter of the current year, the company’s loss increased again from 152.9 million to 169.1 million US dollars – even the jump in sales from 1.9 to 11.1 million US dollars cannot hide the fact that Nikola urgently needs to has to work on its cost structure. As a result, the Nikola share certificates have become almost worthless: While they temporarily cost over USD 90 in June 2020, the current price of a Nikola share is only USD 0.5896 (as of the closing price on May 26, 2023). .
Strict austerity measures and concentration on the essentials – this is how Nikolas should be able to survive
The main problem for Nikolas lies in the still extremely low sales volume of its electric trucks. Just 63 battery-electric trucks were produced in the quarter under review, while 31 were delivered to dealers — far too few to achieve the profitability shareholders are demanding for the foreseeable future. Nikola CEO Michael Lohscheller is therefore pursuing a strict austerity course in order to curb the exorbitant costs. For example, Nikola is increasingly divesting itself of capital-intensive businesses, for example selling its stake in a European joint venture to the Iveco Group, an Italian heavy-duty truck manufacturer, for $35 million. Lohscheller also explained that from now on, Nikola will focus on hydrogen-powered trucks and autonomous technologies. At the same time, he confirmed that the fuel cell-powered version of his semitrailer with a longer range will be launched in July this year.
The worst is imminent: the cash poster, which is modest anyway, will melt away despite the cost-cutting measures. As of March 31, Nikola had $121.1 million in cash on hand, a huge decrease from the prior quarter’s figure of $233.4 million (as of December 31). You don’t have to be a financial economist to know that for Nikola it’s all about survival. Sales urgently need to be increased while at the same time reducing the extreme cost situation in order to secure Nikola’s existence. Potential shareholders of the crisis-ridden company must undoubtedly bring a good deal of optimism with them. After all: With the low share price, investors’ expectations of Nikola’s future are now extremely low and can hardly be undercut.
Editorial office finanzen.net
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