Which Electric Vehicle Start-ups Will Survive?
The electric vehicle market has been flooded with start-ups. So which ones are for real and which ones aren’t?
The success of Tesla has inspired a variety of hopeful imitators; companies hoping they can reproduce the formula that has led Tesla to become the most highly valued company in the world. However, while starting a new company is difficult in any industry, it’s particularly risky in the automotive industry.
In the early days of EVs, two start-ups emerged hoping to shake up the car industry. The Department of Energy awarded Tesla a valuable loan that rescued the company before it began mass production. While few remember now, there was a second upstart electric vehicle (EV) company that also received a loan: Fisker Automotive. After producing less than 2,500 plug-in hybrids, Fisker went bankrupt, defaulting on its loan in the process. So which of these hopeful start-ups are likely to become successful, and which are more likely to fail?
Interestingly enough, the ghost of Fisker Automotive has returned, this time branded as Fisker Inc. Despite failure on the first attempt, Fisker Inc. may yet prove succesful. The company’s namesake Henrik Fisker remains one of the most famous car designers in the world. After getting their stock listed publicly through a reverse merger, the company has a valuation of about $4 billion at time of writing.
Unlike other startups, Fisker intends to outsource production to Magna Steyr, who currently produces electric I-Pace on behalf of Jaguar in addition to a number of cars for other major automakers. Magna Steyr has also taken a 6% stake in Fisker in exchange. The connection to Magna Steyr gives credibility to Fisker’s ability to bring their mass-market crossover, the Ocean, to market.
However, Fisker is already well behind on bringing their first model (the EMotion) to market. They’ve also flip-flopped between several different battery technologies, casting some doubt on their technological claims.
While Fisker is a serious player, I wouldn’t put them at the top of the pack.
Likely the most serious of the startups is Rivian Automotive. Rivian has raised huge amounts of funds, including backing from Amazon and Ford. Additionally, they have already acquired a former Mitsubishi plant and aim to start deliveries in just a few months. If Rivian can hit that timeline, they’ll be the first company to successfully bring a pickup truck to market. Recently, reports indicated that Rivian has around 30,000 pre-orders, which should be enough to cover initial production. They have plentiful funds, high-powered backers, a capable manufacturing facility, and they should be the first to reach a thus untapped market with a compelling product. Their first two models (the R1T and R1S) both have impressive specs that should bring in a fair bit of interest once they hit the market.
Rivian has all the pieces to be a successful automaker. While only time will tell for sure, this company has all the pieces to find success.
Similarly, Lordstown Motors aims to be in production with a pickup truck of their own a few months later. Lordstown has investment from GM, as well as a former GM plant in Ohio. Unlike many others, Lordstown has kept a fairly low profile to this point. Reports also indicate that they’ve garnered enough pre-orders to cover their first year of production (about 20,000 vehicles) with only commercial orders. When Lordstown opens up their orders to the general public we should get a better gauge of demand for their vehicle.
Lordstown Motors also went public through a reverse merger, and is currently valued at about $3.3 billlion. This is slightly less than Fisker Inc, and far less than the $10+ billion Rivian is estimated to be worth (though Rivian is private so their exact value is unknown).
However, for now, Lordstown looks to be on the right track. Time will tell if their focus on fleet customers will pay off.
Lucid is headed by Peter Rawlinson, formerly the chief engineer of the Tesla Model S. In late 2018, Lucid secured a $1 billion investment from Saudi Public Investment Fund. Reports indicate that this should give them a valuation of just under $2 billion, small compared to some of the other startups we have values for. Their flagship model, the Lucid Air, is aiming for the same market as the Tesla Model S and Porsche Taycan. Since the Model S hasn’t seen a major update since its introduction in 2012, this may leave an opening for the Air to make its entrance. However, the Air will enter into a crowded field with impending competitors from Mercedes and BMW as well. Will the vehicle be enticing enough to persuade buyers to take a chance on a new and unproven company over established automakers?
Lucid is currently building their factory in Arizona and aims to begin deliveries by spring. They look likely to at least make it to market, but they’ll enter a competitive space and it’s yet to be seen if they have the resources to make it work long-term.
Canoo is relatively new to the scene, and was formed when high-profile executives left Faraday Future to form their own venture. Overall, they would likely be placed somewhere in the middle of the pack. However, they have enough expertise and funds to earn some recognition. The company’s founders include Stefan Krause, former CFO of BMW and Deutsche Bank, and Ulrich Kranz, another former senior BMW executive. The company has displayed an interesting looking mini-van that they intend to bring to production in 2022. After going public only last December, they’ve earned a respectable market cap of around $3.25 billion. Canoo is an interesting company with some legitimate capabilities, but they have a lot left to prove.
Less Serious Startups
A company called Atlis has gained a fair amount of media traction with their proposed XT truck. However, the company has little established expertise and even less funds — they’ve raised just $2 million — largely through crowd-funding — according to Crunchbase, an insignificant amount for a company apparently trying to bring a vehicle to market. Ultimately, there is no indication that Atlis has either the funding or technical expertise required to bring a vehicle to market. Worst of all, they don’t even have a working prototype of their vehicle.
Atlis has shown no proof of having the money, experience, or capability to bring a vehicle to market. Chances are Atlis never even makes it to market.
Once a rising star founded by a Chinese billionaire, Faraday Future has struggled through layoffs and constant financial struggles for years now. They’ve cancelled their factory construction, and have now leased small former tire plant in California capable of producing only 10,000 vehicles a year. Faraday intended for their first deliveries to be a few months ago, but that doesn’t seem to have occurred.
After seemingly teetering on bankruptcy for years, Faraday Future seems very unlikely to bring their car to market. It’s an unfortunate fate for a once-promising company.
Bollinger Motors has a $125,000 rugged-looking truck (reminiscent of a Land Rover) they aim to bring to market. So far, the company has been self-financed by its founder, Robert Bollinger, making it impossible to determine if they have the resources to bring a vehicle (even a high-priced, low-volume one) to market. Bollinger is reportedly trying to raise $100 million to help facilitate the launch, but even this is a small sum in the automotive world. At this point, Bollinger is something of a black box that is difficult to analyze. However, Bollinger doesn’t appear to be a major player, and my best bet at this point is that they never sell a meaningful number of vehicles.
Sono gained some headlines a model with solar panels all over it, but they’ve raised relatively little funding and they have a long way to go to reach production of any meaningful numbers. Until they get a lot more money and prove a legitimate demand exists for their unique vehicle, they shouldn’t be taken too seriously.
The automotive industry is a tough one to crack; it’s exceedingly rare for a new player to break in. The shift to electric cars has presented a window of opportunity for startups, but it’s closing fast as traditional automakers produce models of their own. In all likelihood, the large majority of these companies will fail, but it’s not unlikely a small minority could survive and carve out a significant place in the global market. If I had to place a bet, it would be on Rivian. Time will tell which automakers can make it work.