The World Is Transitioning To The EV Future, But Not Without Growth Pains

Monday’s quarterly report from Lordstown Motors RIDE raised significant concerns as the EV startup is struggling with production issues and its undergoing electrification. It already halted production of its EV pickups on February 23rd, after only having delivered just six of them. The latest results widely missed estimates and dragged shares down almost 9%. This while other companies like Ford Motor F and General Motors GM are moving forward.

Halted Production And Shipments Of Endurance

To address performance and quality issues with certain components, Lordstown Motors stated last Thursday it is suspending production of its first EV, the Endurance pickup truck. It had built about 40 trucks and delivered only six to customers since coming to life last November. The EV startup also voluntarily recalled 19 pickups to address a “specific electrical connection issue that could result in a loss of propulsion while driving.” The necessary corrections are being done in partnership with Taiwanese contract manufacturer Foxconn, which invested in the startup and bought Lordstown’s plant. They may include part design modifications, retrofits, as well as software updates. These lates recall and production issues are only making the list of Lordstown’s challenges even longer as the start-up has been plagued by management, production and execution issues since going public almost two and a half years ago.

Key Figures For Lordstown

As of December 31st, Lordstown had $221.7 million in cash and short-term investments on hand. The December quarter revenue amounted to approximately $194,000. Although the startup didn’t generate any revenue during last year’s comparable quarter, it widely missed estimates of $1.29 million, while its adjusted loss was also larger than expected with loss per share being 45 cents, versus a loss of 42 cents per share it ended up with during 2021’s fourth quarter. Net loss for the quarter got much worse from last year’s $81.2 million to $102.3 million, partially due to an impairment charge of $36.5 million that the firm said is owed to a decrease in its stock price. During the fourth quarter, only three Endurance pickups were delivered to customers, while the company incurred $30 million in cost of sales.

As of December 31st, cash, cash equivalents and short-term investments were $221.7 million with first quarter expectations being in the range between $150 million and $170 million.

Lordstown also reiterated doubt in its ability to continue as a going concern and did not provide a production or delivery forecast regarding its electric pickup, with CFO Adam Kroll stating only that the company will continue its capital constrained strategy but will need to raise significantly more capital to cover costs of developing its flagship vehicle.

Foxconn Holds The Key To Its EV pivot

So far, Foxconn has invested $52 million, of which $30 million is aimed at creating a new EV platform which is part of its effort to develop an open architecture for electric vehicles. The program being developed could eventually be worth up to $170 million if all milestones of this partnership are hit as the asset-light Lordstown is well aware that the next platform and vehicle program it is developing with the support of Foxconn’s abundant ecosystem is “key” to its long-term success, with economies of scale also being a major benefit of the cooperation.

With CEO Edward Hightower at the helm, the EV startup is struggling with production costs, it significantly missed its delivery targets for the Endurance and like its EV peers, it is battling rising costs and supply chain challenges. It is a far cry compared to a target to deliver 50 vehicles in 2022 and more in 2023 out of the planned first batch of 500 units when commercial production kicked off last September. Then again, Tesla’s TSLA Cybertruck production won’t be starting before the end of this year. Lordstown is by no means alone as the EV venture is certainly not a piece of cake and both its startup peers and much larger legact automakers are dealing with the same sort of challenges, but some are carving a path better than others with the legendary Ford Motor seeing an increase of 88% in EV sales in February compared to a year earlier, with a spike in sales of its electric version of America’s best-selling pickup, The Ford F-150.

Tesla & The Cybertruck

Tesla’s electric pickup has been stated to be on track to start production this year at the Texas plant, but volume production won’t be reached before 2023. Meanwhile, Rivian Automotive Inc’s RIVN production still grew at a rapid pace to 10,020 vehicles in 2022’s fourth quarter, up from 2021’s mere 1,015 vehicles. Unfortunately, the EV startup missed its target of producing 25,000 vehicles in 2022 as it was short by 663 vehicles. Although it’s not a huge miss, it’s far less than the original estimate when Rivian went public, promising to produce 50,000 vehicles by 2022.

EV challenges remain

Supply chain shortages and rising costs of materials have slowed down EV production and raised operating costs which is why Rivian significantly rose the prices of its R1T truck and R1S SUV and produced fewer of them, while completely eliminating the entry-level versions of both models. The costs of building an EV aren’t expected to fall anytime soon, especially as the cost of its most expensive ingredient, the battery, isn’t expected to start dropping before 2024, according to BloombergNEF.

Innovation is key

While Tesla is following a recession playbook by cutting costs across dimensions, from parts to logistics and competing with discounted prices, others are still going strong in their efforts to redefine the EV market with innovation.

Lordstown automotive peers are going full speed ahead towards an all-electric future

As GM slowly increases production, others such as Hyundai Motor Company HYMTF and Ford are intensifying production of EVs in attempt to get closer to the industry leader and EV pioneer Tesla who targets to produce as many as 2 million electric vehicles globally this year. Ford ranked second in U.S. EV sales last year and now expects to increase production of the electric version of its bestselling pickup, Ford F-150, named the Lightning. Moreover, Hyundai America tapped into the know-how of an automotive clean energy corporation, Worksport Ltd. With joined forces, Hyundai and Worksport will produce modified prototypes of Worksport’s SOLIS solar tonneau cover and Worksport’s COR energy storage system to fit and power Hyundai’s Santa Cruz pickup. Worksport is ramping up for production in their new factory in New York state according to Buffalo News last week. This at a time where Rivian is struggeling with its truck beds and delivers their trucks without them. Will consumers choose based on design, milage or accessories? Which EV players will succeed the most and who will be the fastest? One thing is for sure the EV Races are far from over and the world can gear up for more EV developements in 2023.

This content is for informational purposes only and not intended to be investing advice.