Making cars is hard. Making electric cars, it seems, is even harder, with Rivian facing a supply issue while the market at large faces demand challenges. Sometimes disruption hits the disruptors hardest of all, especially with a company like Rivian.
This Morning Dump is going to swing back to some electric car news because there’s a lot of it. Rivian reported a challenging quarter but Lucid, on the other hand, did better than expected, even though it’s losing a lot more per vehicle at the moment. Both of these are automotive companies, but what about battery companies? The Biden Administration just pushed out a huge loan for an electric battery company for… reasons.
And, finally, Bentley has revised its forecast for the future and it hasn’t really changed that much, which is quite interesting.
Rivian’s Motor Woes
American electric automaker Rivian seemed to be having a good year, especially with the recently announced deal to get a huge cash injection from Volkswagen in exchange for sharing some of its software expertise with the German automaker.
It turns out this cash was very necessary as the company announced its Q3 financials and things aren’t looking particularly rosy as revenue dropped year-over-year for the first time since the company’s IPO. From Rivian:
Compared to the third quarter of 2023, a portion of the decrease was driven by timing of higher EDV deliveries in the third quarter of 2023 following the first quarter of 2023 line shutdown. The remaining portion of the decrease was driven in part from our production disruption causing a limited number of R1 variants being available for sale and a more challenging consumer environment.
The shareholder letter goes into a little more detail:
Rivian produced 13,157 vehicles and delivered 10,018 vehicles during the third quarter of 2024. As previously disclosed, Rivian is experiencing a production disruption due to a shortage of a shared component within our Enduro motor system on the R1 and RCV platforms. Our team has a strong sense of urgency in finding a solution as we work in close partnership with the supplier to ramp additional capacity to accommodate planned production.
In a sign of growth, the company lost a little less than it lost last year, with a negative gross profit of $392 million as opposed to $477 million in Q3 of 2023. That’s good, I guess?
I think the bigger issue is that the company is complaining about not being able to make the right vehicles because of supply chain issues and, yet, Rivian produced 13,157 vehicles and only delivered 10,018, which implies that this issue is as much about the “more challenging consumer environment.” Presumably, the implication here is that with a revised powertrain supply the company could produce a product mix more in line with where it thinks the market is.
Ultimately, when you combine net losses with weak deliveries you get a loss-per-vehicle of $39,130, which is higher than in the past. (This doesn’t mean they lost this much building each vehicle, it’s just overall company losses divided by vehicles sold).
The bottom line for Rivian is that, for as good as the trucks might be, the company needs to scale up in order to reach even a break-even position, which it’s already having trouble doing. It’s not an impossible task and Rivian is better positioned than many. This is also a reminder that Tesla, now a gargantuan company, spent years expanding before being truly profitable and it had a lot of government loans and carbon credits to lean on.
Lucid Loses $341,604 Per Car, But That’s Better News Somehow
Rivian is trading down this morning and, so far, Lucid is trading up. You’d think that Lucid would have reported better numbers than Rivian, but the market seesaws between expectation and reality more than anything. The expectation was that Rivian would do alright and Lucid wouldn’t in Q3 and Lucid’s revenues were up about 45% to $200 million instead.
The company reported third-quarter revenue of $200 million, narrowly beating estimates of $198 million, according to data compiled by LSEG.
Lucid’s upbeat revenue comes as it slashes prices and offers incentives like cheaper financing to woo customers who have been gravitating towards less-expensive hybrid vehicles as high interest rates pressure budgets.
The company’s gross margin was also only -106.2% compared to -134.5% in the prior quarter, though it’s a margin that’s worse than a year ago. This makes sense as the company tries to push more cars and expand in the run-up to the production of the Gravity SUV.
Battery Recycler Gets Massive Federal Loan
President Biden attempted to build a robust, domestic electric car industry to help both decarbonize the environment and also create new jobs here in the United States as a hedge against Chinese battery dominance. Will that continue under a new administration? It’s unclear.
What is clear is that the Biden Administration will spend the next approximately two months trying to get as much done on that front as possible. This includes giving a bigger-than-expected loan to a New York-based battery recycling company called Li-Cycle.
The loan for the plant, which would be one of the largest U.S. sources of the battery metal lithium, also cements a key part of Biden’s climate agenda, ensuring the company receives government financial support regardless of any steps that President-elect Donald Trump may take when he assumes office in January.
Concerns that Trump could try to slow Washington’s financial support for the renewable energy transition have spooked investors since his Tuesday victory. While Trump is not expected to be able to stop that transition, Biden officials are quickly moving to close loans and approve projects before January.
I suspect we’ll see a lot more of this activity before January.
Bentley Will Still Eventually Transition To Full EVs
Bentley announced an update to its “Beyond 100” plan for the automaker and I assumed, as with other automakers, the company would also walk back its plans to electrify by 2035. To my surprise, the company did not.
Here’s what Bentley’s “Beyond 100” plan announced in 2020:
Bentley Motors Beyond100+ strategy outlines the company’s ambitions towards a fully electric future beyond 2030, to 2035. Beyond100+ is an extension of the forward-thinking Beyond100 business strategy that focuses on leading the transformation of luxury vehicles towards electrification.
Bentley Motors aim to produce a new PHEV or BEV model every year over the next decade with an ambition to be building only fully electric cars from 2035. This will be marked by the reveal of Bentley’s first fully electric car in 2026, the world’s first true Luxury Urban SUV.
And here’s the update from Bentley CEO and generally pretty cool dude Dr. Frank-Steffan Walliser (he was in charge of Porsche motorsports and performance products prior to this gig):
“Four years almost to the day that Bentley initially outlined its Beyond100 strategy, we adapt to today’s economic, market and legislative environment to initiate a major transformative phase for tomorrow. Beyond100+ becomes our guiding light as we extend our ambitions beyond 2030, while maintaining our aim of a decarbonised future, including offering only fully electric cars from 2035, and reinforcing our credentials as the British creator of extraordinary cars for over a century and beyond.”
Curiously, with its big PHEVs replacing the W12, Bentley has been one of the few arms of Volkswagen to see a product mix that wasn’t as binary as either ALL GAS or ALL EV. I would expect some of those PHEVs to become EREVs in the future, but nothing here has indicated that.
Besides affirming its commitment to electrification, Bentley also said it would introduce the “world’s first true Luxury Urban SUV,” which I take to mean a smaller electric SUV.
What I’m Listening To While Writing TMD
The video for a-ha’s “Take On Me” has been seen 2 billion times, and in a world that doesn’t always make sense this feels right to me. It feels just. While Norway’s new wave-y/pop-y-/synth-y a-ha isn’t exactly a staple, the song is fantastic and the video for it by the legendary Steve Barron is one of the best examples of the genre.
The Big Question
Will Rivian or Lucid be the bigger company (or even still here) in 2030. Why?
I feel like Rivian and Lucid both are a little late to get their smaller cars out. Rivian really puzzles me on their losses as they got the Amazon truck contract, they’ve had investment from VW, they’ve had great reaction to the R2. So is it just lack of capacity or mismanagement?
Not the best comparison but Tesla was building Model 3s outside under tarps to get them done, quality definitely wasn’t job 1 but they were delivering. Maybe it’s Rivian’s go camping attitude but they don’t seem to have the same concern on getting their mainstream model going.
Lucid’s losses are just, dang, how many BYD Seagulls would that buy? Is it 35? Is that 35 el-cheapo Chinese EVs being lost for every car? How many Chang-lis would that be? Like 100?
Third option- building cars at an assembly line level is hard, takes a lot of cash, and lots of time to be profitable. It took Tesla 7 years from founding to first delivery (3 years of botique Roadsters that were built with a ton of Lotus parts) and a further 10 years after that to have their first profitable quarter. Rivian delivered it’s first car 12 years after founding, but it’s all their own, and they appear to be trying their damndest to compress the profitability cycle.
The explosive growth of “tech” stocks has sort of distorted the market view of startups. It’s very easy to scale when you are making software and your cost of goods is zero, when you have to actually deliver a physical product subject to federal regulation, it’s a different story.
I guess it helps to have oil money to pay for EV production and development.
Dear lucid:
Leave $100,000 in used $20 bills in a yellow duffle bag behind Bob’s Convenience and Lotto or I will buy one of your cars”
where are they going to find a yellow duffle bag in this economy?
It’s the old “we lose money on every sale that we make it up and volume”, except without the volume part.
Yeah…the math on articles like this never makes sense. But you need to have a lede with some conflict to gain readers.
I assume Rivian’s plans account for this, and 5 years from now it’s all likely quite different.
Wait…Lucid loses a new Ferrari 296 GTB for every car it sells?! That’s madness. I get that you’ve got to spend money to make money and EVs are still in their infancy but I can’t help but wonder if some of the resources we’re incinerating on these damn things could go to better use…
stop thinking and just consume!
Lucid seems to having cutting edge tech in efficiency, above even Tesla.
Rivian has better selling products at the moment, but not really a killer app.
To me, that speaks to Lucid having a better chance of being scaled up or bought out. While ranges remain low and recharge times high, efficiency is going to matter for EVs. If you’re the best at something, you’re going to be valued.
Sure, but how long will they be able to maintain that lead and/or how big will it remain? Or will everyone catch up relatively quickly? But I think the biggest killer is going to be the market no longer valuing that. Part of me is thinking once everyone starts getting to some magic range (maybe like 300-400 or even 500 miles of range) at prices competitive to similar ICE vehicles, no one is really going to care about efficiency. Just look at how many people buy relatively inefficient vehicles today – or in the very least are willing to forgo a more efficient variant of the exact same vehicle to save a relatively small up front cost.
Yes, that’s why I included my caveat of “while ranges remain low and recharge times high”.
I certainly don’t think 300 or even 400 rated miles is enough to take away concerns over range from everyone, at least while recharge times are high and cold weather range suffers. 500 miles, maybe. But range anxiety remains the #1 or 2 reason why people don’t buy EVs now.
If and when all day road trips and towing become commonplace at no time cost vs ICE cars, I agree that efficiency will take a backseat to other considerations, like it does now with gas cars. But we are still a ways from that point IMO.
Agreed, I was thinking along those lines myself reading this news item. It might make more sense to think of Lucid as a premier EV innovation lab, that happens to produce and sell cars to help defray the R&D cost. They can either eventually ramp up production numbers and efficiency themselves to reach breakeven, or get sold to a company that already has scale and that could put the Lucid IP into practice.
It is also worth mentioning that burning huge piles of cash forever and never making it back is de rigueur in the disruptive startup space; Uber is an established, going concern, even though at their current level of profitability they will never end up paying back the investment that got them to the point of profitability within the lifetime of those investors. I personally struggle to see how that makes sense, but it must make sense to enough people that the business model works – I guess that explains why ‘cash flow’ is a much more important metric to companies than profitability, as odd as that sounds. All I know is that if I tried to run my personal finances that way, that would be a short one-way ride to bankruptcy.
Drat, I added the wrong hyperlink when I edited the comment. Here’s the chart I wanted to show: https://global-uploads.webflow.com/61ea4a526864d021a5ef3bfc/64ca6c8bbf4114f701444b58_2023-08-02-1-uber-finally-turns-operating-profit.png
Rivian’s fate entirely depends on the R2. Tesla sales increased dramatically (and Tesla finally made a profit) when they released the Model 3/Y. The R2 is priced similarly to the Model Y, so I could see Rivian sales following a similar trajectory if the R2 doesn’t suck. Rivian also now has access to the Tesla charging network, so there is no longer an obvious reason to choose a Y over an R2. Plus, Rivian benefits from Elon’s strong association with Tesla. I don’t know who Rivian’s CEO is, and that is a good thing.
I really have no idea what Lucid’s future is. They are basically where Tesla was in 2013. They are too early in their development to know if they will succeed or not.
Who is R.J. Scaringe, Alex.
I could say “Who is RJ Scaringe?” and not be answering in the form of a question. That is definitely better than Tesla’s situation. Not all press is good press.
I bet they’ll both be here. They’ll both see more success once they get more middle market two row SUV’s out. Rivian has its delivery truck business to keep some money rolling in the door. Lucid has the Saudi PIF. The Saudi princes aren’t dummies. They’re trying to diversify the Saudi economy from petroleum. All that solar that keeps the oilfield pumps humming can also be used to charge electric vehicles as the oil runs out.
https://en.wikipedia.org/wiki/The_Line,_Saudi_Arabia
That project was (is?) so obviously stupid from every angle that I am 100% convinced it is actually some sort of money laundering scheme. From whom to whom is not clear, but dirty cash absolutely changed hands.
Eventually the whole oil kingdom is going to follow in the footsteps of the island of Nauru. It’s still a long way off, but that’s where it’s headed, and that’s why the Saudi’s are trying so hard to diversify. The other oil economies would be wise to follow suit.
That said, I do wonder how successful the Saudi’s will be in that quest, long term. Once you’ve gotten used to all those petro dollars flowing in, it takes some serious adjustment to adjust to the new reality when the taps shut off.
Diversifying is a great goal. The Saudis have enough money in enough investments that something will take off.
Localizing EV production helps solve a few problems. One, jerbs! Jerbs! Jerbs! All those unemployed folks can go work a few shifts a week building cars. Or dusting solar panels. Wait, who am I kidding? They’ll hire that work out and go back to being Saudis in Lucids. Two, more diverse industry as the supply base builds up. Three, they can keep foreign currency coming in by exporting cars. A made in SA Lucid may not be tariffed to death like a BYD or Nio.
I agree PIF money helps Lucid considerably, but I don’t think the Saudi investment is evidence that Lucid has a positive future. The PIF also invested heavily in LIV golf and that has been hemorrhaging money because it was an obviously bad idea. The PIF has so much money that they can invest recklessly or in highly speculative projects with minimal consequences.
I’m not sure if the Saudis have the best business sense; they are wealthy by luck (i.e. being located on massive oil reserves) instead of by making good decisions. They remind me a lot of lottery winners who end up bankrupt because they thought their money was infinite. The PIF has a ton of money available, but if oil money was infinite, they wouldn’t feel a need to diversify.
Watch the “unplugged” version of Take On Me on YouTube. The soccer moms completely lose it, but in a reserved middle aged lose it kind of way. Totally different vibe to the song.
Dude can still hit the high notes though, gotta respect him for that.
I loved that Mark McGrath pointed out he did that in the days before ProTools and Autotune. He just hit it night after night. What a voice.
I want Rivian to succeed so badly. They are the only EV maker that I care for. I hope they’re able to roll out the smaller/cheaper models quickly.
While Scout is much futher from production, their initial reveal has me rooting for them too. But out of what’s currently on the market? Yeah, Rivian is my favorite.
People also fail to realize how much smaller the R1T and R1S are compared to the Scouts
So much this, I want them to at least survive long enough for me to order an R3X.
VW has no need for both Scout and Rivian. If both of those brands exist in 2030, VW will have divested itself of at least one of them.
VW seems utterly incapable of getting Scout across the goal line without their investment into Rivian. Hence, why they need both.
For now, yes, but it’s a short term answer to the “make or buy” business decision. I don’t see them being a long term investor in Rivian. And if Rivian makes it, odds are Scout won’t. They’re both playing in an increasingly crowded market.
“For now”
Why are you acting like they can just skip the “now” stage? Yes, it may only be for now, but they aren’t going to get to the future without going through now.
Competing against Rivian is a future problem. And while they are similar, they certainly is enough differentiation that they should be able to compete. Just because a Peugeot 208 exist, doesn’t mean VW can’t sell Golfs…
I see your point, but I’d argue the market for smaller economy vehicles is much bigger than the market for the types of vehicles Rivian and Scout are producing/planning to produce.
Ford sold like 750k F-series last year.
GM sold 850k Silverados/Sierras.
Ram sold like 540k Rams.
While yes, those are ICE, electric is clearly going to have a big roll in the future. I find it highly unlikely that offerings like the Rivian and Scout are going to be a small market in the future.
Volkswagen has a 25% stake in Rivian and a 50% stake in a software company JV with Rivian, I expect their investment in Rivian themselves isn’t intended to be long-term thing and that VW will eventually draw it down once they feel they’ve gotten what they needed out of the partnership
My thoughts exactly, assuming Scout takes off. If it doesn’t, they’ll wind down Scout and hold on to or expand their stake in Rivian. Sadly, I don’t see room for both, either within VW’s portfolio or within the realm of vehicle manufacturers. I think there’s too much overlap in their products.
VW doesn’t own Rivian and doesn’t seem particularly interested in owning them. They gave them those billions to get the software. That’s kind of it. Any stakeholding is likely political and probably in Rivian’s interests vs VW’s. They literally blew $2 billion on their software spinoff, CARIAD, and got absolutely diddly from that. That being said, I could see Rivian and Scout playing at different enough price points to justify a potential acquisition at some point. VW could be on its way out of the US market.
P.S. I’m kind of surprised that The Autopian hasn’t done a report on CARIAD. It’s frankly wild