EV startup Lucid Motors is going to report its quarterly earnings this evening and the suspicion is the company will continue to lose money. A lot of money. Is there something wrong with the cars? Nope. The cars are great. So what’s the deal? Let’s get into that because there’s a limiting factor that impacts Lucid and anyone else trying to sell EVs in the United States.
It’s going to be an all-electric edition of The Morning Dump and I’m on the mother-of-all electric vehicles: a Siemens ACS-64. It’s a train! I’m headed up to Boston this morning to support one of my oldest friends, whose son is about to undergo a seven-hour brain surgery to remove a tumor lodged in there. This is a scary prospect, but the surgery should help improve the little guy’s quality of life a bunch. Inasmuch as it’s a thing you do, please keep the family in your thoughts and prayers today.
What will I be doing today on a practical level? I don’t know, but I can certainly talk for seven hours if that’s helpful. As a warmup, let’s talk some more about electric cars.
Unlike Lucid, GM is on track to make profitable electric cars by the end of the year, and a key reason is the start of cell production at one of its battery plants in Tennessee. While GM is moving in the right direction, the transition to an EV future in the United States isn’t going to be an easy one, and Vice President Kamala Harris is going to be in Detroit today to announce $100 million to help car companies and suppliers make that transition. This makes a lot of sense practically, and even more sense politically.
Finally, politics will be fully on display in France as the leaders of China and France meet this week. One of the topics of conversation? EVs!
The EV Startup Conundrum
I thought the Lucid Air was a great electric car when I drove it, in spite of some small software issues that seem to plague pretty much all super-modern cars. The biggest issue, though, was the price. At the time a Lucid Air Grand Touring started at around $139,000. The cost has since been dropped to $109,000 for the GT, but it still offers 514 miles of Tesla-beating range on the EPA test cycle.
If you’re going to get an electric luxury sedan it’s hard to argue for any other car currently on the market. The base Lucid Air Pure still looks like a dream and, at $69,900 (before taxes and delivery) its 400+ miles of range make it a better deal than the Model S. [Ed Note: There is the Tesla’s Supercharger advantage, of course. -DT].
The good news for Lucid is that sales in the first quarter were up by 40% year-over-year to almost 2,000 vehicles, which shows that the price drop is working. While it’s working to move some Airs, the company is still wildly unprofitable, and a price reduction when you’re losing money isn’t a long-term strategy.
In 2022, the company lost $1.3 billion. Last calendar year, the company lost $2.8 billion. If you’re not great at math, those numbers are going in the wrong direction. Lucid is, of course, an American company making EVs in America. The not-so-big secret is that the company is being heavily backstopped by Saudi Arabia, presumably as a hedge against a future drop in demand for oil. But even the Saudis can’t pump money into Lucid forever, right?
Many of these companies are following in the footsteps of Tesla and making, arguably, better vehicles than Tesla currently is. I haven’t driven a Gravity yet, but the company’s first SUV looks a lot better than the Model X.
So why can’t they succeed where Tesla has?
There’s a great line in this Automotive News piece on Lucid’s financials that sums up the problem:
Parkev Tatevosian, an investment writer at The Motley Fool, said Lucid and other EV startups face a difficult task because they need to scale up production and grow sales but there aren’t enough buyers to do so.
“These companies are in a position where they need to increase supply in order to become profitable but at the same time the [EV] industry is already oversupplied compared to where customer demand is,” Tatevosian said in a video. Unlike its legacy rivals, Lucid can’t shift sales to gasoline or hybrid models as EVs wane.
That is exactly correct. Both Lucid and Fisker launched into already oversaturated markets. There’s definitely a large portion of the market that wants electric cars, but most of them already have electric cars. Even worse, most of those cars are Teslas, and because of its status as an early adopter the brand loyalty for Tesla is the highest in the industry.
Tesla benefitted from government loans, carbon offset tax credits that funneled money from traditional automakers into Tesla’s pockets, and a huge first-mover advantage. It didn’t hurt that the products were better than anything else modern carmakers had even imagined.
While the Model S was expensive when it launched, the only real competition was the Nissan Leaf, which lacked the performance and, more importantly, the style. Tesla was able to therefore grow rapidly and funnel that money into more models and more production.
This worked for Tesla but it hasn’t quite worked for any other EV startup in the United States and Europe. Of the automakers not affiliated with a larger car company (like Polestar), the most successful new entrant is probably Rivian, which still loses billions of dollars, but at least was smart enough to build a truck/SUV combo to find some grey space in the market. Almost everyone else, including the major automakers, rushed to two-row crossovers, thus overstuffing that market far beyond demand.
To reach the next tranche of buyers, companies will have to not just offer more model types, they’ll have to offer significantly cheaper cars. But, yet again, this means automakers will need to dramatically increase the efficiency of production, which requires more sales, which requires cheaper cars, which requires more investment, which requires more sales, which requires cheaper cars… ad infinitum.
Again, from the Automotive News piece linked above:
“This is not sustainable,” Tatevosian said. “I understand Lucid has enthusiastic investors that are willing to give the company money and invest in the company. But that is not unlimited. They can’t continue giving money to Lucid to burn.”
I don’t know. Maybe they can? Stranger things have happened.
How GM Is Going To Get Profitable
Do you know what big car companies can do that EV startups cannot? Make gas-powered cars. Almost every major automaker in the world is profitable to some degree and, likely, were extremely profitable during the pandemic. This makes the investments in electric car production a lot easier.
There’s an argument to be made that, because of carbon offsets, Tesla itself was funded in large part by the sale of gasoline-powered cars. This continues today, with Tesla earning about $1.79 billion from offsets in 2023.
General Motors has focused on building efficient and profitable electric cars and the big key to this is production of its Ultium battery packs. Thus far the packs, made by an affiliated company co-owned with LG, were only built in Ohio. The opening of a plant in Spring Hill, Tennessee should get GM a lot closer to net profitably.
Ultium in Warren, Ohio, has been making battery cells for GM since August 2022, supplying them to various GM EV plants in North America. The Ohio plant is the road map to help subsequent Ultium factories ramp up production faster, GM CFO Paul Jacobson said during the automaker’s first-quarter earnings call with Wall Street.
GM leaders and analysts say bringing the new Ultium Spring Hill factory online is critical if GM is to meet its promises: to produce 200,000 to 300,000 EVs this year and make money on them by the second half.
“We ramped our first battery joint venture plant last year, and as they increased production and made other efficiencies, the cost of cells came down significantly,” Jacobson said. “And cell plant No. 2, in Tennessee, is ramping even faster based on the learnings from plant one and is expected to reach full installed capacity by the end of the year.”
According to GM, the Cadillac Lyriq (also made in Spring Hill) now costs $12,000 less to make than it did a year ago. A third plant set to open later this year should help even more.
$100 Million For Suppliers To Transition To Supporting Electric Cars
If you’re a tire supplier for automakers there are new things to be learned in the transition to electric cars but, presumably, these vehicles will need tires made approximately the same way tires were always made. Even better, EVs currently need more tires than their gas-powered counterparts on a lifetime basis.
But what if you make oil filters? Or alternators? Or any of the greasy bits that make an internal combustion engine run? The transition to making electric cars might be a little harder.
In order to help, Vice President Kamala Harris is going to be in Detroit today to announce $100 million in federal money to help this transition. From her office:
More than $100 million in funding for small- and medium-sized auto parts manufacturers to expand or retool manufacturing facilities:
The Department of Energy will set aside $50 million of its Automotive Conversion Grants Program for partnerships with states to help small- and medium-sized suppliers convert from manufacturing internal combustion engine parts to manufacturing parts for the EV supply chain. This funding will maintain the Domestic Conversion Grant’s same focus on supporting retooling to keep good, good-paying and union jobs in the same communities as automakers and auto suppliers transition to electric vehicle manufacturing here in America. The Department of Energy recently requested public input on the design of these state-federal partnerships in order to best support small- and medium-sized manufacturers in the auto supply chain.
The Department of Energy is setting aside up to $50 million of its Industrial Assessments Center Implementation Grants Program to help auto suppliers kickstart manufacturing diversification and conversion projects. Specifically, this program, which was funded by President Biden’s Bipartisan Infrastructure Law and is covered under the President’s Justice40 Initiative, provides grants of up to $300,000 to entities that have received an Industrial Assessment Center assessment to improve their facilities’ energy and material efficiency, cybersecurity, or productivity, or reduce the greenhouse gas emissions.
Here is the non-cynical spin on this: Global climate change is real. Automakers are not quite being forced to build EVs, and no one is being made to buy them yet, but there’s a lot of heavy cajoling going on and it’s silly to pretend there isn’t.
I visited the bucolic home of Theodore Roosevelt on Long Island this weekend. It’s a national historic site and they therefore have a Junior Ranger program that involves kids answering a series of questions about the place and getting a sweet badge afterward.
Teddy famously loved to quote the West African proverb “Speak softly and carry a big stick.” When asked to put this in her own words “by the Junior Ranger booklet,” my daughter even more succinctly explained that this meant: “If they say no, whack ’em!”
There’s a little bit of that in our industrial policy towards EVs, so helping these suppliers make the transition seems wise. This was pointed out in a post this morning from The Detroit News:
Jonathan Smith, a senior deputy at Michigan’s Department of Labor and Economic Opportunity, applauded the Biden administration’s work to prepare the state’s workforce for the mounting EV transition.
“We’ve always sort of been in this position where we’re just scrambling to respond,” he told The Detroit News, referencing previous challenges for the auto industry, namely the 2008 financial crisis.
“This really feels like one of the first opportunities we’ve had to really get out ahead of a problem in a while.”
Foresight! From Government! What’ll they think of next?
That’s the non-cynical take. The cynical take is that Michigan is probably the most important state in this year’s upcoming election, which is why President Biden, VP Harris, and all manner of other administration figures keep ending up there. It’s why both Biden and former President Trump have both been sucking up to auto workers.
If the automotive industry were based in a less competitive state like New York or Texas would taxpayers be spending so much to save these jobs? Maybe!
What Kind Of Bargains Can France Make On EVs?
All politics is local, except when it’s global. All politics is local and global. And regional. And sometimes national. All politics is all geographies simultaneously.
And that’s good! Politics might get rough, but the idea is that we can establish a set of rules, laws, and mores that help us decide things without doing what we used to do, which was just kill everyone who disagreed with us and take their stuff. Humanity has mostly moved on from this stage.
France is one of the more open-minded places when it comes to environmentalism, largely because even the more mainstream conservative parties there believe in climate change. But France is also highly protective of its car industry.
At first, France welcomed Chinese-built electric cars and even helped subsidize them, which meant a flood of Dacia Springs, Tesla Model 3s, and MG MG4s built in the Asian nation. In addition to concerns over Chinese subsidies and unethical labor practices (aka alleged slavery), France didn’t want anything bad to happen to its own car industry so it changed the rules for its EV subsidies to include production/shipping, which led to a dramatic drop in the appeal of those cars.
All of this is going to come up this week when Chinese President Xi Jinping meets with France’s President Emmanuel Macron. Xi needs Europe to be favorable to Chinese cars in order to help the country deal with its overcapacity problem, whereas Macron wants China’s help in ending the war in Ukraine (to Macron’s credit, he’s been a huge supporter of Ukraine). Macron also wants to talk about Cognac.
Paris is the first stop on Xi’s European trip, seeking to rebuild relations at a time of global tensions. After France on Monday and Tuesday, he will head to Serbia and Hungary.
France hopes the discussions will help convince China to use its leverage with Moscow to ‘’contribute to a resolution of the conflict” in Ukraine, according to a French presidential official. Russian President Vladimir Putin recently announced plans to visit China this month.
Macron will press Xi over supplies from Chinese companies supporting the Russian war effort despite EU sanctions, he said. China claims neutrality in the Ukraine conflict. France also wants China to maintain a dialogue with Kyiv, added the official, who was not authorized to be identified according to presidential policy.
Last year, Macron appealed to Xi to “bring Russia to its senses,” but the call was not followed by any apparent action by Beijing.
I’ll keep an eye on it this week and see what kind of movement we get from either side.
What I’m Listening To While On This Train To Boston
Hell yeah, Dropkick Murphys! Nick mentioned this song in the Discord and it was the perfect accompaniment to the trip. I know the song well, but I’d never actually seen the video, which includes two key rarities: menacing accordion play and a Grand Marquis cop car… What in the name of Raylan Givens is that all about?
The Big Question
Is there room for another EV startup or is this the end?
{ yells in Taycan }
You’re not wrong, Matt, but also Tesla lost more money than Lucid has so far before it started making money.
Tesla spent several years with periodic “we’re three weeks from bankruptcy” events. Mostly survived through luck and Elon having very rich friends. Plus a lot of very burnt out engineers.
It was all about the charging with Tesla. They addressed the biggest hangup people had – where am I going to charge this thing if I am away from home? Without the Superchargers, EVs would still be relegated to running errands around town like a fancy golf cart.
I know personally that I considered Tesla solely because they had the Superchargers and others didn’t.
Teslas supposedly no longer have that exclusively, but the competitors also don’t have that same kind of advantage on any aspect of the market.
As noted in the article, Rivian is at least “different” in their truck/boxy SUV approach. They are still $80k “lifestyle vehicles” though, so they’re only going to sell so many.
And I’m guessing the Lucid Air is a sedan so it had better aero to get its range maxed out, but they did make a sedan when the segment is basically on life support. Yes, it seems like the only place sedans still live are the $100k+ segment, but if the air was a much better competitor to the Model X instead of S, I wonder if they’d be doing better.
Otherwise you got legacy automakers that a lot of consumers will be more comfortable with. I’d bet the majority of people would rather buy a Chevy than some new startup, even if the startup’s offering blows the Chevy out of the water. Chevy is safe.
If you want luxury, do you want the “prestige” of a Mercedes or BMW, or the new company no one has heard of.
GM, Mercedes, and BMW will also honor your warranty (as well as any OEM/dealer network does) in 3 years. I saw a Fisker Ocean the other day and just wondered how much money the poor guy spent on that thing.
You make a few good points and have gotten a few happy faces on your post for your strongly worded opinions, but you’ve blended a complete lack of knowledge in the middle.
EVs require fewer parts. The lower part count is an undeniable fact documented not only by the makers but also by third party analysis through disassembly.
YES, EV and ICE require many of the same systems and subsystems, but the undeniable fact is that the core motivator of engine, transmission, fuel, intake and exhaust systems of an ICE has thousands more parts than an EV motor, battery and speed reduction gear.
Denying basic facts makes you come across as incredible, disingenuous, and as someone with an agenda to sell.
Even counting those, you’re still wrong. Incredibly wrong, by thousands.
If I could count on you to actually pay up, I’d bet you two cars, one of each variety, to prove it.
But we wouldn’t need to actually buy the cars to disassemble because the evidence is already out there for anyone smart enough to find it.
Or maybe you’re plenty smart but too opinionated to actually look. Either way, you’re still entirely wrong about the parts count.
There’s no place for this kind of language and attitude here.
Just a few thoughts.
1. Tesla succeeded on a fanboi platform that had more to do with adoring Elon and a little on EV Vehicles. No EV Maker has that.
2. Hybrids are the answer but I Dothan any EV maker .akes a hybrid.
3. At the cost of producing you need supercar money but no car companies are successful ICE, Hybrid, or EV on selling supercars especially new manufacturers.
4. Charging is a big block that Noone has figured out. The EV Market is just where Tesla has chargers and for cars that use Teslas systems. I doubt Rivian or anyone else has a decent network.
5. Those Chinese wondercars that are EVS how are they charged?
Regarding #1:
Nobody knew or cared who Elon Musk was when the original Tesla Roadster was sold. Elon now claims that using Lotus’s platform was a huge mistake, but there’s no way they would’ve succeeded without the credibility that came with converting an existing Lotus platform.
Okay just have to point out you’re wrong. So wrong, incredibly wrong. Not close to being right just wrong. Like 2+2=elephant wrong. Like looking down the barrel of a cannon and telling the help to fire it off wrong. Like having a fine dinner with English food wrong. I can’t find a good example that is as wrong as you are.
As an early Tesla investor (I bought my first shares a few days after the IPO), I’ll simply say that you’re entirely clueless.
My remarks about nobody knowing or caring who Elon Musk was back then was regarding the car buying public, not those buying the stock. Of course Tesla investors knew the principal company leaders.
And even average Tesla buyers at that time may have heard his name, but there was very little reason to care, other than that he was some successful “tech bro” with money who chose to get involved.
Feel free to reinvent history. But you’re not right.
Yea try pre IPO. Musk had been celebrated as a leader a visionary etc. If you never heard of him prior to the IPO let me share other secrets with you.
1. Man has gone to the moon.
2. Dinosaur ???? once roamed the earth.
3. Glue is sticky.
4. Eating poison is Abad idea.
5. We need to breathe oxygen.
These are just a few more facts I’m making up.
Are you an Amish Investor? I need to know why you invest in things you are not knowledgeable about. Also bad idea don’t invest in things you don’t know about.
I keep hearing that no one has figured out charging yet. To which I must say – B.S.! I live in one of the most rural parts of one of the most red states and there are fast chargers all over the place. Also, I charge at the house on 120 and my range is usually way further than I want to drive. My sub20k Korean car smokes the driving quality of anything else I’ve ever owned. Everyone who’s ever driven it has expressed a desire to get an e.v. for their next car. Anyway, superior experience, charging not a problem.
The nearest one to me is over 100 miles. So drive down charge, drive back and oops can’t go anywhere unless I recharge.
Nice rural cabin you have there, with no working electricity.
Nope I live in a small group of houses 600 people 600,000 farming acres. 3 bedrooms on the river but no charging stations. Even at the dealers who don’t sell EVS. Just because you have it doesn’t mean everyone has it. Pittsburgh is the closest fair charge area and it is 2 hours from me. I do have electricity and grocery stores no good Chinese food which sucks.
However I know everyone who lives within a quarter mile from me. My neighbor had trouble with his weedeater I told him use mine it’s in my unlocked garage. He weedeated his place and mine. I have never locked my car anywhere I go and I seldom lock my house. Yes I’m just an ignorant person.
but no charging stations.
Not even a 120V plug? Not even that?
Okay no fast charging or super chargers. Everyone has an electric socket but not 12 hours for every charging. I see you are switching from facts to crumbs
Given your complaint to someone who pointed out they do just fine in ruraland with level 1 120 V it was quite appropriate.
But apparently an internet connection and a bridge to live under. Troll.
Bet he was fun during the great Ford vs Chevy debates;-)
Telsa’s early sales were less about Musk and more about lack of competition. It was basically just Tesla and a bunch of crappy compliance cars in the BEV space (with honorable mention for the underrated Volt).
Hybrids, especially range-extender hybrids, probably should have gotten more attention the last ten years or so. It seems a bit backwards to advocate for dropping BEV and going all hybrid right as the BEVs are starting to get practical for larger segments of the market, though.
No one will respond to this cause we are all scared. Welcome back, nice to read this.
I don’t fully agree that there are MORE parts on an ICE, that would padantic (is that the right word?). I would argue that an ICE has more parts to wear out. I also don’t think we are fully there yet where the motors become bricks when borked, but I can’t imagine it would not move in that direction, either.
Speaking of EV (PHEV) stuff generally, just saw that Jeep has confirmed a 4xe gladiator for 2025. I’m surprised no one on this site has mentioned it yet. I always told myself I’d buy the first smallish electrified AWD truck that was reasonably priced (looking at you Rivian), but it seems like the gas mileage on the existing 4xe (on which the new gladiator is likely going to be based) when not in electric mode is terrrrrrible (for a PHEV at least). And while it might be cheaper than a Rivian, I’m still not so sure it’s going to fall into the category of “reasonably priced.” Also, Jeep reliability…. I really do want to support companies making electrified trucks through. Well, I’ve got a year to mull it over and save up my pennies.
Also, will be sending hope and positivity and good vibes to the kid undergoing surgery. I really hope it goes well for them.
Well, if you can wait until 2026, please consider waiting for the Rivian R2. If you want a (truly) capable 4WD EV, Rivian is the company to support. I was heartbroken when the R1S came out at the price point it did. I’ve had 6 Jeeps in my lifetime, most of them Cherokees and Grand Cherokees, and I too vowed to buy the first truly capable 4WD EV (I could afford) once available. I put down my deposit early on the day Rivian had their reveal. Truck and SUV enthusiasts will greatly benefit from the existence of a profitable and healthy Rivian going forward into the future.
You put down a deposit for the R1S? Did you end up buying it? What’s your experience been so far?
No, I meant I put down a deposit on the R2 the day of the reveal. I should have written that more clearly. I’m not of the means to be able to afford an R1S, sadly. It’s a beautiful and extremely capable machine. The R2 will be a bit less so as it will not have air suspension, but I have high hopes for it overall.
I’m surprised no one else has commented, but seems like any time “4xe” is mentioned here, someone talks about quality issues that Jeep is having with that drivetrain.
concerns over Chinese subsidies and unethical labor practices (aka alleged slavery)
Meanwhile in America we have a carveout for ACTUAL slavery expressly permitted by our constitution ala the 13th amendment:
Section 1
Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
https://constitution.congress.gov/constitution/amendment-13/
Those license plates don’t make themselves!
Sorry Komrade Noone is forced to work in the air conditioning and modern plants. It is all voluntary and there are more volunteers then spots. But good for you pointing out something completely irrelevant. It is all a better working experience than forced labor in the deadly mines in China where only your only crime is your pedigree.
“U.S. prison labor programs violate fundamental human rights” but OK, you keep telling yourself US good, China BAD!!
“The many incarcerated workers we interviewed told us story after story of inadequate equipment and training, punishments doled out if workers refused to labor, and an overall helplessness to a government institution functioning as both jailer and boss.”
https://news.uchicago.edu/story/us-prison-labor-programs-violate-fundamental-human-rights-new-report-finds
More interesting Big Question based on today’s news stories: Would you trade the end of the war in Ukraine for opening up domestic markets to Chinese EVs?
To me this is almost a would-you-rather question. The war is the immediate evil and ending it would be good, but allowing China to further cripple our manufacturing base could have serious long-term repercussions.
Matt, if you’re going to be in Boston, make sure to bring the following items home: