Not All Electric Vehicle Companies Are Created Equal

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By Felicity Bradstock

Shares of 19 EV and EV-adjacent companies that have gone public via SPACs have seen their share prices fall about 50% from their highs. Meanwhile, GM and Ford shares have gained 43% and 61%, respectively.

As Tesla began to boom and electric vehicles (EV) were the words on everyone’s lips, several startups decided to get a piece of the action. But after initial success, with many buying into the EV mentality, traditional automotive companies have caught up, and have the history and expertise to back them up.

Over the last year, entrepreneurs have sought to capitalize on the EV boom by investing in pre-revenue companies through Special Purpose Acquisition Company (SPAC) deals.

But the public isn’t so fond of these deals. EV companies Canoo and Lordstown have all seen share prices drop substantially over the last six months, following SPAC mergers in 2020.

Just this week, Lordstown Motors (RIDE) just filed its 10-Q quarterly financial report which highlights a severe cash flow problem, “Our current level of cash is not sufficient to fund commercial-scale production and the launch of the sale of such vehicles. These conditions raise substantial doubt regarding our ability to continue as a going concern.”

This is after the company raised almost $700 million late last year when it went public. Following this, its spending increased rapidly, and the company lost around $125 in the first quarter of 2021, warning it would need more cash if it were to achieve its objective of manufacturing 2,200 electric pickup trucks by the end of the year.

The EV startup trend has been likened to the early 2000s tech boom. During this period, pre-revenue tech companies, much like current EV companies, told investors that it would likely take years to grow. This leads companies to become highly competitive with one another, rushing to develop their technologies in an aim to attract investors and buyers fast.

However, “As appetite for risk has declined in this environment, no sector besides tech has been hit as hard as the EV landscape,” Dan Ives, Managing Director, at Wedbush Securities explains.

One of the main challenges for these startups is the development of new EVs by well-known companies such as GM and Ford. While startups bet big on the EV revolution in the early days, many simply can’t compete with long-established firms with the funding and expertise to quickly develop their new EV segments.

In May, Ford announced its aim for 40 percent of global sales to be EV models by 2030, with a planned investment of $30 billion by 2025. CEO Jim Farley centers this funding around his “Ford+” plan, which aims to expand into emerging markets including connected vehicles and subscription services.

Since Farley’s announcement, Ford share prices have climbed from $12.81 to $15.51, following a peak and 12-month-hihg of $15.97 at the end of May. Ford stated in February that it would be investing $22 million in the development of EVs through 2025, but thanks to the Ford+ strategy this could now be higher.

Putting words into action, Ford recently slated the release of a highly anticipated all-electric version of its most popular F-series truck, the F-150, for 2022.

Similarly, General Motors announced its aim to sell exclusively electric vehicles by 2035 at the beginning of the year. This will mean an end to its production of all diesel- and gasoline-powered cars, trucks and SUVs within the next fifteen years. This target also goes towards GM’s aim for net-zero carbon emissions by 2040.

Since the announcement, GM stock prices have increased significantly from around $51 a share to just over $63. The development goes hand-in-hand with President Joe Biden’s policy priority to attack climate change by transitioning away from fossil fuels.

As early bets on several EV startups now appear overly optimistic given the inevitable development of EVs by major automotive players, such as Ford and GM, the question now is which will survive, and which will go the way of many early-2000s tech companies to be long forgotten as the giants thrive?

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