Electromobility as the next big thing: In the slipstream of the success of Tesla Numerous electric car startups have raised money from investors, especially in the USA. However, an analysis by the Wall Street Journal (WSJ) comes to a sobering conclusion: many of Tesla’s potential successors started out on the stock market as high flyers, but are currently fighting for financial survival.
For the Analysis, the WSJ examined 43 electric startups
, which went public between 2020 and 2022. Three of them – Lordstown, Proterra and Electric Last Mile Solution – are now bankrupt. Two others – battery makers Romeo Power and Volta – were sold at a fraction of their initial valuation. For the remaining 38 companies, the WSJ compared operating cash flow with short-term financial needs and short-term investment plans.
18 companies are at risk of running out of money by the end of 2024
The result: At least 18 of the electric or battery startups are at risk of running out of money by the end of 2024, according to the Wall Street Journal. These include well-known companies such as the electric truck manufacturer Nikola, as well as Fisker, which specializes in the production of electric luxury SUVs. Furthermore on the WSJ list
There are companies like Faraday Future, Canoo, and Phoenix Motor.
Rising costs, gaps in supply chains, problems with manufacturing and lower demand than hoped are currently forcing Nikola and Fisker to implement strict austerity measures. The promise to investors that they would revolutionize the industry within a short period of time with new models has now been lost.
While the majority of electric car manufacturers are currently trying to raise fresh money with the help of capital increases or new rounds of financing, the valuation of the former stock market high flyers has collapsed dramatically. On average, the companies examined by the WSJ have suffered price losses of 80 percent since their stock market debut. Investors have lost billions of dollars within three years. “The valuation of electric car manufacturers at the time was one of the biggest bubbles I have ever experienced,” comments Gavin Baker, investor at Atreides, to the WSJ.
IPO via Spac – and then the crash
Most of the companies don’t just have the price fall in common. During times of stock market euphoria, the vast majority were brought to the stock exchange at short notice via “Special Acquisition Companies” (SPAC), i.e. with the help of an already listed, empty company shell, which was very popular not only in the USA during the Corona pandemic . When going public via a SPAC, the company’s future promises and growth plans are subject to less scrutiny than in a regular IPO.
Although the demand is increasing Electric cars worldwide. However, not nearly as fast as many of the newcomers to the stock market had calculated and promised their investors. This is now putting many companies in trouble: themselves Tesla has now decided to significantly reduce prices and enter into a price war with the competition in order to promote sales. And the undisputed champion also had a critical moment shortly before the market launch of the mass-market model Tesla Model M around five years ago, when the company threatened to run out of money.
Nikola, whose founder was one of them this week He was sentenced to four years in prison, declined to comment to the WSJ. A spokesman for Fisker emphasized that the coming quarters would paint a different picture than the previous third quarter due to increasing deliveries.
Lucid and Rivian relaxed, worries about Faraday Future
The WSJ counts the pickup truck manufacturer Rivian and the luxury car manufacturer Lucid among the companies that, despite all the difficulties, are sufficiently financed beyond 2024.
At Faraday Future, on the other hand, the cash burn rate is worryingly high. According to the analysis, Faraday burned an average of $875,000 per day in the third quarter. As a result, the cash reserves fell below the ten million dollar mark. A Faraday spokesperson commented that the company is now focused on reducing costs, increasing production and raising fresh cash.