This is a tough time to be a start-up.
New entrants into the electric vehicle market are facing a slew of challenges, including runaway inflation, supply chain hold-ups and Russia's invasion of Ukraine.
Rivian Automotive (RIVN), which went public in November, is reportedly delaying delivery of its long-awaited SUV, the R1S, by one to nine months.
Navigating a Tight Supply Chain
Rivian did not immediately respond to a request for comment, but in a letter to customers posted on RivianForums, the company said that "we’ve continued to navigate a tight supply chain, we’ve had to reduce complexity wherever possible, including prioritizing certain build combinations over others."
In addition, the company said, "we continue to prioritize deliveries in locations where service infrastructure is in place so that we can provide the full ownership experience to Rivian owners from day one," Rivian said.
"My R1S Launch Edition moved from April-May 2022 to August-September 2022," one customer wrote. "Not as bad as I was expecting."
"Was July-Sept now Oct December - ground hog day in these delay emails but falling into the trap thinking OK... This is legit final delay," another poster said, referring to the 1993 film starring Bill Murray.
Last month, Ford (F) disclosed in a Securities and Exchange Commission document that it sold Rivian stock, a move that was seen as a blow to the upstart electric vehicle maker.
'Bumps in the Road'
Ford, which held 102 million Rivian shares, sold 8 million of those Rivian shares on May 9, according to the filing posted on May 10.
Earlier this month, DA Davidson analyst Michael Shlisky initiated coverage of Rivian with an underperform rating and $24 price target.
While the company's pickup truck and SUV electric vehicles are higher priced than typical mass-market models, the "high-performance and feature-rich vehicles may be able to justify the premium pricing," Shlisky said in a research note.
Shlisky said he "loved" the truck he tested, but the analyst was worried that negative headlines will outnumber the positives in the months to come.
Like most electric vehicle startups, "there have been bumps in the road," he said.
In a June 6 regulatory filing, the company shared a letter to shareholders from Rivian CEO RJ Scaringe, who said that "since raising $13.7 billion of gross proceeds in our IPO last November, the capital markets have changed dramatically."
'We Have Focused Our Roadmap'
"We have focused our roadmap to ensure that the $17 billion of cash we had on our balance sheet as of March 31, 2022 can support the 2025 launch and ramp of our R2 vehicle platform," he said.
In addition to Ford, Amazon (AMZN) is also another major shareholder in Rivian.
Scaringe said in his letter that "our strong partnership with Amazon and its initial order of 100,000 vehicles enables us to work with one of the most sophisticated fleets in the world to demonstrate how electrification and connectivity fundamentally improve the operating costs for commercial fleets."
"On the consumer side," he said, "the R1T and R1S establish the brand and lay the foundation for us to grow and expand our portfolio globally across different price points and form factors, the first of which will be our R2 platform."
Scaringe told shareholders "the journey ahead won't be easy," and other EV startups are probably having similar feelings.
'Difficult Territory'
Canoo (GOEV), another EV start-up, recently warned that it runs the risk of running out of money in coming months, stating "that there is substantial doubt about the company's ability to continue as a going concern."
More recently, Electric Last Mile Solutions (ELMS) announced that it would file for bankruptcy, saying "there were too many obstacles for us to overcome."
So is there any reason to believe that EV start-ups are on the endangered species list? Peter Wells, professor of business and sustainability at Cardiff University, doesn't think so.
"The automotive industry has long been difficult territory for new entrants to compete against the established advantages of the incumbent majors able to deploy vast economies of scale, strong brand recognition, and mature supply chain and distribution structures," he said.
Prior to the emergence of EV technologies, Wells added, "the industry had been continuing a process of global expansion of markets and, in parallel, consolidation of ownership – albeit mediated by governments."
Exception That Proves the Rule?
Wells said Tesla (TSLA) has managed to disrupt this pattern, "but is in danger of becoming the exception that proves the rule."
"Tesla has some distinctive features that other new entrants have struggled to meet," he said, "notably a clear first-mover technological edge, the deployment of an infrastructure solution alongside the rollout of cars onto the market, substantial initial financial backing that enabled a ‘grow first, profit later’ strategy, deep levels of investment support from national and (US) state governments, and a charismatic CEO able to capture the public imagination and legitimize those ‘early adopters’."
There are plenty of other new entrants seeking to replicate this story one way or another, Wells added, "but now the established incumbents have, to varying degrees, turned their considerable corporate resources to bringing EVs to market in scale."
"Hence the window of opportunity for companies to leverage the EV moment seems to be closing pretty fast," he said. "It is not over for sure....However, I anticipate that new entrants will increasingly need ‘tech’ company backing with resources and technologies and different ways of reaching customers."
