Kelley Blue Book: ‘There surely will be failures.’ As competition builds, some EV startups may fall by the wayside.

by | May 22, 2023 | Stock Market

Fisker. Lucid. Faraday Future. Nikola
Rivian. Chances are good you’ve never heard of some of these automakers. Chances are good you’ve never seen one of their cars on the road. But an American driver in the early days of motoring might not have seen a Davis, a Cord, a Ford
a Buick, or a Coey-Mitchell, either. They would have had no way of knowing which of those companies would still be building cars in our time.

The electrification of the automotive industry has seen a bevy of new startups launch, each hoping to become the established automakers of a century from now. If history is any guide, most of them will fail. But a few will hang on. “It should not be surprising these companies are burning through cash and piling up losses,” he Washington Post says. Electric vehicle startups Fisker
and Rivian
have each watched their market values deflate significantly by mid-May.Automakers must lose money for years to make money The automotive industry is one of the hardest businesses to break into because of the huge capital expenditures required to reach critical mass. Starting up a new automaker requires outsized outlays of cash and years of losses. If it works, it can result in outsized profits. Tesla
is today the world’s most profitable automaker and America’s best-selling luxury car brand. But the company saw its first profitable quarter selling cars 18 years after its founding. The company had sustained itself in the meantime by selling regulatory credits to other automakers. But that option isn’t available to newer rivals. Now that almost every company builds an EV, traditional automakers no longer buy credits.  Michelle Krebs, executive analyst at Kelley Blue Book parent company Cox Automotive, compares it to the early days of the automotive industry. “There was a shakeout of just a few players,” she says, with companies like Ford and General Motors surviving and others, like Davis and Eldridge, disappearing. There will be a similar shakeout of EV builders. Read more: A Successful EV Start-Up Needs Cars, Capacity, and CashEV transition creating opportunities EV startups have certain advantages the earliest automakers didn’t have. Today’s EVs are often built on so-called skateboard platforms – flat combinations of batteries, electric motors, steering, and suspension components that can be scaled up or down to build many different types of vehicles. For instance, General Motors’
new Ultium platform underlies everything from compact SUVs (like the Chevy Equinox EV) to full-size pickups (the Silverado EV). Within a few years, GM vehicles wi …

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