Things are getting rocky for EV startups.
It wasn’t that long ago corporate media outlets were hailing Lucid’s long-expected entry into the market as a true Tesla challenger. Now, the California automaker which has famously relied on Saudi money, is in serious trouble as demand for its only model line, the Air, is sliding along with production numbers. Like Rivian and other EV startups, Lucid is facing an uncertain future and harsh realities.
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The buzz right now comes after Lucid released its 2023 forecast, showing production numbers well below what analysts had predicted from the automaker. According to the automaker, it anticipates churning out just 10,000 to 14,000 vehicles this year, far short of the 21,000-plus figure conjured up by analysts. This comes as reports about customers canceling orders continue to pour in, indicating demand for the Lucid Air is weakening with time.
After the disappointing forecast figures, Reuters reports Lucid shares dropped 11% in after-hours trading. Obviously, investors are rattled about the future viability of the company.
Even worse, Lucid’s Q1 2023 production and delivery figures took a dive. The startup automaker only made 2,314 vehicles versus 3,493 assembled in Q4 2022. Deliveries for the first quarter of this year came in at a mere 1,406 units, down from 1,932 in the final quarter of last year. You’ll notice there’s quite the gap between production and deliveries, a fact that’s troubling.
Just like every other automaker under the sun, Lucid has faced difficulties with supply chain disruptions and shortages. Some customers who put in a preorder on an EV long ago have given up in disgust, concluding they should simply buy something else they can actually get. Lucid claims to have 28,000 active customer orders as of February 21, down 6,000 from the figure it cited in Q3. It has only delivered about 1,900 vehicles since, so that gives us some idea of how many cancellations are pouring in.
Not helping the situation has been Tesla’s aggressive price cuts, something startups which often are already selling EVs at a high per-unit loss were completely unprepared to address. That move, combined with government incentives from the Inflation Reduction Act, are exposing that EV shoppers are in fact quite price sensitive, especially as interest rates and inflation remain high and the economic outlook seems shaky at best.
Facing increasing competition in a sliver of a market segment which isn’t growing as aggressively as some had previously expected, Lucid has been forced to slash about 18% of its workforce. A report from The Wall Street Journal says the roughly 1,300 employees to be cut include some executives as the EV startup looks to cut costs and ride out the current storm.
While Lucid certainly is in trouble, that doesn’t necessarily mean the automaker is done for. However, investors, analysts, and others will be watching what happens with the company closely as rumors of an even more intense EV price war in the US circulate.
Image via Lucid