(Bloomberg) — The contrasting fortunes of America’s two major electric vehicle startups have Wall Street picking a side — and it’s not Lucid Group Inc.
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After recently hitting an all-time low, the stock had fallen nearly 25% this year through Thursday’s close, while pickup truck maker Rivian Automotive Inc. compared to a 1% decline of The percentage of positive analyst ratings on Lucid fell to only a quarter of all recommendations. For Rivian, more than half of the ratings equate to buy.
The programs reflect profound differences. Lucid, which said in August it expects to produce at least 10,000 cars by 2023, will burn $338,000 for each vehicle it makes this year, according to Bloomberg Intelligence estimates. Analysts’ average 2023 sales estimate has almost sunk. 50% in last 6 months.
By comparison, Rivian, which is estimated to lose about $110,000 per vehicle according to Bloomberg Intelligence, forecast full-year production of 52,000 units on Monday and raised its average expectation for 2023 sales by about 5%.
“Lucid is well below the pace it needs to hit 10,000 cars this year, which is why they continue to pay,” Jerry Bruckman, chief investment officer at First American Trust, said in an interview. “The stock will continue to be challenged until it shows significant improvement in the number of units sold.”
Car manufacturing is a capital intensive activity. That’s why Lucid and Rivian’s deepest supporters — Saudi Arabia’s Lucid and Amazon.com Inc. Public Investment Fund for – helped them command a premium valuation for Rivian. But that only goes so far at a time when markets are grappling with the prospect of high-long interest rates and tight liquidity. Rivian shares fell 23% on Thursday after the company said it planned to issue $1.5 billion in convertible debt.
Lucid tapped the capital markets for cash earlier this year and secured an infusion from a Saudi fund, which typically doesn’t sit well with shareholders. “It dilutes the stake, so it’s a tough spot from a typical investor’s standpoint,” Bruckman added.
The company is currently in a quiet period ahead of its third-quarter earnings report and did not comment for the story. The stock fell as much as 2.3% on Friday, while Rivian fell 3.4%, as a warmer-than-expected U.S. jobs report spurred a market-wide selloff.
Lucid and Rivian, once considered more credible rivals to Tesla Inc., entered the public markets in mid-to-late 2021, when market enthusiasm for new EV-makers is high. As traders shied away from riskier growth investments, their valuations rose before the tables turned sharply in 2022. Lucid is down 91% from its peak, while Rivian has lost 89%.
Severe supply-chain shortages and rising prices of battery raw materials hurt them further, but the problems have plagued Lucid this year. The company struggled to grow sales, selling around 1,400 units in the first and second quarters. In the third quarter, around 2,100 cars were estimated to have been sold. On the other hand, Rivian’s sales have grown significantly in every quarter so far this year.
There is also an increasing risk that Lucid will default on its debt. According to Bloomberg Insights credit analyst Joel Levington, the company’s default risk is now 16%, nearly four times the average for global automakers. “Lucid’s near-term strength is its cash balance of $5.2 billion, but cash burn of nearly $7 billion through 2024 maturity scenarios,” Levington wrote in a note Wednesday.
At the same time, the company is trying to gain a foothold in a market already dominated by Tesla. The company makes a luxury electric sedan that competes with Tesla’s Model S, along with several new models released by Mercedes-Benz Group AG, BMW AG and Volkswagen AG’s Porsche and Audi brands.
“The problem is how Lucid has positioned itself — going after a luxury, small-scale market, while Rivian is targeting a large addressable market,” said Tom Narayan, an analyst at RBC Capital Markets. Narayan noted, “Rivian is not out of the woods, and it is in a better place right now compared to Lucid.”
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The market values of both Rivian and Lucid are similar to those of Detroit automaker Ford Motor Co. And there was a time when General Motors beat the company’s market valuations. Now they are worth less than half of those companies. As of last count, Ford led the pack with a value of nearly $48 billion, followed by GM at $42 billion. Rivian is around $17 billion and Lucid is around $11 billion.
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–With assistance from Subrat Patnaik.
(Adds silver stock movements in the eighth column.)
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