(Bloomberg) — It’s been a rough stretch for electric-vehicle startups lately, marked by manufacturing blunders, swooning stocks and regulatory investigations. That’s ratcheting up the tension as smaller players scale up production and compete for kind of mainstream success enjoyed by Tesla Inc.
“Not every startup will survive the shakeup that will occur in the nascent commercial EV sector,” Rick Dauch, chief executive officer of electric-van maker Workhorse Group Inc., said this week on a conference call with analysts. The words were echoed by Lordstown Motors Corp. chief Dan Ninivaggi, who said most smaller manufacturers will succumb to bigger players. Both of the companies have market values below $1 billion.
The candid comments underscore the challenging environment for EV startups these days. This week alone, EV makers have cut production targets, warned of the need to raise capital, killed a vehicle model or upset customers with price hikes.
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The EV market has drawn new entrants in recent years, with a number of firms going public through reverse mergers with blank-check companies. As startups have run into trouble — in some cases facing scrutiny by federal authorities — many have fallen below their debut prices.
That’s not to suggest that the entire EV space is ailing. Indeed, Tesla ranks among the most valuable companies in the world, while automotive pioneer Ford Motor Co. this week announced a sweeping reorganization to capitalize on the growth potential of plug-in models.
Even as some smaller firms stumble, many startup leaders insist their own companies will come out fine on the other side, pointing to their distinct offerings.
Takes Lucid Group Inc., the maker of luxury EVs that has a market capitalization of $37 billion despite only recently beginning deliveries. As CEO Peter Rawlinson put it on a conference call, “We don’t see ourselves competing directly with any particular car companies.”
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