Lucid delivered a startlingly small share of its produced cars to customers — revealing a problem plaguing EV companies vying to be the next Tesla
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Late earnings aren't fun for anyone, but they're particularly problematic for fledgling startups like Lucid in the capital-intensive auto business. Lucid Motors
Rivian and Lucid have reported that they have shipped far fewer cars than they have built this year.
The electric vehicle startups attribute this to production ramp-ups and logistics.
But it is crucial for companies to close the gap.
Automakers across the auto industry have faced problems related to supply chains and logistics that have prevented them from getting vehicles into the hands of paying customers — but figures from automakers like Lucid show EV startups are taking a bigger hit than incumbents like fords
Lucid reported that it built 2,282 cars in the third quarter of this year but only delivered 1,393 of them to customers. From January to September, only 66% of the 3,687 cars produced were delivered.
Rivian has also seen a gap, albeit less extreme: The Amazon-backed startup built 7,363 vehicles and delivered 6,584 in the third quarter. In the first nine months of 2022, Rivian had produced 14,317 cars and delivered 12,278, a rate of 86%.
In the "normal" years leading up to the coronavirus pandemic, the auto industry shipped virtually every car it built, according to Eric Anderson, a senior research analyst at S&P Global. In 2021, that rate slowed due to a global chip shortage and various supply chain disruptions, he said. But the industry average is still well above Lucid's 66%.
The ratio matters because car companies don't record revenue until the car is delivered. But as startups disrupt the dealer-based sales model, legacy metrics are harder to apply, Anderson said.
"It's hard to say what a healthy level is for this gap right now because it's applied to such a new concept," Anderson said. At the same time, it is important for startups to “go in the right direction”.
Lost or delayed earnings are no fun for anyone, but they are particularly problematic for the young players in this capital-intensive business. Rivian sat on $13.8 billion at the end of the third quarter, while Lucid had $3.85 billion and plans to raise another $1.5 billion. A Lucid rep had no additional comment on what was said in the earnings; Rivian declined to comment.
"It's one thing to be a startup and develop a few thousand cars," said Peter Maithel, principal automotive analyst at Infor. "But then it's a challenge to scale production to the point where it's economically viable."
Lucid's production and delivery gap "was primarily a function of vehicles being distributed across three areas of the delivery process: vehicles in transit, vehicles awaiting pre-delivery inspection, and vehicles awaiting delivery to a Customers are waiting," Lucid CFO Sherry House told investors in a third-quarter earnings call.
Part of Lucid's early delay was related to production launch issues. Although vehicles were being built, former and current employees said cars rolled off the assembly line missing key parts or were awaiting inspection given Lucid's ultra-high quality standards.
Insiders attributed the problems with the parts to Lucid's outside logistics companies and said it has particularly led to a supply shortage at Lucid's Tempe, Ariz. warehouse -- parts being stacked incorrectly or left damaged, causing built cars to be set aside .
Lucid has since internalized its logistics activities to remove these obstacles, and so far that appears to be working as Lucid has accelerated its pace of production.
Still, House said she expects vehicles produced to surpass vehicles shipped in the near future as Lucid accelerates production and begins international deliveries.
Rivian CFO Claire McDonough blamed logistics for the gap and added another production shift. "The transit time of rail shipments, coupled with an increase in volumes from the start of our second shift towards the end of the quarter, will result in a significant mismatch between production and deliveries for the fourth quarter," she told investors during Rivian's Q3 earnings call .
What that means for the future
Businesses are expecting the gaps to narrow - and it couldn't be more critical that they do so.
As time elapses for deliveries and the gap widens, these companies are not only delaying sales, but also risk losing customers to established competitors and therefore market share.
Legacy automakers like Ford, GM and Volkswagen have long-established production, logistics and delivery strategies, noted Jessica Caldwell, an automotive analyst at Edmunds. Additionally, EV startups like Rivian and Lucid won't enjoy the first-mover advantages that Tesla had in the early days of scaling vehicle production, making this moment even more crucial for those companies, Caldwell said.
"These companies are becoming less exciting," she said, "just because they're not the first."
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