Tesla Struggling Rivals Lucid and Nikola Need Cash

The two electric vehicle manufacturers are facing soaring production costs.

Soaring commodity prices are hobbling electric-vehicle startups. 

At the rate things are going, the cost surge may well disrupt the auto industry’s disruptors.

The cost of battery development has more than doubled since the coronavirus pandemic, research firm AlixPartners has calculated. That’s due to the supply-chain wreck caused by the pandemic and to the soaring prices of raw materials after Russia invaded Ukraine. Both countries are big producers of minerals.

The costs of raw materials (cobalt, nickel, lithium) necessary used in EVs have on average more than doubled (up 144%) in two years to $8,255 as of last May, according to a report published in June by AlixPartners. 

As of March 2020, these costs amounted to $3,381. The cost of developing an electric vehicle has increased by about $2,000 over the past two years, the research firm added.

This situation has particularly hurt Nikola (NKLA) – Get Nikola Corporation Report and Lucid (LCID) – Get Lucid Group Inc. Report because it has forced them to burn cash faster than expected. 

And the two firms have just said separately that they are looking to raise fresh funding.


Nikola: Share Issue

In a U.S. Securities and Exchange Commission filing, Nikola, the maker of electric trucks, says it will issue $400 million of new shares. It will sell the shares at prevailing market prices.

In the document, Nikola, which intends to close the $144 million takeover the battery supplier Romeo Power, does not say how it will use the proceeds from the sale..

The Phoenix company, which says it is “driven to revolutionize the economic and environmental impact of commerce as we know it today,” had $842 million in cash at the end of the second quarter after raising $200 million.

The company produces Tre battery-electric trucks. And it is also developing a hydrogen-fuel-cell electric semi truck, the Tre FCEV, with a range of as much as 500 miles and a refuel time of under 20 minutes. That configuration would enable it to carry freight over longer distances. 

The start of regular production of the Tre FCEV is scheduled for the second half of 2023.

In the second quarter, Nikola produced 50 Nikola Tre BEVs and delivered 48 of those to dealers. The company had expected 50 to 60 units to be produced and 50 to 60 Tre Bevs to be delivered.

The company was founded in 2014 and went public in May 2021 by merging with a special-purpose-acquisition company, or SPAC.

In early August the company said Chief Executive Mark Russell would step down on Jan. 1 and be succeeded by Michael Lohscheller, who joined Nikola last February.

Lucid Motors

Lucid: Shelf Registration

As for Lucid, the manufacturer of the Lucid Air luxury electric sedan, wants to raise $8 billion in several stages, according to a filing with the SEC. 

The firm will raise the money via a shelf registration, which means that Lucid may sell different types of securities and has the right to issue stock as needed. The price and the terms will be decided at the time of the transactions.

“Lucid is not offering or selling any new securities as of the filing of this registration statement,” the company said.

“After this registration statement is declared effective by the SEC, we may, from time to time, issue, offer and sell any combination of the securities described in this prospectus in one or more offerings, up to an aggregate offering amount of $8 billion, over the three years after this registration statement is declared effective by the SEC.” 

The firm added that this “will provide us with greater flexibility to raise capital in the future.”

The Newark, Calif., company ended the second quarter with $4.6 billion in cash on hand, “which is expected to fund the company well into 2023,” it said in early August in its second-quarter-earnings release.

But Lucid halved its vehicle-production target for 2022, saying it expected to produce 6,000 to 7,000 vehicles instead of its previous estimate of 12,000 to 14,000.

“Our revised production guidance reflects the extraordinary supply-chain and logistics challenges we encountered,” CEO and Chief Technology Officer Peter Rawlinson had said in a statement  

“We’ve identified the primary bottlenecks, and we are taking appropriate measures – bringing our logistics operations in-house, adding key hires to the executive team, and restructuring our logistics and manufacturing organization.”

“I remain confident that we shall overcome these near-term challenges,” Rawlinson added.

Lucid’s majority shareholder is Public Investment Fund, Saudi Arabia’s sovereign wealth fund, which alone owned nearly 61% of the group as of June 29.

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