Tesla has no competition absolutely none,
there is not one other company in the world that is capable of making a profitable EV,
not one other company in the world that is capable of producing volume production.
Alright there is one little one that does meet both those criteria, the Wuling death trap. But
I classify that closer to an electric bicycle than a car. But we are in the 3rd month of 22
now. 4 years ago Tesla hit volume production. It was a major break-through, I can tell you it was a
bit stressful getting those productions number up initially in 20217, wondering if they could do it
or not, and later we heard it was much closer than we realized, and nearly didn't make it.
There are other companies that do make electric cars and sell them to
consumers too, but they lose money each time they sell a car, so it's hardly competition,
if your competitors just continue to lose money on every sale,
particularly whilst Tesla generates $10,000 every sale, oh and sells a lot more than a few hundred.
And now look what has happened just recently.
A lot of evidence coming out about just how difficult it is to make an EV.
I am not just talking about legacy autos either, but the EV start ups Rivian and Lucid.
Rivian just raised their prices as high as 20%. And the vehicle prior to this price increase,
well it wasn't the cheapest. The truck, R1T, went from a starting price of $67,500
to $80,000. That is quite a boost, and will reduce their market considerably. For a lot
of people this prices goes from an expensive price tag, to unaffordable. $80,000 is a lot of money.
In the Rivian Facebook group there are tons of members reporting they cancelled their order,
and are very dissatisfied with these price rises. Of course they still get tax credits, and I have a
feeling Rivian will be receiving tax credits for sometime, maybe it's entire life as a company,
until it crashes and gets acquired by Amazon. Admittedly this price is still cheaper
than a Model X, and like I said, customers get tax credits.
Rivian blames it all on inflation of course, but there were internal pressures already.
Apparently Rivian’s Finance Director, and worked to develop projections showing how much of a loss
the company would incur if Rivian did not raise prices. Yea, it's tough making a profit with EVs,
imagine how much harder it would be with affordable EVs.
I was literally saying this the other day, in a video explaining why EV prices
will all have to rise. It's for this reason, they simply can't make a profit, they can't
get their costs down low enough, so the only other options is to raise prices. Expect it to
come across the board. I also explained how an EV should be more expensive than an ICE car anyway,
as it is a better product. It costs less to run and has a longer life use. Therefore, I believe it
is acceptable to raise prices anyway. One issue was they had to remain competitive to Tesla,
but Tesla have been raising their prices anyway. We are only talking about price points here,
not value. Obviously Tesla will always be the best value at every price point.
"Our primary challenge is affordability. Creating an expensive truck is relatively easy.
If it is extremely hard to do so for Tesla, despite our much greater economies
of scale & better technology, then it is damn near impossible for others.".
Once again Elon mentioning just how hard EV production is.
Ok, great, well if Rivian's customers are willing to pay more for the brand,
then Rivian has a higher chance of survival. But I am not sure Rivian
are going to get away with a higher price point. This is incredibly tough.
Oh yea, don't forget there may also be a Cybertruck on the way sometime too.
That might also impact Rivians demand further again. I don't understand how
this company is going to meet it's targets. But maybe Rivian will have enough demand, there
deosn't appear to be much other competition out there. Other than Tesla, still no one else today
is capable of making EVs successfully. So maybe there is enough demand for an $80,000 Rivian.
And things aren't going swimmingly for Lucid either. Lucid have just cut their car
production forecast for this year by 40%. Expectations of production has gone from
20,000 units for the year, now down to just 12,000. And we know there is a good chance,
it will probably come under 10,000 even. The company is blaming, you guessed it,
supply chain issues. Funnily enough not chips though, no having issues sourcing commodities like
glass and carpet. But I am sure, its likely a lot of it is coming down to manufacturing too.
We know the real story, EVs are a really tough game. Especially when all the best talent wants
to go where they have the most resources and potential to live out their ideas and creativity,
where it is encouraged. I am talking about Tesla taking all the best labor.
I don't think Lucid can raise their prices any further though, $139,000 is a lot of money. If
they can't make profits at that price point, then what chance do they have. Lucid has differentiated
themselves from Tesla to somewhat justify the price tag, and offer a more luxurious vehicle with
even longer range than a Tesla. But when Lucid offer their standard model, the Air Pure, well
they will need to somehow try and make a profit when the price tag is reduced to $80,000. And
possibly fairly soon, as I am not sure how many people really want to spend $139,000 on an EV.
Remember when Tesla launched the Model S, and it had a fairly high price tag,
particularly adjusted for inflation. Well Tesla could more than justify that price point,
they offered something very unique. An electric car, now there is a lot
more competition. Luckily Lucid doesn't have that major targets to reach just yet anyway.
Just taking a quick look at Lucid's Q4 report. Revenue was 27
million dollars, from 125 deliveries, that actually comes to a $216,000 average selling
price. Perhaps there are some options to order to take the price that high. I am not sure.
But it did cost $155 million to make that many cars. That's right cost of goods sold was $5.7
million per vehicle. That's an expensive car, but that was just the cost of building them,
the company itself also cost money to run.
This ended up in creating a net loss in GAAP earnings of over $1 billion, just for Q4. Oh, and
they only have $6.2 billion left in cash. That's enough cash to make over 1000 more Lucid Airs,
before they can't make payroll. Right of course that cost of goods sold per vehicle number will
decrease as the production ramps. However, the total cost of goods will obviously increase,
particularly as they go from 125 vehicles last year, to 100 times as many this year.
At this trajectory of the current burn rate they will be out of cash by the end of the year.
It's early days still, so we never know, and hope for the best that as many EV companies
make it as possible. But it just goes to show, once again, what an incredible job Tesla do,
or even managed to do 10 years ago with the Model S. The equivalent of where Lucid is now,
except struggling tremendously despite all the EV break-throughs over the last decade.
Lucid's valuation seems like it is based some sort of path to profitability here. But it looks like a
very quick crash and burn at this stage. Lucid is 2/3 owned by Saudi sovereign wealth fun, you are
messing with Saudi's money, which is basically bottomless. They can sink as much as they want
into Lucid, they are looking for a new industry to replace their previous. Tesla has proven itself to
be very profitable, and a lot of potential, even potentially more than Aramco. Obviously the Middle
East is going to get a big shock when the world demand for oil keeps dropping, and they need a
new industry to replace the old. They have lots of money to sort it out, why do you think they
floated Aromco. Dubai is the same, but instead of investing an EV company they invested in tourism.
Given that this company is really just funded by a wealthy oil oligarchy, then maybe the burn rate
isn't as important. Maybe Saudi Arabia can just top up the capital when it's required, and keep
the company going, until maybe it makes a profit. Which it may never, and Aromco may crash too.
In the meantime it looks like Lucid is acting like it has all the money in the world. Announcing a
new factory plant in Saudi Arabia, with capacity of 150,000 vehicles. And they are going to start
building in a few months. Which would indicate a lot more capital available to them eventually.
Anyway, I dont think Lucid deserves any valuation remotely like it does today,
until they can at least prove they can manufacturer with a reasonable gross margin.
Rather than negative 33,700% margin. For me that's still quite a way to go.
Lucid have also delayed the launch of their gravity SUV. Hmmm, a luxury sedan,
followed by a luxury SUV. What a clever business model. Then perhaps release some more affordable
models along the way. I see, that sort of plan could actually work, its really clever.
You know, only if they can ever make a profit, which may need a bit more cleverness.
Lucid are clearly going for the luxury market, and branding themselves heavily that way.
In their defense, it is a lot harder to go for affordable EVs. Lucid's price points are so high,
surely they are bound to make some profit eventually. It will be interesting to
watch how these 2 EV companies grow. I don't say this to put down Lucid. I
say this to support Tesla. Tesla doesn't get close the admiration it deserves through its
absolutely marvelous engineering and technology. We should be hearing Biden stating how proud he is
that Tesla is an American brand, and everything Tesla is doing for America.