But none has managed to sustain those swells, each watching their market values deflate 75 percent or more as of Wednesday. This week, each reported large losses and dwindling cash supplies.
It should not be surprising these companies are burning through cash and piling up losses, industry observers note. Though start-ups rarely turn a profit in their early days, such automakers contend with unique costs and manufacturing challenges not seen in other industries like, for example, software. Tesla reported its first full-year profit in 2020 — nearly two decades after it was founded.
“It’s deja vu,” Krebs added, referring to the current rush of entrants in the EV market. “There will be a shakeout.” Electric vehicle makers are facing challenges, including increasingly limited opportunities for funding due to higher interest rates, as well as competition from legacy automakers, which can subsidize their EV business losses with revenue from gas-powered vehicle sales, analysts said. Ford, for example, said in March that its EV business would take a $3 billion loss, but the company would still turn an overall profit of as much as $11 billion.
Venkatesh Prasad, senior vice president for research at the Center for Automotive Research, said EV start-ups are seeing opportunities for outside capital dwindle as interest rates rise — and they also face stiff competition from established automakers that can scale their products faster to meet demand. “And so with the start-ups, you have both risk and uncertainty happening at the same time,” he said.