BMW says it isn’t going to leave lower-priced vehicle segments in the transition to EVs, Lucid lost well over half a billion dollars in the third quarter, and Rivian is facing pressure to boost output and keep demand up even though the economy is slowing. All that and more in The Morning Shift for Wednesday, November 9, 2022.
1st Gear: BMW is Committed to Cheaper Offerings
BMW’s CEO Oliver Zipse said the company wouldn’t be cutting vehicles from cheaper segments during and after the transition to EVs. It’s in contrast to the move Mercedes-Benz is making. Well, “cheap” here is relative, as we are still talking about BMWs.
“We are not leaving the lower market segment. Even if you consider yourself a premium manufacturer, it is wrong to leave the lower market segment – that will be the core of your business in the future,” Zipse said. From Reuters:
His comments contrast with the strategy of rival Mercedes-Benz, which said in July it was dedicating 75% of its investments to top-end vehicles and its highest-selling segment of “core luxury” C-Class and E-Class models while cutting the number of entry-level models.
BMW’s chief financial officer warned last week that although sales of fully electric vehicles were expected to double this year from 2021 levels, the company expected rising inflation and interest rates to weigh on incoming orders, particularly in Europe.
It’s always nice to see companies stay committed to market segments for vehicles some people can actually afford. Now we just have to wait and see how these two diametrically opposed strategies from the two German companies will impact business.
2nd Gear: Lucid Managed to Lose $670 Million in Q3
Lucid’s production goal of somewhere between only 6,000 and 7,000 Air electric sedans this year is a partial reason for the company posting a $670 million loss in the third quarter of 2022. Lucid says it has been dealing with supply chain issues and growing pains.
The company had initially planned to build 20,000 Airs in 2022.
It’s not all bad news, though. The automaker posted revenue of $196 million during the same time period. That’s up big from the $232,000 it made a year earlier. From Automotive News:
“We had record quarterly production of 2,282 vehicles, more than triple Q2, and deliveries of 1,398, which was more than double Q2,”[Peter] Rawlinson [Lucid CEO] said. “I’m also pleased to announce that we’ve now proven our ability to produce 300 cars a week.”
Lucid also said it will open reservations for its second vehicle next year, with deliveries estimated to start in 2024.
“We continue to have strong demand with over 34,000 reservations as of November 7, 2022,” said CFO Sherry House. “We plan to open reservations for Project Gravity SUV in early 2023, which we believe will unlock a very large and incremental addressable market.”
Lucid is planning to launch two new versions of the Air, the Pure and Touring, on November 15. During the event, the company will also be announcing an update on its upcoming Project Gravity SUV.
3rd Gear: Rivian Under Pressure to Keep This Shit Up
Missed production targets and an easing of demand are spelling some worry for electric truck maker Rivian. Now, the company’s CEO, RJ Scaringe, is under pressure to increase production of the R1T pickup truck, R1S SUV, and electric delivery vans.
He’s expected to face questions on an earnings call that is scheduled for this afternoon. It’s being reported that Rivian could be facing a net loss north of $1 billion in the third quarter of 2022… outdoing Lucid. From Automotive News:
The automaker said in early October that it produced 7,363 vehicles at its Illinois plant in the third quarter and delivered 6,584 vehicles. Rivian said it expects to meet its full-year production target of 25,000 units for the three vehicles it sells. The company does not break down production by model.
Rivian has struggled to meet demand amid supply chain challenges. The company’s most recent public statement on its order backlog put pre-orders at 98,000 for the R1T and R1S as of June 30. Separately, Amazon has an initial order for 100,000 EDV vehicles.
Scaringe may also face questions over plans to build a second plant in Georgia for the company’s smaller R2 platform, designed for more mainstream vehicles. Rivian has said it has enough cash to build the factory and produce the new models.
The company has reportedly lost almost $125 billion in market value since its IPO last year. The stock has lost just about 60 percent of its value from the $78 price that was initially offered a year ago today.
4th Gear: Week Yen Helps Japanese Automakers
Japanese automakers are seeing strong profits despite the mess of a world we currently live in because of the yen’s fall from grace.
The currency is currently at a three-decade low against the dollar. That has had the effect of offsetting issues the companies are facing in terms of demand. It has given a boost to the value of overseas earnings. From The Wall Street Journal:
Honda Motor Co and Nissan Motor Co. raised their profit forecasts for the fiscal year through March on Wednesday, thanks in large part to the impact of foreign exchange rates. The auto makers issued the brighter outlooks despite forecasting they will sell fewer vehicles due to continuing chip shortages.
Honda executive Eiji Fujimura said the company’s sales revenue target for the current year would be a record high if achieved. But, because much of that is attributable to currency effects rather than sales volumes “we do not say proudly this is a record high,” Mr. Fujimura said.
Though a weak yen makes it more expensive to import some commodities and components, and squeezes domestic-focused companies, it is typically a boon for big multinational Japanese manufacturers. In addition to boosting the yen-denominated value of company earnings, a weak currency means that products made in Japan are more competitive when sold abroad.
The yen was trading Wednesday at around 145 to the dollar, compared with about 115 to the dollar at the beginning of this year. Recently the currency hit a 32-year low, leading Japan’s government to spend more than $40 billion last month in an effort to prop up the yen.
As of Tuesday, 223 companies in Japan’s Topix index raised their net profit outlooks for the fiscal year ending March 2023, according to data from SMBC Nikko Securities. That compares with 109 companies that cut their forecasts.
Despite the weak yen, executives aren’t sure it’ll be easy to predict the future of the automotive industry over the next six months. That unpredictability is because of things like raw material prices and the ongoing semiconductor chip shortage.
5th Gear: It’s Not Looking too Good for Arrival
Electric van startup Arrival is quickly running out of cash. The company says it may not have enough money on hand to keep the business going through the end of next year.
The company is reportedly looking at some pretty drastic options to help fix its funding issues. The biggest, and, most likely, move, is probably going to have a gnarly impact on its United Kingdom-based workforce. From Reuters:
Arrival’s move to “right-size” also comes as it shifts focus to the larger U.S. market, with an eye on incentives from the Inflation Reduction Act.
EV startups that promised to disrupt the automotive industry with novel manufacturing techniques and products are scrambling to keep a lid on costs due to supply-chain issues and rising raw material prices.
“We’re actively engaged in capital raising … we’ve had some preliminary discussions with a handful of parties,” John Wozniak, Arrival CFO, said in a post-earnings call.
The company, which posted a bigger third-quarter loss, expects to have enough cash to fund the business into the third quarter of next year.
Back in 2020, Arrival received an order for 10,000 of its electric vans from UPS. There was even an option for an additional 10,000 units on top of that. Oh, how the mighty have fallen.
Arrival’s reported net loss grew to $310.3 million in the third quarter (losing hundreds of millions in the third quarter is a recurring theme in today’s Morning Shift). That number is up about 10-fold from the $30.6 million loss during the same period last year. Not great.
Because of all of this turmoil, Reuters reports the company’s shares were trading at an all-time low of just 36 cents. Really not great.
Reverse: They’ve Always Been Bums
Neutral: So Much for the Red Tsunami, Huh?
Democrats had a pretty good night last night, you might have heard.
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