Armed with wealthy backers, Rivian founder RJ Scaringe and Lucid CEO Peter Rawlinson floated shares in the two auto companies in the latter half of 2021 with the promise of following in Elon Musk’s footsteps — only to stumble out of the gates.
Now their paths seem to diverge.
While Rawlinson defied expectations across the board and lowered his forecast for the number of Lucid Airs he will build in 2023 to “prudently align with deliveries,” Scarring surprised the market.
First, the Rivian CEO raised his production target for the year by 2,000 vehicles amid a smaller-than-expected loss, before announcing – in news welcomed by investors – that he had freed himself from exclusivity in a van deal with his largest shareholder, Amazon, that limited growth.
The result is that Rivian expects to build 54,000 cars this year, six times the number Lucid expects.
In his call with investors, Scaringe said he’s excited about the outlook as his company prepares to deliver in 2026 a smaller, more affordable SUV priced around $45,000 and positioned in the booming midsize segment. “I think there is an overreaction to some of the headwinds we are seeing in the short and medium term,” he added, downplaying the risks posed by rising interest rates and geopolitical instability.
This gives investors hope that Rivian can survive a potential shakeout in the electric vehicle industry as demand declines amid a growing new-car affordability issue cited by Musk himself.
A tale of two electric car makers: $refn Fiscal 2023 production guidance continues to increase (to 54K from 52K) due to strong demand for SUVs and pickup trucks; while, $LCID Continues to lower FY2023 production guidance (to 8.0K-8.5K from 10K) due to weak demand for large sedans.… https://t.co/qdWvhMV1dV
– Gary Black (@garyblack00) November 8, 2023
If so, he may escape Musk’s gloomy prophecy that predicted the duo would likely file for Chapter 11 bankruptcy.
The two electric vehicle startups were then suffering from one characteristic of the highly competitive auto manufacturing industry: that the automaker’s fate often depends on its suppliers. At the time, both Lucid and Rivian found they couldn’t rely on their suppliers to deliver everything from critical microchips to some basic parts like foot mats.
“Unless something changes dramatically with Rivian and Lucid, they’re both going to go bankrupt,” Musk said last June during a podcast.
Lucid’s Saudi owners give the stock a leg up
Still scarred by his near-death experiences, the Tesla CEO knows all too well what the two endure amid investors’ expectations of high growth. In the same interview, Musk admitted that his new factories in Germany and Texas were “giant money ovens” burning Tesla’s money.
In Lucid $LCID The SPAC offered as of 2021 that it expected to generate $5.5 billion in revenue and deliver 49,000 vehicles in 2023.
Lucid has now generated $438.1 million in revenue so far this year and now expects it will deliver between 8,000 and 8.5,000 vehicles this year. pic.twitter.com/TPbJvW8aLQ
– Evan (@StockMKTNewz) November 7, 2023
That’s why Tuesday’s news that the two smaller rivals appear to be on diverging paths when it comes to production forecasts is so significant. In the automotive industry, the utilization rate of a plant’s installed capacity is the most important lever for determining profitability.
Factors like pricing trends or the sales mix of a model range are also important, but at the end of the day, most automakers will always prioritize running their production plants at maximum capacity whenever possible.
Thus, shares in Scaringe’s Rivian are expected to jump about 6% in early trading on Wednesday. Meanwhile, Lucid has developed a reputation for constantly lowering production targets, and its shares are expected to decline 4%.
Lucid can consider itself lucky, but speculation that majority owner, Saudi sovereign wealth fund PIF, may take the company private provides some sort of footing for the stock.