Rivian and Lucid and the hard truth about EV

Rivian lost $1.5 billion last quarter. Lucid Motors delivered about 2,000 vehicles in the same period, against a production capacity designed for 34,000 per year. Fisker filed for bankruptcy.

The EV startup dream is meeting the manufacturing wall. And the wall is winning.

The factory problem

Building a car that works is hard. Building a million cars that work is a different kind of hard entirely.

The engineering challenge of an electric vehicle is largely solved. The motors are efficient. The batteries hold enough charge. The software works. Every EV startup that’s reached the prototype stage has demonstrated a car that drives well, looks good, and does what it’s supposed to do.

The manufacturing challenge is unsolved for most of them. Building a car on an assembly line, with consistent quality, at a cost that allows a reasonable margin, at a volume that sustains a business, is a problem that has humbled some of the smartest people in technology.

Tesla nearly died in 2018 during what Elon Musk called “production hell.” The Model 3 ramp was a nightmare of quality issues, bottlenecks, and improvised assembly processes. Tesla survived because Musk moved into the factory and because the company had just enough cash to keep the lights on while they figured out how to build cars at scale.

Rivian and Lucid are in their own versions of production hell. The difference is that the window for surviving it might be closing.

The cash problem

EV startups burn enormous amounts of cash. R&D is expensive. Factory construction is expensive. Ramping production is expensive. And unlike software companies, where growth is cheap once the product is built, car companies have massive per-unit costs: materials, labor, logistics, warranty, dealership infrastructure.

Rivian has about $9 billion in cash. At $1.5 billion per quarter in losses, that’s six quarters before the money runs out. Less if spending increases. The company needs to either reach profitability, raise more capital, or find a partner before the cash is gone.

Lucid has Saudi Arabia’s Public Investment Fund as its primary backer. That’s a deep pocket, but even sovereign wealth funds have patience limits. If Lucid can’t sell enough cars to justify continued investment, the funding could slow.

The harsh truth: most EV startups won’t survive. The capital requirements are too high, the manufacturing challenges too steep, and the market is increasingly competitive as legacy automakers (Ford, GM, Volkswagen, Hyundai) ramp their own EV programs.

What Tesla figured out

Tesla’s survival wasn’t about having the best technology. It was about having the stubbornness to solve the factory problem. The Gigapress (a single casting machine that makes the entire underbody of a Model Y in one piece) eliminated hundreds of welds and dozens of parts. The highly automated paint shop reduced costs. The battery cell manufacturing integration reduced supply chain risk.

Each of these innovations happened because Tesla treated the factory as a product to be iterated on, the same way they iterated on the car itself. The factory is the machine that builds the machine. Tesla understood that early. Most startups understand it too late.

The self-driving angle

Here’s why I’m writing about EV startups on a blog about the future. Every new EV has a sensor suite. Cameras, radar, sometimes LIDAR. The hardware for autonomous driving is being built into every vehicle, waiting for the software to catch up.

If Rivian and Lucid survive, their vehicles become part of the autonomous fleet of the future. If they don’t survive, the sensor technology, the software platforms, and the engineering talent get absorbed by whoever acquires their remains.

Either way, the technology survives. The companies might not.

The lesson

The technology was never the hard part. The hard part is building the factory. Hiring the workers. Managing the supply chain. Delivering the product. Handling the recalls. Servicing the customer. The boring, unglamorous, industrial work of making things at scale.

Silicon Valley has spent 20 years building software companies where the product is bits and the marginal cost of distribution is zero. EV startups are a reminder that atoms are different. Atoms cost money. Atoms have weight. Atoms require factories.

I’m rooting for Rivian and Lucid. Their products are good. But good products don’t guarantee surviving companies. The factory is the test, and the test is unforgiving.

Reuters has good coverage of the financial details. I recommend following their EV coverage if you want the numbers behind the story I’ve been telling with feelings.

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