Other than Canoo Inc. (NASDAQ:GOEV), in the electric vehicle (EV) market, hope and excitement are quickly giving way to the realities of the marketplace.
In other words, EV makers are starting to face the same issues that traditional automakers have long faced – like how to cut costs amid an industry slowdown.
Recession worries are firmly in place now and reducing spending across various sectors – including the auto industry. In many cases, EV makers are feeling the pain for the first time.
Many EV Makers Lack Experience With This Type of Market
While Detroit automakers have been through this situation many times, not many EV makers have. That is especially true for startups that don’t have established lines that they can count on to continue to generate sales in difficult times like these.
In comparison, Ford, General Motors, and other established car makers have established makes and models that they can raise the price on to keep money coming in.
Still, Even Traditional Automakers Are Worried About What Could Lie Ahead
Paul Jacobson, chief financial officer at General Motors, said at a Deutsche Bank Conference in June that he and his fellow executives are closely watching market indicators. “I don’t want to end up in a situation where we walk off a cliff,” he said.
The dire economic conditions are forcing many EV makers to scramble lest they face the same fate as Electric Last Mile Solutions, an EV maker that filed for Chapter 7 bankruptcy in June.
Among those needing to cut costs and possibly even reinvent themselves are EV startups like Rivian Automotive Inc. (NASDAQ:RIVN) and Arrival SA (NASDAQ:ARVL).
Canoo Inc. (NASDAQ:GOEV) would be on this list, except the company just announced on Tuesday (July 12) that it had secured a deal to provide 4,500 delivery vans to Walmart.
That News Sent Canoo Inc’s Stock Price Soaring!
It went from 2.37 at the start of the day to a high of 4.74 – that means its price nearly doubled.
In a marketplace drowning in bad news, Canoo’s deal stood out like a beacon in the night.
But the truth is when you look past the initial dark industry news, some good news is lying underneath.
For instance, while traditional new-vehicle auto sales slumped mightily during the COVID-19 Pandemic, EV sales remained strong.
The International Energy Agency reported that sales of electric and hybrid vehicles nearly doubled to 6.6 million in 2021.
However, This is 2022 & Recession Worries Are Quickly Changing the Marketplace
That’s why Arrival, a startup EV maker in Great Britain, announced it is laying off up to 30% of its workforce and reorganizing its business to cut costs further and better adapt to the new, much more challenging economic environment.
Arrival isn’t the only startup making changes. Rivian has already cut a significant number of jobs even though it has a major deal to supply delivery vans to Amazon. In fact, Amazon is a major investor in the company.
Another young EV maker, Lordstown Motors Corp. (NASDAQ:RIDE) has restructured, sold assets, and partnered with Foxconn (TPE:2354), a Taiwanese contract manufacturer, to better meet the challenges of today’s economy.
Those appear to be the major ways that EV startups are adjusting to meet current economic challenges – employee layoffs, asset sales, and mergers with other, more financially viable companies.
Industry Giants Are Not Immune to What’s Happening
The truth is even industry stalwarts like Tesla (NASDAQ:TSLA) have made job cuts.
Industry officials are uncertain about the future and worried about just how bad it could get.
In an article on Yahoo Finance, Stellantis CEO Carlos Tavares said rising inflation is cutting off easy access to “free money.”
“This means some startups will have a little bit more difficulty to develop by themselves.”
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