Why EV Makers Can't Escape Traditional Automakers' Pitfalls
Electric vehicle manufacturers like to boast about disrupting the automotive industry by manufacturing vehicles with a heavy dose of technology and software, implying that legacy automakers are somehow out of step with modern times. But now, these brand-new manufacturers are encountering the same potholes that have long plagued their more experienced competitors -- and their business cycles, and reactions to them, are similar. As pandemic-fueled parts shortages, inflation, and rising interest rates roil the economy, no automaker, new or old, is immune from their effects.
The automotive industry still needs to spend vast amounts of capital before it can offer investors any assurance of sales success. While EVs are not quite as difficult to build as vehicles powered by gasoline-fueled internal combsution engines, they still must undergo the same amount of development and testing, and the factories that build them are just as pricey. Making it to the start of production is still a huge hurdle to clear.
In July, Rivian (NASDAQ: RIVN) announced that it's cutting 6% of its 14,000-member workforce, despite 2022 sales projections of $1.8 billion in 2022 and $6.2 billion in 2023. Rivian Chief Executive Officer RJ Scaringe said the cost-cuts were needed to continued growth in manufacturing without having to raise additional cash. Scaringe is cutting fat among the company's white-collar employees, not at its factory in Normal, Illinois.
Source Fool.com
