Imagine an automotive marketplace where one company can build an electric car for US$10,000 less than Ford, the company that merely invented the assembly line and mass production. That company is of course Tesla, as Ford CEO Jim Farley humbly acknowledged in his recent, public pas de deux with Elon Musk. Now Tesla is looking to ensure that dominance, cutting even more costs, building a new factory in Mexico, slashing vehicle prices by $5,000 on average, ratcheting up pressure on Ford, GM, Hyundai, Volkswagen, and others.
None of this necessarily prevents any innovative EV startup from entering the fray and somehow becoming the next Tesla. Yet with Ford going all-in to close the cost gap but expected to lose about $3 billion in its EV operations this year, the question for relatively speck-size startups has become unavoidable: At what point does being late to the game and trying to keep up become just too little, too late?
Tesla increasingly appears a one-off, a feat of automotive alchemy that can’t be neatly replicated.
Driving the new electric VinFast VF8 last month near San Diego certainly elicits some empathy toward this EV startup—in this case, a hyperambitious Vietnamese automaker. VinFast knows they’re going to have to do better, much better, to compete against Tesla—as well as those massively capitalized incumbents named above.
That hard-earned reality check actually faces every EV startup today. Born in seemingly limitless EV promise, electric startups are struggling or foundering as the easy money dries up and automaking reality rears its head. From Lordstown Motors to Nikola and Faraday Future, once-starry-eyed companies are seeing market valuations evaporate as they struggle to ramp up production and secure funding in a brutal, inflationary economy. These plug-in newbies saw Tesla as their spirit guide. Yet instead of providing a template for followers, Tesla increasingly appears a one-off, a feat of automotive alchemy that can’t be neatly replicated.
On design, tech, and financial fronts, Lucid and Rivian remain the last best hope of the current crop of startups, already delivering winning designs and genuine innovations to showrooms. Yet even their ultimate success is far from assured. After early production snafus, Rivian says it is on track to build 50,000 R1Ss and R1Ts in 2023, a rare flicker of light in the current storm. But Rivian’s market cap has also fallen (as of this story’s publication) to $13.6 billion, a steep plunge from $153 billion shortly after its public debut in 2021. Lucid burned through more than $1 billion in first-quarter losses and delivered just 1,406 of its Air sedans. Beyond a deep-pocketed Lucid, owned by the Saudi sovereign wealth fund, and Rivian, backed in part by Amazon, the odds are getting longer.
VinFast moves fast—perhaps too fast
VinFast’s first entry beyond its Vietnamese home market underscores the challenges ahead. VinFast is part of VinGroup, a sprawling conglomerate owned by Vietnam’s richest man, Pham Nhat Vuong. The VinFast VF8 is the company’s first-ever EV, and the first of four electric SUVs the company plans to introduce through next year. During my test drive, a ship bearing nearly 2,000 VF8s had docked on the California coast, the cars bound for customers in the United States and Canada. The very next day, VinFast announced it was going public via a special purpose acquisition company (SPAC) merger, seeking to raise some $20 billion to fund its expansion, including a factory in North Carolina.
At first glance in San Diego, the VF8 appears reasonably competitive, including its Pininfarina-designed body. With dual electric motors and standard all-wheel-drive, the VF8 Plus edition spools up 407 metric horsepower and 620 newton meters (456 pound-feet) in the Plus model. That allows a sub-5.5-second sprint to 100 kilometers an hour. Taking a page from Tesla, there’s a 39.6-centimeter center touchscreen, a reasonably adept UX, and an energy-saving heat pump.
Canoo’s piddling 4,500 EV van order means nothing if the company can’t deliver. And Lordstown Motors was a Hail Mary play from the get-go.
With its 82 kilowatt-hour, nickel-cobalt-aluminum oxide (NCA) Samsung battery, this VF8 City Edition ekes out a 333-km range in Eco guise, or 307 km for the Plus. VF8 Standard editions adopt an 87.7-kWh NCA battery from China’s CATL, boosting range to 424 or 391 km. On my test drive, the VF8 Plus City Edition delivered pleasing real-world efficiency on a test run, on pace to top its 333-km rating handily. A nominal 400-volt architecture delivers a claimed charging rate of up to 160 kilowatts, allowing a 10 to 70 percent charge in about 24 minutes. That’s slower than the 800-V competition from Hyundai and Kia, but it’s still competitive.
However, things ran downhill from there, quickly. The production-spec cars we drove seemed worryingly half-baked and riddled with glitches. A long list of misses included an unsettled ride, chintzy interior materials, fitful build quality, and uncomfortable seats. Wearying road and tire noise spoke to a shortage of sound deadening. Glitchy electronics, including driver-assistance functions, beeped incessantly or sometimes failed to work at all. Following the drive, and a rare firestorm of media criticism over the VF8, company engineers vowed to quickly make changes; including a fast rollout of over-the-air software updates to fix myriad kinks. But for a completely unknown company that hopes to make a good first impression in the United States, VinFast can ill afford any damage to its reputation. To the good, VinFast will lease you a VF8 for as little as $414 a month, although its prices—$50,200 for the Eco, and $57,200 for the Plus—are harder to swallow, especially after Elon Musk ruthlessly chopped the Model Y’s base price to $46,990.
EV startups, waiting for a hero
At least VinFast is managing to deliver some cars. For several startups, a resounding failure to launch is especially troubling in an EV world that moves at light speed. Faraday Future surely doesn’t have one, unless you believe there’s a future for a $180,000 electric SUV that was first shown six years ago—and still hasn’t emerged from its California factory. Taking absurdity to new heights, Faraday just announced a “limited edition” of the SUV it has yet to deliver: The FF 91 2.0 Futurist Alliance SUV, now at a $309,000 price that fits as awkwardly as its name. The company is taking preorders, but you’d better hurry, since Faraday announced in April that it’s down to its last $30 million and still requires “sufficient” additional funding, parts from suppliers, and successful crash testing before it can deliver vehicles.
For all these EV wannabes, the level of difficulty has only increased as early-mover advantages have evaporated.
As for Canoo, it has touted a deal with Walmart to supply a piddling 4,500 electric delivery vans. But that inked deal means nothing if the company can’t deliver. Canoo stock is taking on water, down 96 percent. Canoo has failed to deliver on Oklahoma production promises and is running out of time and cash: The company was down to its last $6.7 million in March, in an industry that requires billions to develop vehicles and keep the lights on.
Lordstown Motors was a Hail Mary play from the beginning. Despite the personal blessing and support of former President Trump, Lordstown has failed to deliver a single Endurance pickup to its intended fleet of customers. The company is now at death’s door, withered by disasters from EV battery fires to executive malfeasance. After frittering away a few hundred million dollars, Lordstown has built a grand total of 31 painfully uncompetitive trucks.
Foxconn—best known as the assembler of the iPhone, but with zero automaking experience—is backing away from a plan to build the Endurance pickup at a former GM plant in Ohio. Foxconn also claims it will build the Fisker Ocean SUV at the same plant, even as entrepreneur and former auto designer Henrik Fisker works to get his Fisker Pear rolling from a Magna Steyr factory in Germany. Yes, the same Henrik Fisker who sweet-talked his way to a $529 million U.S. Department of Energy loan to built the Fisker Karma in 2009. Car and company went belly-up almost immediately, and taxpayers were left holding the $139 million bag. Fisker, as ever, must be counting on short memories and long odds.
Nikola’s bid to create long-haul hydrogen trucks, with its own refueling network to supply them, increasingly seems a literal pipe dream. Short on cash, and having issued a “going concern” warning, Nikola’s most critical hook-up may not be hydrogen but rather the $1.3 billion DOE loan it is seeking.
It’s worth recalling another startup that put government backing to more felicitous use: Tesla, which might never have achieved liftoff without the government’s $465 million boost.
For all these EV wannabes, the level of difficulty has only increased as early-mover advantages have evaporated. Tesla has matured into a profit-making juggernaut. Any remaining market vacuum is rapidly being filled by global automaking giants. Legacy automakers committed $526 billion to switch lineups to EVs through 2026 alone, according to consulting firm Alix Partners.
Tesla has carved out that dominance with unbeatable manufacturing efficiency, and the North American–based vehicle and battery production that are now critical requirements for consumer tax breaks under the Inflation Reduction Act.
For VinFast and some other startups, there’s more at stake than the success or failure of another EV contender. VinFast intends to build a North Carolina factory with a 150,000-unit annual capacity and about 7,000 jobs. That’s all backed by $1.2 billion in tax subsidies, in the biggest publicly backed project in North Carolina history.
President Biden lauded VinFast’s bid to build cars in the United States, as he has for Hyundai and other major players. His administration’s Inflation Reduction Act is placing its own all-in bet on EVs, directing nearly $400 billion to clean energy, in everything from domestic EV and battery production to consumer tax credits and charging infrastructure. It all recalls an earlier can-do moment following the Great Recession, when the federal government bailed out Detroit and bankrolled electric automakers such as Fisker—whose spectacular collapse left it tarred as the Solyndra of car companies. It’s worth recalling another startup that put government backing to more felicitous use: Tesla, which might never have achieved liftoff without the government’s $465 million boost.
Among the current cast of electric dreamers, Lucid and Rivian still deserve benefit of the doubt. As for the rest? Their fading fortunes recall a industry truism, one that Warren Buffett alluded to at a Berkshire Hathaway shareholder meeting: “The auto industry is just too tough.”
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