EV startups are in trouble.
For example, virtually none of them have achieved major success thus far outside of Rivian.
However, it’s worth noting that they have also had backing from legacy automakers such as VW and Ford to help them get off the ground.
Rivian also scored a sizable contract to make electric delivery vehicles for Amazon – though even their most acclaimed product, the R1T eclectic pickup truck which was awarded MotorTrend’s Truck of the Year honors in 2022), loses a substantial amount of money on each truck they sell.
In a Nutshell, Profitability Has Eluded EV Startups
There are a few different reasons for this.
One is that these products take too long to reach the market. The economy is entirely different from when Silicon Valley first invested in these companies to where the market is now.
For example, the costs required to produce the materials for EV batteries significantly fluctuated. Any company can only withstand vast sums of money going out while new money is not coming in for so long.
Such is the case with EV battery producer Proterra.
Founded about 19 years ago, Proterra has a hand in various projects as an EV battery producer, such as developing electric buses and charging methods.
Even though they have contracts to produce EV batteries and buses for many cities (as well as the Swedish-based electric truck company Volta), the cost of producing them exceeds what they’re currently making from the contracts.
So they’ve had to declare Chapter 11 bankruptcy.
Though they are still producing EV batteries while undergoing bankruptcy proceedings, their production volume has been dramatically reduced, which doesn’t help when production volume is one of the keys to making money in your industry.
These reduced production numbers limit what Proterra can supply to companies like Volta who recently had to declare bankruptcy because they couldn’t produce enough electric trucks with their battery supplier declaring bankruptcy.
Volta released the following statement about why Proterra’s bankruptcy has affected them in this way, “The recent news that our battery supplier (Proterra) has filed for Chapter 11 Bankruptcy, has had a significant impact on our manufacturing plans, reducing the volume of vehicles that we had forecast to produce. The uncertainty with our battery supplier also negatively affected our ability to raise sufficient capital in an already challenging capital-raising environment for electric vehicle players.”
Going back to Proterra, it’s interesting to note that many have pointed to their expensive electric bus developments as the primary drain on their cash flow – but if the future of transportation is in EVs, and a company producing electric buses and batteries can’t stay in business making those – who can?
It Takes Money To Make Money
Another prominent issue for EV startups is that legacy automakers are getting their products to market quicker and they’re also extremely profitable – so they can produce EVs at a loss because they make so much off of manufacturing gas-powered vehicles.
But even legacy automakers are struggling to find profitability with EVs. Stateside, only Tesla has cracked that code so far. Overseas, China is figuring out how to produce EVs at volume and for profit.
But China is also the world’s largest EV market, and they can produce EVs far cheaper than any American or European.
So until EVs and their batteries can be produced for way cheaper or all the promised innovations that will make this technology so great and easy to manufacture finally happen – the future of the EV industry looks pretty murky.