Key Takeaways
- Fisker said this week it’s preparing for “another difficult year” and Tesla adjusted its pricing strategy in China to boost demand, in the latest of what’s been a tough stretch for many electric vehicle makers.
- Apple reportedly canceled its plans to make an EV earlier in the week.
- The U.S. government opened an investigation into potential risks associated with connected vehicles made with Chinese tech and is considering new regulations.
- The developments come after Rivian and Lucid reported results that missed estimates.
Electric vehicle (EV) maker Fisker (FSR) warned it’s preparing for “another difficult year” and Tesla (TSLA) adjusted its pricing strategy in China to boost demand, in the latest of what’s been a tough stretch for many EV makers as some backed off their EV initiatives and reported earnings that shook investor confidence.
Earlier this week, Apple (AAPL) reportedly canceled plans to make an EV. The U.S. government also opened an investigation into potential national security risks associated with connected vehicles made with Chinese tech and said it’s considering new legislation, in a move that could push U.S. automakers to change suppliers to reduce reliance on Chinese components.
Tesla Offers Price Incentives in China To Stimulate Demand
Elon Musk’s Tesla announced new incentives for some Tesla models in China this week to boost demand as the company works to compete with Chinese EV makers like BYD (BYDDY).
Tesla said that customers in China buying before the end of March could receive a discount of up to 34,600 yuan ($4,800) on the Model 3 and Model Y, along with other benefits. It’s not the first time Tesla has lowered vehicle prices to stimulate tepid EV demand in a competitive market.
Government support for Chinese firms also adds to difficulties for American EV makers competing in the Chinese market.
Fisker Cautions of ‘Another Difficult Year’
Fisker (FSR) warned this week that amid “going concerns” about the company’s ability to continue, it is in negotiations with “a large automaker.”
“2023 was a challenging year for Fisker, including delays with suppliers and other issues that prevented us from delivering the Ocean SUV as quickly as we had expected,” CEO Henrik Fisker said, adding that “there were a number of unanticipated challenges, including rising interest rates, finding enough skilled labor, and identifying appropriate real estate locations to make the DTC model function effectively.”
The company said that it is preparing “for another difficult year” and “adjusted [its] outlook for 2024 to be much more conservative than in 2023.”
Fisker shares tumbled 34% to 48 cents Friday following the news. The stock has shed 93% of its value over the past year.
US Investigates Risks From Smart Cars Made With Chinese Tech
Earlier in the week, the Biden administration announced an investigation into national security risks associated with smart vehicles made with Chinese technology and is considering new regulation to address those risks.
The move comes as the U.S. government pushes American automakers to reduce reliance on China through incentives like tax credits to increase demand for electric vehicles (EVs) that restrict the use of Chinese suppliers.
While the U.S. only imports a small number of Chinese cars, partly because of tariffs, Chinese automakers have ramped up exports in recent years, heating up competition.
Apple Reportedly Scraps EV Plans
Apple reportedly canceled its EV projects after quietly working on it for around a decade.
“Ditching the car initiative could be seen as a near-term positive, in our view, as the news allows AAPL to improve cost efficiencies,” CFRA analyst Angelo Zino wrote.
Zino added that while the firm thinks “the car initiative likely offered the greatest long-term upside to AAPL’s revenue trajectory, it was also likely to erode margins,” calling the project ” a ‘pie in the sky’ opportunity.”
The iPhone maker scrapping its EV project also showcases its shifting priorities toward artificial intelligence (AI) initiatives.
Rivian and Lucid Shares Fall to All-Time Lows After Earnings Misses
Shares of Rivian (RIVN) and Lucid (LCID) recently tumbled to all-time lows after the EV makers’ earnings reports, which fell short of analyst expectations.
Last week, Rivian reported a wider-than-expected quarterly per-share loss of $1.58 and provided a weak 2024 outlook. The company set its 2024 production guidance at 57,000 vehicles, well below analysts’ expectations and less than the 57,232 vehicles it produced in 2023.
UBS analysts downgraded their rating to “sell” from “buy” following the results, saying that while that firm has been “optimistic on RIVN’s product and brand ultimately winning out,” the “rapidly changing EV backdrop causes [UBS] to reassess [its] demand view and makes RIVN’s current strategy quite onerous on the ramp to profitability and cash flow.”
Lucid reported in January that the company produced 8,428 Air sedans during 2023, falling short of its initial estimate, which said the EV maker would produce between 10,000 and 14,000 units and its revised estimate of 8,000 to 8,500.
Bank of America lowered its price objective to $4.50 from $7, noting that the firm “see[s] risks from softer demand and expect the company will need to raise more capital, but these points are balanced with our view that LCID has class-leading powertrain tech combined with attractive products.”
Volvo Backs Off Polestar Investment
Volvo announced earlier this month that it would pull back from its investment in Swedish EV maker Polestar. The company said that it is considering restructuring its ownership in the EV startup, distributing 62.7% of its shareholding in Polestar to China’s Geely (GELYF). If approved, Volvo would be left with 18% ownership in Polestar.
The company is the latest automaker to backtrack on its EV ambitions, amid weakening demand for EVs in the U.S. and increased competition from Chinese EV makers.
Polestar shares had tumbled following the Volvo restructuring news but made up for some of the losses after the EV maker said it secured nearly $1 billion in funding from 12 international banks.