By Ben Foldy
The race is on to become the next Tesla Inc. Tens of billions
are riding on the outcome.
Investors from Wall Street to the Motor City are betting that a
field of electric-car startups can emulate the rise of Elon Musk,
who sits at the wheel of a company that is on track to sell 500,000
battery-powered vehicles this year and turn its first-ever annual
profit. His Tesla -- scheduled to join the S&P 500 next month
-- is now more valuable than Toyota Motor Corp., Volkswagen AG,
General Motors Co. and Ford Motor Co. combined.
It won't be a smooth journey either for investors -- which
include the world's largest money manager and the world's
second-largest private- equity firm -- or these industry upstarts,
which face numerous obstacles. Most haven't yet successfully built
or sold a car. Those that have have struggled to do so profitably.
Some are still hiring a workforce or fighting accusations of fraud.
One recently posted a loss of $1.6 billion.
Their fate hinges on a number of unanswered questions. Are
consumers ready to buy a pricey electric vehicle other than a
Tesla? Or is it a safer bet to sell workaday vans and trucks to
companies? Is it smarter to build your own cars in your own
factory? Or should you rely on outside contractors to produce them?
Does it make more sense to focus on China, home to the world's
largest electric-car market, or stay closer to home? How much
pressure will they face from old giants like GM, which said this
week it would spend $27 billion through 2025 on the development of
electric and driverless vehicles?
At stake is the future of transportation -- and who gets to
define it. There will be winners. And losers. There will be
fortunes won. And lost. Here is our guide to the road ahead.
Rivian Automotive LLC, Irvine, Calif.
CEO: R.J. Scaringe
YEAR FOUNDED: 2009
OWNERSHIP: private
CAPITAL RAISED: $5.35 billion in five funding rounds in the past
two years
VALUATION: unknown
NOTABLE BACKERS: Ford, Amazon.com Inc., BlackRock Inc.
FIRST MODEL: Well-equipped versions of the R1T, an all-electric
pickup, will start around $67,500, before tax incentives. Goes on
sale in June 2021.
WHAT EXCITES INVESTORS: Rivian will sell battery-powered pickup
and SUVs, targeting buyers with an outdoorsy, off-roading brand.
The company also has a contract to build 100,000 electric delivery
vans for investor Amazon. Rivian is retooling a former Mitsubishi
Motors Corp. factory in Illinois.
WHAT COULD GIVE INVESTORS PAUSE: Rivian has to build both
quality cars and its sales and service network. It plans to emulate
Tesla's model and sell directly to consumers, an approach
complicated by state franchise laws that protect the traditional
dealership model. Then Rivian has to break into some of the
toughest markets. Tesla has a commanding share of electric vehicle
sales, while the Detroit auto makers dominate in pickup trucks and
off-road brands.
Lucid Motors Inc., Newark, Calif.
CEO: Peter Rawlinson
YEAR FOUNDED: 2007
OWNERSHIP: Private
CAPITAL RAISED: more than $1 billion
VALUATION: Unknown
NOTABLE BACKERS: Public Investment Fund of Saudi Arabia
FIRST MODEL: The Lucid Air is a battery-powered luxury sedan the
company says will be able to drive more than 500 miles on a single
charge in some configurations. The first Airs will cost $169,000
before tax incentives when it goes on sale early next year, with
less-costly versions to follow -- including an entry-level model
expected to start at $77,400.
WHAT EXCITES INVESTORS: Lucid is building a factory in Arizona
and aiming at the high-end luxury market. Executives hope to take
on not only Tesla but Mercedes-Benz and BMW with fully-electric
models. The company touts its proprietary battery and motor
technology, which it says enables sports car-like performance, the
ability to drive further without charging and roomier cabins in a
smaller car.
WHAT COULD GIVE INVESTORS PAUSE: Challenges raising money led
Lucid to delay the Air multiple times since introducing the concept
in 2016. Now, other high-end auto makers like BMW, Mercedes-Benz
and Porsche are rolling out their own luxury electric cars.
Ultraluxury brand Bentley recently said it would sell only plug-in
models by 2026, and others are poised to follow.
Lordstown Motors Corp., Lordstown, Ohio
CEO: Steve Burns
YEAR FOUNDED: 2019
OWNERSHIP: public
MARKET VALUATION: $4.2 billion (as of November 19)
NOTABLE BACKERS: Workhorse Group Inc., Fidelity Investments,
GM
FIRST MODEL: The Endurance is a battery-electric pickup truck
marketed to commercial fleet operators with a starting price of
$52,500 before federal tax incentives.
WHAT EXCITES INVESTORS: Lordstown Motors took over a former GM
assembly plant in Ohio planning to build battery-powered pickup
trucks for commercial fleets and hoping to start production in
September 2021. The company says electric vehicles operate with
lower fuel and maintenance costs -- especially when compared with
gas-guzzling pickup trucks -- making them appealing for businesses
that use them in fleets.
WHAT COULD GIVE INVESTORS PAUSE: Lordstown Motors says it has to
hire more than 1,000 workers and retool a massive plant before
entering an increasingly crowded electric truck market. Ford's
F-150 truck is the bestselling vehicle in the U.S., and the company
is rolling out an electric version also targeting fleet buyers in
2022.
Nikola Corp., Phoenix
CEO: Mark Russell
YEAR FOUNDED: 2015
OWNERSHIP: public
MARKET VALUATION: $10.1 billion (as of November 19)
NOTABLE BACKERS: German auto supplier Robert Bosch GmbH, heavy
machinery giant CNH Industrial NV, hedge-fund investor Jeffrey
Ubben
FIRST MODEL: The battery-powered Nikola Tre semi-truck, built
with CNH Industrial's IVECO brand, is set to begin production in
late 2021. No pricing information is available yet.
WHAT EXCITES INVESTORS: Nikola is targeting the commercial
trucking market. It intends to make big rigs powered by electric
batteries and hydrogen fuel cells, along with refueling stations
and producing hydrogen fuel. Its business model emphasizes
partnerships with other big, established companies to deliver on
core parts of its strategy.
WHAT COULD GIVE INVESTORS PAUSE: Nikola has said its refueling
network alone could cost it billions of dollars to complete, and
its profit potential depends on the company being able to hit
ambitious cost projections for making hydrogen. It is also reeling
from a report by short seller Hindenburg Research that claimed it
misled investors about its technology. Nikola called the report's
accusations false and misleading. Company founder Trevor Milton
departed soon after and Nikola's stock has cratered. The Justice
Department and Securities and Exchange Commission have initiated
inquiries.
Fisker Inc., Los Angeles
CEO: Henrik Fisker
YEAR FOUNDED: 2016
OWNERSHIP: public
MARKET VALUATION: $4.7 billion (as of November 19)
NOTABLE BACKERS: Apollo Global Management Inc., Magna
International Inc., Louis Bacon
FIRST MODEL: The Ocean, a compact SUV made with sustainable
materials, is slated to begin production in 2022. Pricing starts at
$37,500 before federal tax incentives.
WHAT EXCITES INVESTORS: Much of Fisker's manufacturing and
engineering will be contracted to outside vendors. Auto-parts
supplier Magna, which holds a 6% stake in the startup, will build
the company's first model while Fisker focuses on the design and
software. Fisker is also developing a flexible lease model that
functions more like a monthly subscription. Customers will have the
ability to terminate at any point and the company can re-lease the
car, creating recurring revenue.
WHAT COULD GIVE INVESTORS PAUSE: This isn't Henrik Fisker's
first attempt to get an electric-car startup off the ground. In
2007 he founded Fisker Automotive, an early rival to Tesla that
ultimately went bankrupt. And his latest venture isn't without
stumbles. The company promised a battery-technology breakthrough
before ditching the effort, saying it couldn't be commercialized.
Analysts say Fisker's contract-manufacturing approach is risky and
other car companies have struggled with monthly-subscription plans
for vehicles.
Canoo Inc., Torrance, Calif.
CEO: Ulrich Kranz
YEAR FOUNDED: 2018
OWNERSHIP: private but expected to go public through a reverse
merger known as a SPAC by the end of the year
VALUATION: $2.4 billion (valuation estimate at the time reverse
merger was announced)
NOTABLE BACKERS: Daniel Hennessy, BlackRock, AFV Partners
FIRST MODEL: A microbus-like all-electric "lifestyle" vehicle
the company describes as a "loft on wheels" will be called the
Canoo. Pricing for the model, set to hit the road in 2022, hasn't
been announced.
WHAT EXCITES INVESTORS: Canoo's technology integrates the
batteries, chassis, motors and steering components. From that
foundation, the company plans to make distinctive "lifestyle"
vehicles for consumers available through a monthly subscription
starting in 2022, and delivery vehicles starting the following
year. The company has also joined with Hyundai Motor Co. to
co-develop technology and expects to outsource the manufacturing of
its cars.
WHAT COULD GIVE INVESTORS PAUSE: Before finding its merger
partner, Canoo spent more than $300 million since inception and
last year its auditor warned it was at risk as a going concern. Its
first model's success depends on buyers embracing its subscription
service, which is still novel in the car business. Additionally,
Canoo has yet to lock-in a deal with a contract manufacturer to
build its first vehicles.
NIO, Inc., Shanghai
CEO: William Li
YEAR FOUNDED: 2014
OWNERSHIP: Public
MARKET VALUATION: $66 billion (as of November 19)
NOTABLE BACKERS: Chinese mobile gaming behemoth Tencent Holdings
Ltd., Scottish hedge fund (and major Tesla investor) Baillie
Gifford & Co., Chinese state investors
MAIN MODEL: The ES6 is a five-seat SUV with a starting price of
roughly 358,000 yuan ($52,000).
WHAT EXCITES INVESTORS: NIO's stock gains outpaced Tesla's
share-price surge this year, and the company's market value has
eclipsed GM as of Thursday's close. Sales of its luxury electric
SUVs, made and sold in China, are growing. It has also started
providing subscription plans for batteries which allow users to buy
cars without batteries at a lower price and swap them out for a
monthly fee based on their energy needs.
WHAT COULD GIVE INVESTORS PAUSE: Despite a strong 2020, NIO's
future seemed in doubt last year. It posted a net loss of $1.6
billion in 2019 and laid off roughly a fifth of its employees. It
got a 7 billion yuan (roughly $1 billion) lifeline from Chinese
state investors this spring, but it will need to boost sales and
margins to remain competitive with Tesla, which opened its Chinese
factory last year.
Li Auto, Inc., Beijing
CEO: Li Xiang
YEAR FOUNDED: 2015
OWNERSHIP: public
MARKET VALUATION: $30.7 billion (as of November 19)
NOTABLE BACKERS: Chinese e-commerce heavyweight Meituan
Dianping, TikTok creator ByteDance Ltd., BlackRock
MAIN MODEL: The Li ONE is a plug-in hybrid luxury SUV that uses
a small gasoline engine to generate power for lithium-ion batteries
and lists for around 328,000 yuan ($49,500).
WHAT EXCITES INVESTORS: Li Auto can appeal to drivers in parts
of China where charging stations are less plentiful while still
qualifying for some state subsidies. Li's hybrids require smaller
and cheaper battery packs, saving the company on costs.
WHAT COULD GIVE INVESTORS PAUSE: Li's focus on hybrids may help
it alleviate drivers' worries about charging in the short-term, but
analysts say the company will need to successfully manage an
eventual transition to an all-electric future over the longer term.
Hybrids also don't get the same favored treatment that pure
battery-electric vehicles do from some local governments.
XPeng, Inc., Guangzhou, China
CEO: He Xiaopeng
YEAR FOUNDED: 2015
OWNERSHIP: public
MARKET VALUATION: $35.3 billion (as of November 19)
MAJOR BACKERS: Chinese e-commerce giant Alibaba Group Holding
Ltd., Chinese phone company Xiaomi Corp., Qatar Investment
Authority
MAIN MODEL: The P7 is a battery-electric sedan that starts at
250,000 yuan ($37,000).
WHAT EXCITES INVESTORS: Xpeng makes SUVs and sedans that
undercut Tesla's Chinese models on price. The company is also
developing its own autonomous-driving software and has an in-car
operating system with its own network of apps. Like its Chinese
competitors, the company has a deep-pocketed tech backer in Jack
Ma's Alibaba.
WHAT COULD GIVE INVESTORS PAUSE: The Chinese government has
helped stimulate electric-car demand with subsidies that are
expected to be fully phased out by 2022. XPeng's software focus is
both capital-intensive and highly competitive, and the company has
warned in filings its efforts could be hindered by further
deterioration of the U.S.-China relationship.
Faraday & Future, Inc., Los Angeles
CEO: Carsten Breitfeld
YEAR FOUNDED: 2014
OWNERSHIP: private
VALUATION: unknown
MAJOR BACKERS: Birch Lake Holdings LP, ATW Partners
FIRST MODEL: The FF91 is a luxury SUV with over 1,000 horsepower
and more than 300 miles of range. The company says it can deliver
the SUV nine months after raising more funds. Pricing is expected
to start at more than $100,000.
WHAT EXCITES INVESTORS: Faraday has tried for years to develop a
luxury SUV that will compete directly with Tesla. The company
recently secured a bridge loan of $45 million as the company looks
to raise more funding to make the FF91. Mr. Breitfeld is known in
the auto industry for his development of BMW's i8 hybrid sports
car.
WHAT COULD GIVE INVESTORS PAUSE: Faraday Future has spent more
than $2 billion and has yet to sell a single vehicle, after
originally targeting 2017 to bring its first model to market.
Founder Jia Yueting declared personal bankruptcy last year from
personal debts in China and the company is still looking to raise
the funds needed to start production.
Arrival Ltd., London
CEO: Denis Sverdlov
YEAR FOUNDED: 2015
OWNERSHIP: private but expected to go public through a reverse
merger known as a SPAC by end of the year
VALUATION: $5.4 billion (valuation estimate at the time reverse
merger was announced)
MAJOR BACKERS: Hyundai Motor Co., Kia Motors Corp., BlackRock,
United Parcel Service Inc.
MAIN MODEL: an electric passenger bus expected in the fourth
quarter of 2021
WHAT EXCITES INVESTORS: Arrival plans to build electric buses
for urban transit or delivery vans at smaller, automation-intensive
assembly plants the company calls microfactories. The factories, it
says, can be built for tens of millions of dollars, far less than a
conventional assembly plant. The company has an order from UPS for
10,000 vans.
WHAT COULD GIVE INVESTORS PAUSE: Many of its prospective
customers -- cities and transit authorities -- are in fiscal
trouble due to the pandemic and dropping urban transportation
ridership. Arrival also faces a strong set of existing competitors
due to widespread acceptance of electric buses in certain parts of
the world. Most new buses sold in China are already electric,
analysts say.
Write to Ben Foldy at Ben.Foldy@wsj.com
(END) Dow Jones Newswires
November 20, 2020 10:26 ET (15:26 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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