Predicting things is hard, but man, Lordstown Motors (RIDE 6.45%) really dropped the ball. The electric pickup truck company, which went public last year in a merger through a special-purpose acquisition company, gave investors some very bad news on Monday.
"We have encountered some challenges"
Lordstown is set to start producing its Endurance electric pickup truck later this year. The company has no revenue right now, so its roughly $1.5 billion market capitalization is solely based on its ability to successfully manufacture its trucks and compete with the likes of Ford (F -0.76%). Ford's F-150 Lightning, an all-electric version of its best-selling pickup truck, will be available next spring. Lordstown has a very small window, then, to get its truck on the market before competition arrives.
Image source: Lordstown Motors.
A report from a short seller in March accused the company of faking orders and failing to disclose production problems. Later that month, Lordstown provided some 2021 guidance along with its fourth-quarter report:
|
Metric |
2021 Guidance as of March 17 |
|---|---|
|
Capital expenditures |
$250 million to $275 million |
|
SG&A expenses |
$40 million to $45 million |
|
R&D expenses |
$180 million to $190 million |
|
Year-end liquidity |
At least $200 million |
Data source: Lordstown Motors.
It took just two months for that forecast to completely fall apart. As part of its first-quarter report, Lordstown updated its guidance:
|
Metric |
2021 Guidance as of May 24 |
|---|---|
|
Capital expenditures |
$250 million to $275 million |
|
SG&A expenses |
$55 million to $60 million |
|
R&D expenses |
$280 million to $290 million |
|
Year-end liquidity |
$50 million to $75 million |
|
Endurance production |
At most 50% of previous expectations |
Data source: Lordstown Motors.
Costs will be substantially higher across the board, production will be way below the company's previous plan, and the company will come close to running out of cash. That liquidity forecast, by the way, includes the impact of cost reductions and delayed investments.
Lordstown blamed higher costs for parts and equipment, expedited shipping costs, and third-party engineering expenses for the revised guidance. The company now says that it will need to raise additional capital to ramp production of the Endurance.
What's the bull case?
Let's imagine that no aspect of the short report on Lordstown Motors is accurate, that the company simply ran into unanticipated production issues in the past two months, and that additional capital will get it back on track for a successful launch.
Even if all that is true, Lordstown will soon be going up against an electric version of the Ford F-150. The F-150 Lightning Pro is Ford's version of its electric pickup truck for commercial customers and fleets, the market segment that Lordstown is targeting. It's going to be an uphill battle for Lordstown, to say the least.
Ford sold nearly 800,000 F-Series trucks last year despite the pandemic. It's been the best-selling truck in the U.S. for 44 years, and the best-selling vehicle of any kind for 39 years. The base model of the F-150 Lightning Pro starts at less than $40,000 and features 230 miles of range. A more powerful version with an extended range of 300 miles will be priced just below $50,000. The Lordstown Endurance will start at $52,500 and sport a range of 250 miles.
For a fleet buyer, what's the rationale for choosing a company that has yet to successfully manufacture a vehicle at scale, is running into serious production problems, and will be at risk of running out of cash without raising more capital? How many Endurance trucks will actually be delivered by the time Ford starts churning out F-150 Lightnings?
There's some chance that Lordstown will emerge as a winner in the electric pickup market. But given all the red flags with the Lordstown story and the daunting competition from Ford, the odds look pretty bad to me.
