What happened
Shares of electric vehicle (EV) stocks like Lucid Group (LCID 1.19%), Hyzon Motors (HYZN 1.44%), and Canoo (GOEV -8.52%) were up big today as the stock market overall rallied. The main reason for the climb is Rivian Automotive (RIVN -2.21%), which is up more than 20% the past couple of days. Rivian said this week it manufactured 4,401 vehicles in the second quarter, and it appears to still be on track for its 25,000 goal for the full-year period.
Lucid, Hyzon, and Canoo are rising in sympathy, up a respective 8.6%, 9.3%, and 14% today as of 3:10 p.m. ET.
So what
A slew of start-up EV companies are trying to get production up and running to capitalize on the EV boom set off by industry leader Tesla. However, all of these start-ups could be in various stages of what Tesla CEO Elon Musk once called "production hell."
Manufacturing is a capital-intensive project, and getting production off the ground burns through lots of cash. And until a company starts selling enough vehicles to cover costs, there's the risk it could run out of money. This is what happened to Electric Last Mile Solutions last month, and it filed for bankruptcy as a result.
Lucid (luxury electric sedans), Hyzon (hydrogen fuel cell-powered trucks and buses), and Canoo (electric "lifestyle vehicle" described as a loft on wheels) are in a similar boat as they scramble to get vehicles out the door and into the hands of paying drivers. At this stage, only Lucid generates notable amounts of revenue, although it too is still at a phase where it is burning through cash.
Data by YCharts.
As for Hyzon and Canoo, they anticipate beginning deliveries later this year. However, they aren't as far along in the process as Lucid. When they provide financial updates on Q2 2022, closely monitor those losses. That will be key to their survival; otherwise, they may need to find a lifeline to continue on their journey.
Now what
To get through "production hell," an EV maker needs to get vehicles out the door before cash and short-term investments dry up off the balance sheet. Here's where Lucid, Hyzon, and Canoo stand right now:
|
Company |
Cash and Short-Term Investments (as of Q1 2022) |
Total Debt (as of Q1 2022) |
|---|---|---|
|
Lucid Group |
$5.39 billion |
$1.99 billion |
|
Hyzon Motors |
$407 million |
$0 |
|
Canoo |
$109 million |
$0 |
Data source: YCharts.
None of these companies are at immediate risk of folding. Canoo is perhaps in the most tenuous situation, but it's working hard to get its electric vans on the road. For all three businesses, though, the precarious condition their balance sheets are in is the reason they've fallen so much this year. Even after today's rally, Lucid is down 48% so far in 2022, Hyzon is down 46%, and Canoo is down 68%. But if they can make positive progress toward financial viability like Rivian did this week, they could be in store for a bigger rally later on. But for most investors, handle these EV stocks with care as a high-risk but potentially high-reward bet.
If you decide to invest at all, be sure to make EV stocks part of a well-diversified portfolio -- one that includes not just other EV start-ups, but also stocks from other stock market sectors.
