What happened
Bad news from luxury electric truckmaker Rivian Automotive (RIVN +3.05%) hurt shares of its electric vehicle (EV) peers on the stock market Thursday morning, sending Lucid (LCID +7.28%) stock down by as much as 9.5%, subtracting 7.4% from Fisker (FSR +0.00%), and torpedoing Canoo (GOEV +0.00%) to the tune of 7%.
The good news is that these losses moderated as the day progressed. By the time markets closed for the day, Lucid had clawed its way back to only a 7.3% loss, Fisker was off by 4.3%, and Canoo somehow ended up in the green -- up 3.2% for the session.
NASDAQ: LCID
Key Data Points
So what
But what was it, exactly, that Rivian said that spooked electric vehicle investors in the first place?
As my fellow Fool contributor Howard Smith reported Thursday morning, Rivian has announced plans to raise $1.5 billion through a convertible debt offering to reinflate its bank account, which has shrunk from more than $18 billion in the immediate aftermath of its IPO to just $9.1 billion today -- a decrease of almost 50% over the space of about six quarters, or about $1.5 billion in cash burn per quarter.
Rivian stock plummeted on the news, which is entirely understandable -- after all, the company basically admitted that it's living the corporate version of paycheck to paycheck, and must use its corporate credit card to fund its losses one quarter at a time. But why would this bad news from Rivian worry investors in EV companies that are not named "Rivian?"
Now what
Because they're in exactly the same situation -- or likely to be there soon. According to the latest data from S&P Global Market Intelligence, Lucid stock burned through $3.7 billion over the last year, and $900 million last quarter alone. Fisker's cash burn rate was $636 million for the last 12 months, and $219 million for the last quarter. Canoo burned $358 million in 12 months, and $78 million in the last quarter.
Both Fisker and Canoo already have more debt than cash on their balance sheets. And at the rate Lucid is burning cash, it could be right there with them, in a net-debt position, in less than a year.
Of the three, Lucid is at least taking steps to bring in more cash by boosting sales. On Thursday, it announced that it will debut a new, lower-priced luxury EV model -- the Lucid Air Pure Rear-Wheel Drive -- bargain-priced at $77,400 (in contrast to the $100,000-plus price tags of its existing models), in response to Tesla's announcement this week that it will sell a standard range rear-wheel drive Model Y for ... $45,630. But it's not clear that having EV companies race each other to the bottom by offering lower prices will necessarily be good for anyone's bottom lines. And of course, it's not clear that Lucid's lower-cost offering will be able to compete with Tesla's lower-end offering that's priced $30,000 cheaper.
Until these companies prove they can follow in Tesla's tire tracks and build profitable businesses, investors have to anticipate they will imitate Rivian in selling more shares and taking on more debt to raise the cash they need.
