Rivian, a USA EV maker, specializing in sport utility
vehicles or SUVs, founded in 2009, is in deep financial trouble. It is
suffering massive losses for years, losing about US$30,000 per vehicle
as reported. The cost of production for each vehicle they churn out is
about US$110,000, while their selling price is around US$85,000. The
company will no doubt bite the dust sooner or later if no solution is
found to cut costs. Tariffs on Chinese vehicles will not save the
company, and cost cutting theoretically is not going to do that much in
reality. The gap is too wide.
Manpower cost cutting measures
will be the most difficult to achieve and the company is looking at
increasing production to benefit from economies of scale. Well and good,
if they still have the Chinese market to consider. We now realize that
markets are just as important as productive capacity. China is now out
of reach and neither can their SUVs compete in the Chinese market.
Rivian's production can probably only sell in the USA market and the EU.
How much of an expansion in production can the company really hope to
achieve to even break even? It is reported that at present there is even
a problem with their inventory piling up and further increase in
production will just make the problem even worse, if sales fail to pick
up or stagnate.
In order to sell, they have to reduce prices
further, which puts more pressure on cost cutting measures and render
that exercise futile.
We have always thought that only legacy
Internal Combustion Vehicle manufacturers in the USA are facing fierce
competition. It looks like even the USA EV makers are facing strong
headwinds to survive.
Anonymous
Stellantis close shop, firing all its workers. No more Jeep, Dodge, Chrysler, etc etc Ford would be next, so would be GM.
ReplyDeleteTrump is a fan of fossil fuel extraction. He even encouraged investments in fracking to extract more oil during his first term. To support his ideal of more fossil fuel extraction, Trump even claims that climate change issues are a farce. If Trump wins in November, ICE vehicle manufacturers in USA and Europe will be given a new short lease of life and EVs will not be allowed to proliferate in the USA and Europe.
ReplyDeleteBut then, how are ICE vehicles manufactured in USA and Europe going to sell their vehicles outside of USA and Europe? Elsewhere around the world, climate change issues are encouraging countries to promote the use of EVs, instead of expensive polluting ICE vehicles. China is getting rid of ICE vehicles with registration for EVs encouraged and ICE vehicles not favored by Chinese citizens. EVs sold in South America, Africa, Middle East and ASEAN will be much cheaper than ICE vehicles without all the tariffs factored in. How are those vehicles from USA and Europe going to compete in markets outside the country? Either ICE vehicles manufacturers move with the tide or face imminent decline. The decline will be either fast or gradual. Keeping EVs out of the USA will just lead to a gradual decline and cannot be avoided. It will also stifle innovation in EV technology and be further behind China.
It is realistically a massive problem for the USA to encourage the migration from ICE vehicles to EVs. There are not enough recharging stations across the country to encourage US citizens to buy EVs. Unlike China, where charging stations are built across the whole country, the USA has not even started on its EV journey by building such charging facilities and it will take massive investments to catch up. It will take years even if it tries to do it now. By then, with EVs innovations, being introduced fast and furious, may make such massive investments in building charging stations end up as white elephants. Nio and Tesla are about to introduce the game changing idea of EVs without batteries to sell at even cheaper prices, using battery swapping technology. And the building of battery swap stations in China are picking up steam. If such endeavor succeeds, the novelty of charging stations may take a hit.