The electric vehicle (EV) and battery startup sector, once a beacon of high-flying promise, is now grappling with survival challenges. A Wall Street Journal analysis of recent filings reveals that at least 18 EV and battery startups are at risk of depleting their cash reserves by the end of 2024. This group includes high-profile companies such as:
These companies, once buoyed by investor enthusiasm for their ambitious plans to revolutionize the industry with electric trucks and SUVs, are now facing hurdles due to rising costs and manufacturing issues.
The situation has led to significant developments, including:
Despite these challenges, some companies are actively working to reduce costs and have managed to raise additional capital.
The median stock among these startups has plummeted over 80% from its market debut, erasing tens of billions of dollars in market value. Gavin Baker, Chief Investment Officer at Atreides Management, described the situation as “the most insane bubble I have ever seen.”
Most of these struggling companies entered the public market through special-purpose acquisition companies (SPACs), which surged in popularity during the pandemic. Unlike traditional IPOs, SPACs allowed startups to make unchecked growth projections.
The Wall Street Journal’s analysis of 43 companies that went public between 2020 and 2022 found that five have either filed for bankruptcy or been acquired. Of the remaining 38, 18 are on track to run out of cash by the end of next year without new capital or cost-cutting measures. Seven of these have only weeks of cash left.
Some of the companies under pressure include:
Other companies like Canoo (GOEV) are also struggling, with CEO Tony Aquila acknowledging the challenges and expressing confidence in raising more capital. Check out the list of EV startups below and their days of cash remaining:
The downturn has impacted major investors like BlackRock (BLK), Fidelity Investments, and Koch Industries, who have invested heavily in the sector. This decline also affects numerous individual investors who were drawn to the potential of these startups.
The rapid change in fortunes for these EV startups underscores the risks of investing in an industry that continues to evolve unpredictably. While demand for EVs is growing, it hasn’t exploded as many startups and investors anticipated. Market leaders like Tesla are also adding pressure by cutting prices to attract customers, further challenging these emerging companies.
