Tesla CEO Elon Musk thinks EV startups Lucid Group and Rivian Automotive are headed for bankruptcy”unless something changes significantly.”
The billionaire entrepreneur sat down with Owners of Tesla Silicon Valley at Gigafactory Texas and made some blunt statements regarding the two hottest EV startups in the US right now.
“Unless something changes significantly with Rivian and Lucid, they will both go bankrupt. They are headed for bankruptcy.”
He compared Rivian and Lucid to a nose-diving aircraft and added that they needed to cut costs drastically to survive.
“Hopefully they can do something, but unless they cut their costs drastically, they’re in big trouble and will end up in the car graveyard like everyone else except Tesla and Ford.”
Interestingly, Musk mentioned Tesla and Ford as the only EV makers that will survive. We have to assume he was referring exclusively to US automakers, but even so excluding GM and Stellantis is highly questionable.
Later in the interview, Musk also said his advice to Rivian would be “to cut costs immediately at all levels dramatically or they are doomed.“
During the extensive discussion, the Tesla CEO also commented on Rivian’s price increases implemented earlier this year. He noted that when you increase the price, you “exponentially reduce the number of people who can afford the vehicles.“
These comments might sound harsh from the CEO of a company that faced similar difficulties in its early days. However, some context must be added to get the full picture.
Rivian is losing money on every vehicle it makes, and many industry analysts, auto manufacturing experts, and even rival automaker CEOs believe the R1T and R1S are still underpriced even after recent price increases.
At the same time, Rivian had more than $17 billion in cash at the end of the last quarter, which it believed was sufficient to allow it to start producing its series of next-generation R2 vehicles at the new plant that it will build near Atlanta, Georgia.
As for Lucid, it ended the first quarter of 2022 with nearly $5.4 billion in cash, which should fund it through 2023, according to Lucid CFO Sherry House. The EV startup has also raised prices for most models starting June 1, 2022.