EV Start-Ups Are Burning Cash Like Crazy. It’s the Key Point for Rivian’s Earnings.

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A BMW X1 Hybrid is recharged.

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Ben Stansall/AFP via Getty Images

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Electric-vehicle startups are starting to realize how true it is that cash is king.

Results from Lordstown Motor (ticker: RIDE) and Canoo (GOEV) have elevated cash and cash burn to Watch Item No. 1 in the minds of investors. It will be the focus for investors tuning into Rivian Automotive’s (RIVN) first-quarter earnings report Wednesday.

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The good news for Rivian is that the company is the best capitalized of all EV startups. The bad news is that it spends the fastest. Management might need to shepherd its money more carefully to separate its shares from the pack.

Lordstown and Canoo both indicated in their first-quarter reports and on calls with investors that they need more cash or risk not making it to volume production. Lordstown has spent roughly $900 million since it became a publicly traded company and needs at least another $200 million to reach production. Canoo has spent roughly $700 million. It is trying to arrange another $600 million in financing.

Those figures indicate that both need roughly $1.1 billion or $1.3 billion to reach production. That isn’t a surprise. Tesla (TSLA) spent about $1.2 billion before it shipped its first 5,000 vehicles.

Other EV startups aren’t in such a tight spot.

Through the first quarter of 2022, Lucid (LCID), Nikola (NKLA) and Fisker (FSR) had spent roughly $1.1 billion, $840 million and $600 million respectively since raising capital by merging with blank-check special-purpose acquisition companies. That investment has gotten Lucid to the production stage, while Nikola is about to start delivering vehicles.

Fisker is unusual. It is having Magna International (MGA) build its first product, an electric SUV called Ocean that is supposed to be shipped starting late this year. That choice means Fisker didn’t have to build a factory, or pay for one.

Lucid ended the first quarter with roughly $5.4 billion in cash. Fisker had $1 billion and Nikola reported more than $700 million in total liquidity.

Based on the companies’ current forecast for 2022 spending, Fisker has cash to cover about six quarters of cash burn, Lucid can keep going for five, while Nikola has enough cash for about four quarters. Lordstown and Canoo need more cash very soon, as their managements have said.

Then there is Rivian, the most cash-rich and fastest-spending EV start-up.

The electric-truck company ended the year with more than $18 billion on its books. Its first-quarter results, due to be released Wednesday evening, will probably show the number was closer to $16 billion at the end of March.

From its inception Through the first quarter of 2022, Rivian will have spent close to $4.6 billion. That amount has gotten the company a factory that is producing trucks. Rivian’s current guidance is to spend roughly $7 billion in 2022, for an average of $1.75 billion a quarter. At that rate, the company would go through its roughly $16 billion in about 10 quarters.

That is the longest leash among the startups, but spending slower might help the stock. Rivian didn’t respond to a request for comment about its cash balance. That isn’t unusual for a company about to report its numbers.

The stock, meanwhile, is off about 80% year to date, with a loss of nearly 12% to $20.08 in afternoon trading Wednesday. The S&P 500 and Dow Jones Industrial Average were down 1.1% and 0.7%, respectively.

Morgan Stanley analyst Adam Jonas raised the question of where the stock could find a bottom in a Tuesday report. “While we acknowledge the Rivian business plan is not yet fully funded through mid-decade, we are excited at the important role the company can play,” he wrote. “That said, for the stock to work we believe investors must have some confidence that either (a) the estimates have bottomed …or (b) that the pace of cash consumption is controlled in such a way as to reduce the chance that the company is a forced capital raiser during a time of great market dislocation.”

Jonas rates Rivian shares at Buy, with a target of $85 for the price. His bear-case call is for the stock to fall to $20, a level that is close at hand.

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