Why So Many EV Companies Fail

The EV revolution could bring more change to the automotive industry than since its founding, and the potential impact is a tempting proposition for entrepreneurs. But this business is not for the faint of heart and nothing like starting an app or a social media company. It takes billions of dollars to build factories, design vehicles, secure suppliers, comply with regulations and find a way to distribute and service cars. Many have dramatically underestimated the capital costs. Going public through Special Purpose Acquisition Companies, or SPACs, is one way to raise funds. Balancing the need to respect age old industry practices, while finding ways to innovate in a highly competitive market is a struggle. The few that have been successful so far, such as Tesla and BYD, are emulating some of the practices that helped automakers like Ford and General Motors emerge victorious from the industry's first wave of consolidation in the early 20th century. But others like Fisker, Lordstown Motors, IndieEV and WM have or are failing.

Chapters:
00:00 - 01:24 Title card: Why so many EV companies fail
1:30 Chapter 1 - The potential
04:31 Chapter 2 - Money
07:34 Chapter 3 - Manufacturing
11:50 Chapter 4 - Vertical Integration

Producer: Robert Ferris
Editor: Darren Geeter
Animation: Christina Locopo, Jason Reginato
Senior Managing Producer: Tala Hadavi
Additional footage: Getty Images, Tesla, Rivian, Canoo, Ford, Dyson, BYD, Lucid Motors

About CNBC: From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

Connect with CNBC News Online

#CNBC

Why So Many EV Companies Fail

[Inverter]

Turns out cars are a lot more complicated than making search engines, social media ads or cell phones. Thank god for public safety laws.

[libbydobson]

Why they are failing? 50k to 100k is considered as a luxury car.. not many can afford 50k and up..

[bandwsf]

Without China's supply chain the costs are just so damn high.

[JT_]

It's more broad than this "EV companies failing" thing. Getting into the auto industry as a whole is enormously difficult, EV or otherwise. The auto industry is littered with such failures. The EV craze is subject to it too, though the craze insulates it temporarily (the craze, meaning, people see that Tesla did it and just assume others can too, but it doesn't work that way).

[MattGaskinsYT]

The video suggests Rivian went public via a SPAC (like most recent EV startups), but Rivian went through a traditional IPO process and raised over $11B which was the 6th largest IPO in history at the time.

[blindsr]

They have such a hard time because starting an auto company is very difficult, we already know this.

[abhiwins]

EV companies are spending most money in making fancy tech inside the EV. Just build a damn affordable 500miles EV with just basic keys and common high speed chargers. It will fly off the shelf.

[PeterParker-wjcr]

This is an example of why its so hard investing into a individual stock. No matter how great the story or idea. Zero guarantee it will make it to fruition.

[masterchinese]

Before there were the "Big Three" American auto companies, there had been a couple hundred little auto companies at the turn of the century. It was a splintered and cut-throat industry.
We are seeing a similar pattern with EVs. It's time for market darwinism and consolidation.

[BM]

"...remnants of the Chrysler Corporation..." Even the once-storied Chrysler brand has been a neglected, pitiful zombie for many years. I predict it'll be killed off in the next few years. How sad.

[farmerjohn]

I remember one start up EV company approaching a TIER 1 supplier. They were flabbergasted at how complicated it is to design, validate and manufacture just one aspect of the car. They thought without the engine 90% of their job issues already done. 😂. Many others followed and ended up the same as the one before.

[andreavenaa]

We’re in the 1990’s of personal computing with EV’s. 10-20 years and the entire auto industry will look nothing like today.

[Abyss-Will]

ALL new car companies struggle, people don't just jump and buy a car from a manufacturer that has never done a car before.

[OneManOnFire]

The local Tesla dealership and it's inventory goes up and down every week. Fully packed with cars to empty. I don't think they're struggling. Side note I like Teslas and I'm not against EV or hybrid.

[Adrianlover]

Ever heard of the term "barriers to entry". It's very difficult to make a car. You need years of experience, an assembly line, distribution center,
years of reputation, and lots of liquid capital.

[anthonycokoye]

Lucid Motors is backed by Saudi Arabia's Public Investment Fund, so I expected them to keep writing those billion-dollar checks for a really long while.

[Aki_Lesbrinco]

This is no surprise or anything new. Whenever a new type of product gets released a ton of new companies appear and most of them fail. The same thing happened decades ago with ICE cars.

[duerf]

Fact is, all of these companies where brought up during the "free money" decade where cost of borrowing was practically zero, so "investors" took the opportunity and dumb lots of money into every startup under the sun. Take Rivian for example; at one point their stock was trending at $100/share without delivering a SINGLE vehicle to the customer and flashpoint April 2024, their stock is now trading at $8.5/share and they're still losing 30 to 40k on every car they sell. These companies have shaky financials, subpar to outright fraudulent technology/engineering, bad supply chain, etc, and it was only a matter of time until reality catches up to them. After all, "only when the tide goes out do you learn who has been swimming naked".

[deroxanlit]

Nobody is really buying any new car with these crazy high interest unless they can get a good deal. The entire car dealership is crumbling

[OwlTL]

I do not believe that EVs will represent 46% of vehicle sales by 2030. They are mostly a gimmick with little benefit to the environment.