Today’s album is a broken record because TMD is gonna be me talking about expensive electric cars again. Why? There’s a lot of news on that front that happened to break in the last 24 hours from various sources.
Right up top we’ve got Mercedes-Benz CEO Ola Kaellenius stating that Mercedes-Benz is still committed to supporting combustion engines as the EV market is starting to stall in Europe and the United States.
Is he wrong? Well, both Lucid and Rivian came out yesterday with their respective financial reports and forecasts and the plan is for pretty much no growth this year for either of them.
The market will ultimately get to be the judge of all those automakers and, in a different way, the market will determine the fate of the EV-focused Lotus Technology division on Friday.
Benz CEO: EV Cost Parity ‘Is Many Years Away
Mercedes has quietly been growing its EV offerings here in the United States and elsewhere, but the reality is there seems to be a hard cap on how many people are willing to make the changeover until prices come down. How far away are prices from coming down?
According to Benz CEO Ola Kallenius, in a Bloomberg interview, it’s a ways away.
Variable cost parity between EVs and traditional cars “is many years away,” CEO Ola Kallenius told Bloomberg Television. “You can see that in the pricing.”
Mercedes on Thursday toned down expectations on EV demand and said it will update its combustion engine lineup well into next decade, becoming the latest carmaker to flag a slower than expected appetite for electric cars.
The luxury automaker said fourth-quarter net profits fell 21 percent to $3.4 billion while revenue dropped 1.8 percent to $43.7 billion. For the full year, Mercedes said net profit slipped 1.9 percent to $15.8 billion while revenue rose 2.1 percent to $166.3 billion.
Yeah, that’s not great, but it’s probably honest. Also, I think BMW might do better over the next year as I think BMW generally has a better EV lineup and a better plan for EVs.
Rivian: We’re Cutting Staff And Forecast Flat Production
Do you have a money guy/gal? I have a money guy. I need someone to help me make the hard decisions, keep track of the various taxable impacts, and otherwise pay attention so I don’t have to. Also, I don’t invest directly in any individual security I might write about for ethical reasons, so having another layer between myself and my investments is pretty convenient (Is there an auto supplier in a mutual fund? Maybe? I don’t know, that’s the point).
I say this because my investment advisor very excitedly bought a Rivian R1S SUV. He was so psyched about it. He’s still psyched about it. He drove it up to me and watched as I poked around the interior.
I like the Rivian and I get the enthusiasm. Unfortunately, there’s probably a limit, so Rivian is cutting its salaried workforce by about 10%, shutting down its Normal, Illinois plant for a few weeks to save money and retool a bit with new suppliers according to Automotive News.
Rivian CEO RJ Scaringe said the company is facing headwinds as U.S. consumers balk at high interest rates for new auto loans.
“Our business is not immune to existing economic and geopolitical uncertainties, most notably the impact of historically high interest rates, which has negatively impacted demand,” Scaringe said on Wednesday’s earnings call.
I think the high interest rates have, for sure, impacted sales of anything expensive. It also makes borrowing money harder. It’s tough. But “geopolitical uncertainties” is, as my favorite economics/finance podcast likes to point out, a buzzword that means everything and thus almost nothing.
Rivian thinks it’ll make about 57,000 vehicles this year, which is basically what it made last year. If there’s hope, it’s the 2nd gen R2 vehicles the company thinks will cost less than $50,000.
Lucid: We’re Making 9,000 Vehicles This Year
The recent price drop for the Lucid Air sedan makes the vehicle a much more attractive offering, which is good, because it’s currently the only offering the company has until the production of the Lucid Gravity later this year.
How are things in Lucid-ville?
Lucid thinks it’ll make about 9,000 vehicles this year, compared to 8,428 vehicles produced in 2023. That’s not great. What’s going on here?
This is a long-EV, short-oil play by the Saudis so I can imagine a scenario where the Saudi PIF keeps plugging money into the company until it has an affordable product at some point in 2026, maybe.
Lotus Technologies Could Be Worth $5.5 Billion At Listing
For the second time in the company’s history, Lotus will be a publicly traded company. Or, at least, the EV-focused Lotus Technology will be when it lists on the NASDAQ tomorrow.
Is this a SPAC? Yes. It’s a SPAC.
This is Lotus + L Catterton Asia Acquisition Corp = NASDAQ: LOT.
From a press release:
Since the transaction was announced, the Company has raised more than US$880 million in pre-closing and private investment in public equity (“PIPE”) financing commitments from global investors, existing shareholders, and strategic partners, representing one of the largest amounts of additional financings raised in connection with a de-SPAC transaction since 2023.
“We are thrilled to announce our upcoming debut on the Nasdaq as we complete our business combination with LCAA,” said Mr. Qingfeng Feng, Chief Executive Officer of Lotus Tech. “This is a pivotal moment in our journey. We look forward to accelerating our growth as a listed company, leading the electric transformation of the global luxury BEV market together with L Catterton.”
That puts the company’s value at $5.5 billion when it launches, but it should be noted, as Autocar does, that was not the original goal.
Lotus Technology originally pushed for a valuation of $12bn (£9.5bn) but instead settled on $5.5bn “due to growing concerns around volatility of global capital markets and the general economic outlook”, according to the filing.
Lotus Technology is separate from the sports car maker, with more ownership resting with Geely, rather than Malaysia’s Etika Automotive – the parent company of Lotus’s previous owner, DRB-Hicom. Etika owns 26.5% of Lotus Technology, compared with 49% of Group Lotus.
A lot of the value of this company might come down to the success of the Lotus Eletre and Lotus Emeya electric cars. Is there still some luxury demand left for the Lotus brand?
What I’m Listening To While Writing TMD
Could anyone else have been cast as the star of the video for Father John Misty’s “Hollywood Forever Cemetary Sings”? No, it had to be Aubrey Plaza. The whole “Fear Fun” album is a great listen, though I’m still uncertain if I’d really get along with Father John Misty (aka Josh Tillmann) or not. He seems like a lot. Oh well, great album.
The Big Question
Does the Lotus stock price end up higher in a year or lower?
I guess these automakers should have looked deeper into their crystal ball and seen a limited market for EVs in the 60K+ range of the market. Ford is finally realizing that. Lucid and Rivian do not have seem to have gotten the message and continue to churn out 80K priced vehicles with a very small consumer segment vying in that price range. There is an article about Renault debuting a 25K Euro, mini-EV for the European market this week. When can we expect something like that in the states?
Geopolitical issues mentioned by Rivian CEO is not a buzzword. It is very important. China dominates LFP battery technology, and it is key to enabling sub $40k EVs. Automotive makers know this and tries everything to get LFP batteries into the product, but geopolitical issues between US and China means a lot of OEMs playing the waiting game for now.