These 11 EV Startups Are Chasing Tesla. They Can’t All Win

A field of electric-vehicle challengers is in hot pursuit of Elon Musk, fueled by funding from Wall Street. It will take skill, guts and good fortune to avoid a crash. These 11 EV Startups Are Chasing Tesla. They Can’t All Win



The race is on to become the next Tesla Inc. Tens of billions are riding on the outcome.

Investors from Wall Street to the Motor City are betting that a field of electric-car startups can emulate the rise of Elon Musk, who sits at the wheel of a company that is on track to sell 500,000 battery-powered vehicles this year and turn its first-ever annual profit. His Tesla—scheduled to join the S&P 500 next month—is now more valuable than Toyota Motor Corp. , Volkswagen AG , General Motors Co. and Ford Motor Co. combined.

It won’t be a smooth journey either for investors—which include the world’s largest money manager and the second-largest U.S. private- equity firm—or these industry upstarts, which face numerous obstacles. Most haven’t yet successfully built or sold a car. Those that have have struggled to do so profitably. Some are still hiring a workforce or fighting accusations of fraud. One recently posted a loss of $1.6 billion.

Their fate hinges on a number of unanswered questions. Are consumers ready to buy a pricey electric vehicle other than a Tesla? Or is it a safer bet to sell workaday vans and trucks to companies? Is it smarter to build your own cars in your own factory? Or should you rely on outside contractors to produce them?

Does it make more sense to focus on China, home to the world’s largest electric-car market, or stay closer to home? How much pressure will they face from old giants like GM, which said this week it would spend $27 billion through 2025 on the development of electric and driverless vehicles?

At stake is the future of transportation—and who gets to define it. There will be winners. And losers. There will be fortunes won. And lost. Here is our guide to the road ahead.

Rivian Automotive LLC, Irvine, Calif.

CEO: RJ Scaringe

YEAR FOUNDED: 2009

OWNERSHIP: private

CAPITAL RAISED: $5.35 billion in five funding rounds in the past two years

VALUATION: unknown

NOTABLE BACKERS: Ford, Amazon.com Inc., BlackRock Inc.

FIRST MODEL: Well-equipped versions of the R1T, an all-electric pickup, will start around $67,500, before tax incentives. Goes on sale in June 2021.

WHAT EXCITES INVESTORS:Rivian will sell battery-powered pickup and SUVs, targeting buyers with an outdoorsy, off-roading brand. The company also has a contract to build 100,000 electric delivery vans for investor Amazon. Rivian is retooling a former Mitsubishi Motors Corp. factory in Illinois.

WHAT COULD GIVE INVESTORS PAUSE: Rivian has to build both quality cars and its sales and service network. It plans to emulate Tesla’s model and sell directly to consumers, an approach complicated by state franchise laws that protect the traditional dealership model. Then Rivian has to break into some of the toughest markets. Tesla has a commanding share of electric vehicle sales, while the Detroit auto makers dominate in pickup trucks and off-road brands.


Lucid Motors Inc., Newark, Calif.

CEO:Peter Rawlinson

YEAR FOUNDED: 2007

OWNERSHIP: Private

CAPITAL RAISED: more than $1 billion

VALUATION: Unknown

NOTABLE BACKERS: Public Investment Fund of Saudi Arabia

FIRST MODEL: The Lucid Air is a battery-powered luxury sedan the company says will be able to drive more than 500 miles on a single charge in some configurations. The first Airs will cost $169,000 before tax incentives when it goes on sale early next year, with less-costly versions to follow—including an entry-level model expected to start at $77,400.

WHAT EXCITES INVESTORS: Lucid is building a factory in Arizona and aiming at the high-end luxury market. Executives hope to take on not only Tesla but Mercedes-Benz and BMW with fully-electric models. The company touts its proprietary battery and motor technology, which it says enables sports car-like performance, the ability to drive further without charging and roomier cabins in a smaller car.

WHAT COULD GIVE INVESTORS PAUSE:
Challenges raising money led Lucid to delay the Air multiple times since introducing the concept in 2016. Now, other high-end auto makers like BMW, Mercedes-Benz and Porsche are rolling out their own luxury electric cars. Ultraluxury brand Bentley recently said it would sell only plug-in models by 2026, and others are poised to follow.

Lordstown Motors Corp. , Lordstown, Ohio

CEO:Steve Burns

YEAR FOUNDED: 2019

OWNERSHIP: public

MARKET VALUATION: $4.2 billion (as of November 19)

NOTABLE BACKERS: Workhorse Group Inc., Fidelity Investments, GM

FIRST MODEL: The Endurance is a battery-electric pickup truck marketed to commercial fleet operators with a starting price of $52,500 before federal tax incentives.

WHAT EXCITES INVESTORS: Lordstown Motors took over a former GM assembly plant in Ohio planning to build battery-powered pickup trucks for commercial fleets and hoping to start production in September 2021. The company says electric vehicles operate with lower fuel and maintenance costs—especially when compared with gas-guzzling pickup trucks—making them appealing for businesses that use them in fleets.

WHAT COULD GIVE INVESTORS PAUSE: Lordstown Motors says it has to hire more than 1,000 workers and retool a massive plant before entering an increasingly crowded electric truck market. Ford’s F-150 truck is the bestselling vehicle in the U.S., and the company is rolling out an electric version also targeting fleet buyers in 2022.

Nikola Corp. , Phoenix

CEO:Mark Russell

YEAR FOUNDED: 2015

OWNERSHIP: public

MARKET VALUATION: $10.1 billion (as of November 19)

NOTABLE BACKERS: German auto supplier Robert Bosch GmbH, heavy machinery giant CNH Industrial NV, hedge-fund investor Jeffrey Ubben

FIRST MODEL: The battery-powered Nikola Tre semi-truck, built with CNH Industrial’s IVECO brand, is set to begin production in late 2021. No pricing information is available yet.

WHAT EXCITES INVESTORS: Nikola is targeting the commercial trucking market. It intends to make big rigs powered by electric batteries and hydrogen fuel cells, along with refueling stations and producing hydrogen fuel. Its business model emphasizes partnerships with other big, established companies to deliver on core parts of its strategy.

WHAT COULD GIVE INVESTORS PAUSE: Nikola has said its refueling network alone could cost it billions of dollars to complete, and its profit potential depends on the company being able to hit ambitious cost projections for making hydrogen. It is also reeling from a report by short seller Hindenburg Research that claimed it misled investors about its technology. Nikola called the report’s accusations false and misleading. Company founder Trevor Milton departed soon after and Nikola’s stock has cratered. The Justice Department and Securities and Exchange Commission have initiated inquiries.

Fisker Inc., Los Angeles

CEO: Henrik Fisker

YEAR FOUNDED: 2016

OWNERSHIP: public

MARKET VALUATION: $4.7 billion (as of November 19)

NOTABLE BACKERS: Apollo Global Management Inc., Magna International Inc., Louis Bacon

FIRST MODEL: The Ocean, a compact SUV made with sustainable materials, is slated to begin production in 2022. Pricing starts at $37,500 before federal tax incentives.

WHAT EXCITES INVESTORS: Much of Fisker’s manufacturing and engineering will be contracted to outside vendors. Auto-parts supplier Magna, which holds a 6% stake in the startup, will build the company’s first model while Fisker focuses on the design and software. Fisker is also developing a flexible lease model that functions more like a monthly subscription. Customers will have the ability to terminate at any point and the company can re-lease the car, creating recurring revenue.

WHAT COULD GIVE INVESTORS PAUSE:This isn’t Henrik Fisker’s first attempt to get an electric-car startup off the ground. In 2007 he founded Fisker Automotive, an early rival to Tesla that ultimately went bankrupt. And his latest venture isn’t without stumbles. The company promised a battery-technology breakthrough before ditching the effort, saying it couldn’t be commercialized. Analysts say Fisker’s contract-manufacturing approach is risky and other car companies have struggled with monthly-subscription plans for vehicles.

Canoo Inc., Torrance, Calif.

CEO:Ulrich Kranz

YEAR FOUNDED: 2018

OWNERSHIP: private but expected to go public through a reverse merger known as a SPAC by the end of the year

VALUATION: $2.4 billion (valuation estimate at the time reverse merger was announced)

NOTABLE BACKERS: Daniel Hennessy, BlackRock, AFV Partners

FIRST MODEL: A microbus-like all-electric “lifestyle” vehicle the company describes as a “loft on wheels” will be called the Canoo. Pricing for the model, set to hit the road in 2022, hasn’t been announced.

WHAT EXCITES INVESTORS: Canoo’s technology integrates the batteries, chassis, motors and steering components. From that foundation, the company plans to make distinctive “lifestyle” vehicles for consumers available through a monthly subscription starting in 2022, and delivery vehicles starting the following year. The company has also joined with Hyundai Motor Co. to co-develop technology and expects to outsource the manufacturing of its cars.

WHAT COULD GIVE INVESTORS PAUSE: Before finding its merger partner, Canoo spent more than $300 million since inception and last year its auditor warned it was at risk as a going concern. Its first model’s success depends on buyers embracing its subscription service, which is still novel in the car business. Additionally, Canoo has yet to lock-in a deal with a contract manufacturer to build its first vehicles.

NIO, Inc., Shanghai

CEO: William Li

YEAR FOUNDED: 2014

OWNERSHIP: Public

MARKET VALUATION: $66 billion (as of November 19)

NOTABLE BACKERS: Chinese mobile gaming behemoth Tencent Holdings Ltd. , Scottish hedge fund (and major Tesla investor) Baillie Gifford & Co., Chinese state investors

MAIN MODEL: The ES6 is a five-seat SUV with a starting price of roughly 358,000 yuan ($52,000).

WHAT EXCITES INVESTORS: NIO’s stock gains outpaced Tesla’s share-price surge this year, and the company’s market value has eclipsed GM as of Thursday’s close. Sales of its luxury electric SUVs, made and sold in China, are growing. It has also started providing subscription plans for batteries which allow users to buy cars without batteries at a lower price and swap them out for a monthly fee based on their energy needs.

WHAT COULD GIVE INVESTORS PAUSE: Despite a strong 2020, NIO’s future seemed in doubt last year. It posted a net loss of $1.6 billion in 2019 and laid off roughly a fifth of its employees. It got a 7 billion yuan (roughly $1 billion) lifeline from Chinese state investors this spring, but it will need to boost sales and margins to remain competitive with Tesla, which opened its Chinese factory last year.

Li Auto, Inc., Beijing

CEO: Li Xiang

YEAR FOUNDED: 2015

OWNERSHIP: Public

MARKET VALUATION: $30.7 billion (as of November 19)

NOTABLE BACKERS: Chinese e-commerce heavyweight Meituan Dianping, TikTok creator ByteDance Ltd., BlackRock

MAIN MODEL: The Li ONE is a plug-in hybrid luxury SUV that uses a small gasoline engine to generate power for lithium-ion batteries and lists for around 328,000 yuan ($49,500).

WHAT EXCITES INVESTORS: Li Auto can appeal to drivers in parts of China where charging stations are less plentiful while still qualifying for some state subsidies. Li’s hybrids require smaller and cheaper battery packs, saving the company on costs.

WHAT COULD GIVE INVESTORS PAUSE: Li’s focus on hybrids may help it alleviate drivers’ worries about charging in the short-term, but analysts say the company will need to successfully manage an eventual transition to an all-electric future over the longer term. Hybrids also don’t get the same favored treatment that pure battery-electric vehicles do from some local governments.

XPeng, Inc., Guangzhou, China

CEO: He Xiaopeng

YEAR FOUNDED: 2015

OWNERSHIP: public

MARKET VALUATION: $35.3 billion (as of November 19)

MAJOR BACKERS: Chinese e-commerce giant Alibaba Group Holding Ltd. , Chinese phone company Xiaomi Corp. , Qatar Investment Authority

MAIN MODEL: The P7 is a battery-electric sedan that starts at 250,000 yuan ($37,000).

WHAT EXCITES INVESTORS: Xpeng makes SUVs and sedans that undercut Tesla’s Chinese models on price. The company is also developing its own autonomous-driving software and has an in-car operating system with its own network of apps. Like its Chinese competitors, the company has a deep-pocketed tech backer in Jack Ma’s Alibaba.

WHAT COULD GIVE INVESTORS PAUSE: The Chinese government has helped stimulate electric-car demand with subsidies that are expected to be fully phased out by 2022. XPeng’s software focus is both capital-intensive and highly competitive, and the company has warned in filings its efforts could be hindered by further deterioration of the U.S.-China relationship.

Faraday & Future, Inc., Los Angeles

CEO: Carsten Breitfeld

YEAR FOUNDED: 2014

OWNERSHIP: private

VALUATION: unknown

MAJOR BACKERS: Birch Lake Holdings LP, ATW Partners

FIRST MODEL: The FF91 is a luxury SUV with over 1,000 horsepower and more than 300 miles of range. The company says it can deliver the SUV nine months after raising more funds. Pricing is expected to start at more than $100,000.

WHAT EXCITES INVESTORS: Faraday has tried for years to develop a luxury SUV that will compete directly with Tesla. The company recently secured a bridge loan of $45 million as the company looks to raise more funding to make the FF91. Mr. Breitfeld is known in the auto industry for his development of BMW’s i8 hybrid sports car.

WHAT COULD GIVE INVESTORS PAUSE: Faraday Future has spent more than $2 billion and has yet to sell a single vehicle, after originally targeting 2017 to bring its first model to market. Founder Jia Yuetingdeclared personal bankruptcy last year from personal debts in China and the company is still looking to raise the funds needed to start production.

Arrival Ltd., London

CEO:Denis Sverdlov

YEAR FOUNDED: 2015

OWNERSHIP: private but expected to go public through a reverse merger known as a SPAC by end of the year

VALUATION: $5.4 billion (valuation estimate at the time reverse merger was announced)

MAJOR BACKERS: Hyundai Motor Co., Kia Motors Corp. , BlackRock, United Parcel Service Inc.

MAIN MODEL: an electric passenger bus expected in the fourth quarter of 2021

WHAT EXCITES INVESTORS: Arrival plans to build electric buses for urban transit or delivery vans at smaller, automation-intensive assembly plants the company calls microfactories. The factories, it says, can be built for tens of millions of dollars, far less than a conventional assembly plant. The company has an order from UPS for 10,000 vans.

WHAT COULD GIVE INVESTORS PAUSE: Many of its prospective customers—cities and transit authorities—are in fiscal trouble due to the pandemic and dropping urban transportation ridership. Arrival also faces a strong set of existing competitors due to widespread acceptance of electric buses in certain parts of the world. Most new buses sold in China are already electric, analysts say.

Updated: 11-24-2020

China’s Kaixin Nears 1000% Annual Gain On Electric Vehicle Rally

A jump in premarket trading for Chinese electric vehicle maker Kaixin Auto Holdings will bring total gains to the stock close to the 1,000% mark as investors’ euphoria with the sector lifted industry shares across the globe.

Kaixin surged 50% in premarket trading Monday after gaining over 963% since the end of September as investor optimism ballooned amid Tesla Inc.’s S&P 500 inclusion last week.

The company also announced a deal earlier this month with China-based car e-tailer Haitaoche would take a controlling interest. Haitaoche is looking to cut deals with electronic vehicle manufacturers in China.

Kaixin’s market valuation has swelled to almost $400 million from about $40 million in September.

Tesla Hits $500 Billion Mark After Soaring 547% This Year

Tesla Inc. is smashing through records as its impending addition to the S&P 500 Index has sparked a buying frenzy among investors, pushing the company’s market valuation over the $500 billion mark for the first time on Tuesday.

Shares of the electric vehicle company have soared this year, rising nearly 550%, with gains accelerating over the past week after S&P Dow Jones Indices last Monday said Tesla will be added to the benchmark. The stock surge helped co-founder Elon Musk add $100.3 billion to his net worth this year and overtake Bill Gates to become the world’s second-richest person.

Tesla shares rose as much as 4.1% in New York in early trading, touching an all-time high of $543.17, and pushing its market capitalization to over $506 billion. Crossing the treshold valuation brings true a prediction from Musk, who is said to have made it 18 months ago in a call with investors.

With Tesla set to join the index on Dec. 21, money managers and investors who closely track the S&P 500 will now have to buy the stock in order to accurately mirror the gauge. Goldman Sachs Group Inc. has said Tesla’s inclusion could result in $8 billion of demand from active U.S. large-cap mutual funds.

Tesla’s ascension and entrance into the group of blue-chip investments is also good news for the broader sector. Nio Inc., Workhorse Group Inc., Nikola Corp., Lordstown Motors Corp., XPeng Inc., Li Auto Inc. and Ayro Inc. have also rallied and some are now trading at new record highs.

Electric-vehicle makers and other related companies across the world have also enjoyed frenzied buying on optimism the auto sector will be dominated by electric-powered cars in the decades ahead. That combined with high valuations for Tesla is pushing investors to lesser known names that can benefit from the sector’s growth opportunities, but with a smaller share price.

Tesla’s Relentless Surge Propels EV Peers Amid Growing Optimism

The rally in electric-vehicle stocks received a fresh boost of confidence on Monday from Wedbush Securities, which said there is now a “major inflection” in EV demand globally.

Wedbush analyst Daniel Ives raised his best-case price target on Tesla to $1,000 from $800, reflecting a 104% premium to Friday’s close. Tesla shares rose as much as 6.7% Monday, touching an all-time high of $522.22. The shares have set fresh records in two of the last three trading days.

Smaller upstarts followed suit, with Nio Inc., Workhorse Group Inc., Nikola Corp., Lordstown Motors Corp., XPeng Inc., Li Auto Inc. and Ayro Inc. all rallying and far outperforming the broader market’s gains. The EV supply chain and other related stocks also benefited, with shares of financial technology firm Ideanomics Inc. jumping as much as 87%. The company’s EV division provides group purchasing discounts on commercial vehicles, and it said Monday morning that it’s increased its stake in e-tractor company Solectrac Inc.

While many electric-vehicle stocks attracted investor attention earlier this year, the rally reached a fever pitch last week after it was announced Tesla will soon become a part of the S&P 500 Index, suggesting index investment is gaining momentum. A strong focus on EV adoption in China and U.S. President-elect Joe Biden’s pledge to develop the industry also helped sentiment, as evident in a surge of new companies trying to enter the public markets.

Updated: 11-29-2020

Tesla’s S&P 500 Debut Is Set To Put $100 Billion In Trades In Motion

Asset managers and trading desks will be scrambling next month to account for the market juggernaut.

Additions and subtractions to the S&P 500 are normally a ho-hum affair. The 509th biggest company in the U.S. might jump to 497th place, and thus into the index. Investors who track it buy the one stock and sell another.

But no one has ever tried to add Tesla Inc., TSLA 2.05% a $555 billion company prone to huge swings in price. That’s happening next month, and it’s causing headaches across Wall Street.

To avoid missteps, S&P polled big investors on whether they would prefer adding Tesla’s weight all at once on Dec. 21 or split over two trading days in December—an unprecedented move for S&P.

Asset managers and trading desks across Wall Street have held virtual summits to debate the matter. The vote from many appears to be for the two-day option, partly because of Tesla’s size, along with the potential for elevated volatility in the stock market.

“If we begin to anticipate a worst-case scenario from what could happen from the Thanksgiving holiday, we could expect greater than usual volatility,” said David Mazza, a managing director and head of product at exchange-traded-fund manager Direxion, referring to a possible further surge in coronavirus cases. He endorses Tesla’s addition to the S&P 500 over two separate trading sessions.

Tesla’s addition to the index is expected to be particularly challenging because the company will be the largest to ever join, and it is expected to make up at least 1% of the gauge. At its current value, it would be the sixth-largest company in the S&P 500, just bigger than Berkshire Hathaway Inc. and smaller than Facebook Inc.

The stock, which has a cultlike investor base, has surged more than 40% to $585.76 since Nov. 16, when S&P announced its intended inclusion, extending its gains for the year to sevenfold. The S&P 500 itself is up 13% in 2020.

The decision rests with S&P, which said it intends to announce results of the consultation on Monday. Regardless of the outcome, investors and traders expect the market for Tesla shares to heat up even further ahead of the inclusion. Goldman Sachs Group Inc. GS -0.48% predicts shares will eventually touch $600, a 2% gain from current levels, by the time Tesla joins the index.

Tesla’s inclusion is expected to put more than $100 billion into motion. Index funds will have to sell smaller stocks already in the S&P 500, somewhere between $60 billion and $80 billion depending on Tesla’s market cap, and use that money to buy shares of the car maker, asset managers and traders said.

Actively managed funds benchmarked to the S&P 500 are projected to buy $8 billion of Tesla shares, Goldman said in a recent note. The move will also spur trading within separately managed accounts that use the S&P 500 as a benchmark, as well as hedging activity by trading firms that buy and sell ETFs.

Those sums are big, but investors say Tesla’s addition to the index would normally be manageable in a single day. Shares of Tesla are widely traded, with daily volumes reaching as high as nearly $65 billion in mid-July, suggesting there is enough liquidity to cover the trade.

The trade date, Dec. 18, coincides with a once-quarterly event known as quadruple witching, the Friday near the end of each calendar quarter on which options and futures on both indexes and stocks expire simultaneously. Volume is usually heavy on those days and would help boost liquidity on the day of Tesla’s inclusion, investors said.

They said the curveball is accounting for other potential volatility in the stock market tied to Covid-19 or signs the economic recovery is faltering. The market has been particularly rocky this year. There have been more single-day stock moves of at least 3% for the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite than in any year since 2008.

Investors who had shared their opinion with S&P have offered another suggestion that appears to have earned broad support: breaking the trades up over two different quarters, according to people familiar with the discussions.

A longer break between the trades would help asset managers digest any sharp moves related to Covid-19 or other news the market doesn’t take well and help keep funds in line with benchmarks, investors said.

“A stepped approach over multiple quarters helps with the liquidity challenges. There’s good precedent for it,” said Chris Johnson, head of ETF capital markets at Charles Schwab Corp. , referring to MSCI’s two-phased inclusion of China A-Shares to its emerging-markets index in 2018.

There are also concerns that the flurry of buying that comes with index inclusion will temporarily drive up Tesla’s share price for firms forced to buy around the addition. That means the stakes are high for S&P and index funds, which account for about 41% of the assets that track the S&P 500.

“The people who will pay the price if S&P screws up are the investors in passive S&P” funds, said Ben Inker, head of asset allocation at investment manager GMO, which oversees about $60 billion in assets.

If the huge burst of demand ahead of inclusion disappears, Tesla’s shares could fall dramatically after they join the gauge, he added.

Timing is hard for investors and indexers alike. Yahoo’s market capitalization peaked less than a month after it was added to the S&P 500 in December 1999—just before the burst of the dot-com bubble. Qwest Communications’ market cap peaked the same day it was added to the index in July 2000. Neither stock trades today.

“Why am I the sucker who has to buy it after the stock is up fivefold?” is what one might wonder if forced to buy Tesla shares after such a tremendous run-up, said Mike Bailey, director of research at FBB Capital Partners, which oversees some Tesla shares.

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