Lending Association

EV crisis: from bad to quite bad

The EV crisis goes from bad to quite bad. US start up Fisker is seemingly on the way out. Rivian, a one time fav supported by Amazon and Ford, remains under the pump. Ad a leading investment bank has cut the ratings of three EV groups, including Rivian and Tesla, plus a big Chinese rival.

But Japanese car giant Nissan is still a strong believer, though with the odd qualification.

Monday saw trading in shares of cash-strapped startup Fisker halted on Wall Street after the company said talks with a large automaker for a potential deal have collapsed.

The termination of talks has led Fisker to search for strategic options, including in- or out-of-court restructurings and capital markets transactions.

It needs money quickly. The New York Stock Exchange announced late Monday that it planned to delist Fisker’s stock due to “abnormally low” price levels. That delisting will mean the company must offer to buy back bonds that are currently due in 2026 and to immediately pay off other debts due in 2025, according to a filing the company made with the Securities and Exchange Commission.

“We do not currently have sufficient cash reserves or financing sources sufficient to satisfy all amounts due under the 2026 Notes or the 2025 Notes, and as a result, such events could have a material adverse effect on our business, results of operations and financial condition,” Fisker said in its filing. Hence the hunt for a saviour.

Fisker’s shares traded at 9 cents just before the halt — down more than 90 per cent year to date and well under the US$28 they reached three years ago.

News of Fisker’s woes was quickly followed by a big downgrade of three EV makers by a leading investment bank analyst.

Mizuho Financial Group analyst Vijay Rakesh downgraded Tesla, Rivian (understandable) and Chinese automaker Nio to neutral from buy, citing slowing demand and increasing inventory of EVs around the world.

First up he slashed his target price for Rivian to US$12 from US$24. He said that he still sees the company well-positioned in the strong SUV/pickup markets and a push towards profitability, “but headwinds remain from slowing EV demand, challenging execution, and elevated cash burn.”

Rivian shares ended Monday at US$10.65. It has around US$7 billion in cash. Amazon still has 16.2 per cent of the shares. Ford sold most of its shares in 2022.

Rakesh said he remains constructive on the broader electrical vehicle landscape with the long-term trends to electrification, but he believes that near-term EV demand and tightening liquidity are creating challenges into 2025.

But EV inventories were up 92 per cent year-over-year in 2023 and are accelerating, he said in his research note.

Mizuho said it now sees 2024 EV growth up 15 per cent year-over-year compared with a previous call for 25 per cent growth. Sales expectations are decelerating faster than expected, Rakesh said. Sales in Europe and the US are sluggish, though Chinese sales are back on track after the disruption of the usual Lunar New Year break in February.

Nio recently cut its delivery guidance for the March quarter.

Analysts think Nio anticipates lower deliveries as it increased its focus on its “Le Dao” mass-market brand, which is set to be revealed in May and is the last chance for the Chinese group which is facing intensifying competition from sector leader BYD.

BYD has just released a new updated range of its core Seal range of battery and hybrid EVs — with a 5 per cent price cut.

Tesla offered incentives to help move current inventory ahead of its 2024 model-year launches. As a result, gross margins are likely to see some near-term pressure, he said.

Rakesh cut the price target on Tesla from US$270 to US$195 (US$172.63 at Monday’s close), telling investors that while Tesla remains a global leader with scale/profitability “bar none,” moderating growth, China competition and higher inventory are challenges.

Tesla is struggling to convince customers about using its much-trumpeted Full Service Mode (FSD) self-driving program, which lucky buyers can pay US$12,000 for , or US$199 a month subscription fee.

Business Insider reported Monday that Elon Musk is becoming frustrated that buyers do not want FSD, so he has directed staff that it was “mandatory” that they install and activate the FSD software on the vehicle, as well as give a test drive.

“Almost no one actually realises how well (supervised) FSD actually works,” Musk wrote. “I know this will slow down the delivery process, but it is nonetheless a hard requirement.”

Business Insider said that “Musk later sent a companywide follow up email telling staff to give customers demos after the vehicles are returned from service centres as well.”

There has been increasing regulatory and customer scepticism about this program and its use. It still needs drivers to monitor the vehicle — which raises the question of who needs it if a driver has to keep track of the vehicle and where it is going.

*****

But not all is gloom. Japan’s Nissan revealed ambitious plans on Monday for a rage of new EVs. That’s even though it (and Honda) are reported to be cutting back on their Chinese production plans.

But it will not be quitting internal combustion engine cars by then, though, judging by Monday’s announcement, it seems to have plans for many more hybrids (or plug-in hybrids) like Toyota is planning and like what is happening in the European and Chinese car markets.

Nissan also revealed plans to cut the cost of its EVs by a third by 2030.

Nissan CEO Makoto Uchida said on Monday that the development of the EV sector — and particularly the price pressures — had arrived “much, much earlier than we thought.”

To address the “extreme market volatility,” the automaker is targeting an additional 1 million vehicle sales by the end of fiscal 2026.

And it also announced plans to develop EVs in “families,” integrate powertrains and focus on battery innovations as it looks to cut the cost significantly.

In a new medium-term business plan, Nissan also said it would launch 30 new models by fiscal 2026, with 16 of these electrified. It’s aiming for EV and combustion engine costs to reach parity by 2030.

“This plan will enable us to go further and faster in driving value and competitiveness,” Uchida said in a statement. “Faced with extreme market volatility, Nissan is taking decisive actions guided by the new plan to ensure sustainable growth and profitability.”

The automaker also said it is targeting an operating profit margin of more than 6 per cent by the end of fiscal 2026, as well as “long-term profitable growth.”

Nissan said it will aim to ensure volume growth through a “tailored regional strategy,” and prepare for an accelerated EV transition by balancing its portfolio between EV and combustion cars, growing volumes in major markets, and financial discipline.

This will be supported by “smart partnerships, enhanced EV competitiveness, differentiated innovations and new revenue streams.”

Nissan said this strategy could yield potential revenues of 2.5 trillion yen (US$16 billion) from new business opportunities by fiscal 2030 — but it will still be producing cars with tailpipes in 2030.