Elon Musk Predicts Potential Bankruptcy For Tesla Rivals Rivian And Lucid

Elon Musk has shared his unfiltered opinions on Tesla rivals Rivian and Lucid after their Q4 earnings reports.

Commenting on Lucid's Q4 earnings, Musk said, "Their Saudi sugar daddy is the only thing keeping them alive," attributing the company's continued operations to the significant financial support received from the Public Investment Fund (PIF) of Saudi Arabia.

The PIF, which holds a majority stake in Lucid, has reportedly invested about $5.4 (£4.26) billion into Lucid since 2018, which includes a $1.8 (£1.42) billion investment in the second quarter of last year.

In a separate post, Musk pointed out that the company's current market cap is "the option value of a Saudi take-private".

Lucid's market cap finished at $8.43 (£6.35) billion at the last close, dwarfed by Tesla's mammoth market cap of $617.09 (£466.08) billion. For the fourth quarter, Lucid reported a revenue of $157.2 (£115.5) million, falling short of analyst expectations, but with a narrower-than-anticipated loss of 29 cents (21 pence) per share.

Rivian faces potential financial headwinds

Musk, who teased the arrival of new Tesla products last month, raised concerns about the sustainability of Rivian's current financial trajectory.

He predicted that the company might face significant challenges within the next year and a half. Nevertheless, he acknowledged the possibility of change, which depends on various factors.

"Their product design is not bad," Musk said of the company, further noting that achieving volume production with positive cash flow is the actual hard part of making a car company work.

For the fourth quarter, Rivian reported a total revenue of $1.32 (£1.04) billion and a net loss of $1.52 (£1.20) billion. Towards the end of the quarter, data shared by Benzinga Pro shows the company had $9.37 (£7.40) billion in cash and cash equivalents and a total liquidity of $10.47 (£8.27) billion, including an asset-based revolving credit facility.

Elon Musk warns of Rivian challenges

Musk has a reputation for accurately predicting the financial difficulties of companies. To recap, he warned of potential bankruptcy for Rivian and Lucid due to their substantial spending in June 2022.

"Unless they cut their costs dramatically, they are in deep trouble and will end up in the cemetery like every other company (automotive) with the exception of Tesla and Ford," the tech mogul stated.

Lucid has been sparing no effort to be at the forefront of the EV industry. In line with this, the company announced a partnership with 3 electric motorsport series including Formula E, Extreme E and E1, last month.

"This one-of-a-kind partnership with PIF is a huge milestone for us in our journey to pioneer the most cutting-edge sustainable transport technology. With so many examples of the positive real-world impact of each series, this 360-partnership takes our potential to the next level," founder of the three championships Alejandro Agag said.

Rivian, on the other hand, is relying heavily on a new smaller vehicle called the R2, which is expected to arrive next month. However, the company's latest earnings suggest it lost nearly $43,372 (£34254.34) per vehicle delivered in the fourth quarter.

For comparison, the company lost nearly $31,000 (£24483.18) per vehicle in the previous quarter and 124,000 (£97932.72) during the same period in 2022.

While Tesla fans might see it as a potential return to EV sales dominance, especially after BYD overtook Tesla for most EV sales, Teslarati's Joey Klender believes the closure of Rivian and Lucid wouldn't just be a victory lap. In fact, the journalist sees it as a major setback for the EV market.

Klender pointed out that competition fosters innovation, diverse options for consumers and drives the EV revolution forward. So, losing Rivian's promising trajectory and Lucid's well-heeled backers would turn out to be a huge blow to the industry's momentum and progress.