Tesla and Ford are in his opinion the only American brands that will survive electrification
Elon Musk believes that Rivian and Lucid are headed “for bankruptcy” unless they quickly and significantly cut their costs.
Tesla is today the leading company in the electric car market, but that does not prevent competitors from emerging who dream of emulating its success.
Two of the most prominent cases are Rivian and Lucid, which are still far from turning a profit and are just beginning deliveries of their first products, the R1T and the Air.
Musk points out that the only way for them to be viable is for them to be able to convince their clients to pay an extra cost that ultimately leaves them with enough profit margin to finance their entire operation.
But in recent times Rivian has raised the prices of its cars, which has generated great discontent among those customers who had already made a reservation. And it is not clear that they will cover expenses.
Lucid barely delivered 125 cars in 2021 and a few months ago lowered its production expectations for this year, from 20,000 to 12,000 units.
Waiting for sales to grow, both Rivian and Lucid subsist on large liquidity reserves from their investors: 17,000 million dollars for the first; 5,400 million for the second.
But all this does not quite convince Elon Musk, who is not sure that his rivals can become profitable.
In fact, he warns them that they are headed for bankruptcy if they don’t change anything.
The founder of Tesla extends his message to the rest of the automotive industry.
“The only American brands that will not go bankrupt will be Tesla and Ford. And unless Rivian and Lucid change something in a meaningful way, they’re both going to go bankrupt,” he said. an extensive interview with the Tesla Owners Silicon Valley.
Musk does pay special attention to Rivian and Lucid in his speech.
“I hope they can do something, but they’re in serious trouble unless they cut spending dramatically. They will end up in the car graveyard like everyone else except Tesla and Ford.”
The founder of Tesla has also developed the factor that he believes is key to the survival of any new player in the automotive industry.
“Unless a new brand can afford autonomy and electrification, and create a very attractive product that achieves high-volume production with costs low enough to command a price that’s no more than what people can afford… ”
“Where car brands can find themselves between a rock and a hard place is if the cost of making the car is so high that they have to raise the price to a point where very few people can afford it, and I think Rivian has right now this problem”.
“When you raise the price – of the car – the percentage of people who can afford it decreases exponentially.”
“At that point, if you can’t reach a production volume that covers your overhead, you’re lost. My advice to Rivian is to cut costs dramatically or they’re lost.”
The most difficult thing, he explained, is that the sale price leaves enough profit margin to finance the growth of the company.
Traditional manufacturers have it easier in their view, because they can afford a lower margin per vehicle as they already have a fleet of millions of vehicles in circulation that need spare parts.
He has compared this situation to the price of shavers, which is often a trifle because the real deal is in the replacement blades.
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Musk thinks Rivian and Lucid will go bankrupt