July 5, 2022

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Musk thinks Rivian and Lucid will go bankrupt

Musk thinks Rivian and Lucid will go bankrupt

In his opinion, Tesla and Ford are the only American brands that will survive electricity

Elon Musk believes Rivian and Lucid are headed for “bankruptcy” unless they cut their costs quickly and dramatically.

Today, Tesla is the leader in the electric car market, but this does not prevent competitors from emerging who dream of emulating its success.

Two of the most notable cases are Rivian and Lucid, which are still far from being profitable and just started deliveries of their first products, R1T and Air.

Musk points out that the only way for them to survive is to be able to convince their customers to pay an extra cost that ultimately leaves them with enough profit margins to fund their entire operation.

But recently, Rivian raised the prices of its cars, which aroused great discontent among customers who had already booked. It is not clear that they will cover the expenses.

Lucid barely delivered 125 cars in 2021 and a few months ago lowered its production forecast for this year, from 20,000 to 12,000 units.

Pending sales growth, both Rivian and Lucid live on significant liquidity reserves from their investors: $17,000 million for the former; 5400 million per second.

But all this does not convince Elon Musk, who is not sure that his competitors can win.

In fact, he warns them that they are heading for bankruptcy if they do not change anything.

The Tesla founder is expanding his message to the rest of the auto industry.

The only American brands that won’t go bankrupt will be Tesla and Ford. Unless Rivian and Lucid change something in an important way, they will both go bankrupt.” intense interview With Tesla Owners Silicon Valley.

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Musk pays special attention to Rivian and Lucid in his speech.

“I hope they can do something, but they are in serious trouble unless they cut spending drastically. They will end up in the car cemetery like everyone else except Tesla and Ford.”

The Tesla founder also developed the factor he believes is key to the survival of any new player in the auto industry.

“Unless a new brand can afford the autonomy and electricity, and create a very attractive product that achieves mass production at costs low enough to get a price no more than what people can afford…”

“Where car brands can find themselves between a rock and a hard place, if the cost of manufacturing a car is so high that they have to raise the price to a point that very few people can afford, I think Rivian now has that problem.”

“When you raise the price of – the car – the percentage of people who can afford it drops dramatically.”

“At this point, if you can’t get to a production volume that covers your overhead, you’re lost. My advice to Rivian is to cut costs dramatically or you’re going to lose it.”

The most difficult thing, he explained, is that the selling price leaves a sufficient profit margin to fund the company’s growth.

Conventional manufacturers find it easier in their eyes, because they can afford less margin per vehicle because they already have a fleet of millions of vehicles in circulation that need parts.

He compared this situation to the price of razors, which is often paltry as the real deal is in replacement blades.

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