Rivian and Lucid's Q4 struggles signal an even tougher 2023 for EV startups

Rivian and Lucid's Q4 production results provide a sign of tough times to come in 2023 for the EV startups.

• Rivian and Lucid had a hard time meeting expectations in 2022.
• Lucid only delivered 61% of the cars it built last year.
• Investors will have less patience for disappointing results in 2023.

Q4 results out of Rivian and Lucid show that the electric vehicle fledglings had a tougher time producing vehicles at the end of 2022 — and that the gap between the vehicles they make and the vehicles they get in customer hands is widening. 

Lucid produced 7,180 vehicles in 2022, it reported in a recent release, surpassing its production target for the year (which it had reduced twice). Rivian produced 24,337 vehicles last year, the company announced, missing its guidance of 25,000. 

The results from Rivian and Lucid signal a tough year ahead for EV startups, said Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions.

"We're moving into a time where it's going to be more difficult for these companies to get the funding they need to keep going," Fiorani told Insider, referring to tougher market conditions as interest rates rise. "As an investor you're going to be watching for every sign of trouble because you're now expecting a larger return on your investment."

Lucid initially targeted building 20,000 vehicles this year, then slashed that to a range of 12,000-14,000, before cutting it again. Those numbers indicate that in 2022, Lucid only delivered about 61% of the cars it made to customers. 

Rivian and Lucid's results came just after Tesla also missed analyst expectations for its fourth-quarter delivery results — and it has investors concerned. Tesla has the advantage of establishing itself during a boom time for investment in risky bets like automotive startups. Rivian and Lucid are ramping up at a more uncertain time.

"If you have momentum like an established player," Fiorani said, "you will have the inertia you need to keep moving forward. But given the risky economic situation, buyers aren't ready to bet on a largely unknown company." 

Production and delivery gaps are widening

Interestingly, Lucid's production ramp-up worsened from the third quarter to the fourth. 

The company's reports indicate it made more progress between the second and third quarters in terms of ramping-up than it did between the third and fourth quarters, and its delivery progress reflected that.

In Q2, Lucid delivered about 96% of the roughly 700 vehicles it built. In Q3, the startup delivered only 61% of what it had built and by Q4 it had only delivered 55% of the 3,493 vehicles it built in that last three months of the year. 

Meanwhile, Rivian's numbers in Q4 — delivering about 80% of the 10,020 vehicles it built — also showed less progress ramping-up from the third quarter than it made between Q2 and Q3. Previously, Rivian delivered more vehicles than it built in Q2 (accounting for vehicles built before the quarter that didn't make their way to customers), but only delivered about 89% of what it built in Q3.

Still, Rivian's production-delivery gap remains less extreme than Lucid's — the firm sits at about 84% rate of delivery for the full year, slightly down from an estimated 86% for the first nine months of the year.

This likely only delays revenue for Rivian and Lucid, since the vehicles they build are promised to buyers rather than sent to dealers, Fiorani said.

"A big thing that's holding back both Rivian and Lucid is just the fact that they're really still fighting for more states to give them permission to sell their cars directly rather than going through a franchise," said Robby DeGraff, industry analyst at AutoPacific. "With newcomers like Rivian and Lucid, that is going to be a warning sign for some people to begin with."

Perhaps the startups are catching on to that. Sources told Insider that Lucid had a big end-of-year push, incentivizing employees to purchase its vehicles, introducing a website to sell existing inventory, dropping the cost of the Grand Touring to its pre-price increase price tag, and initiating a new protocol to try to halt cancellations.

"It's not sustainable to have all these vehicles just sitting there," DeGraff said.