Weekly Brief: Just as EVs Should be Winning, Survival Seems Best Hope

Electric Last Mile Solutions has thrown in the towel and filed for Chapter 7 bankruptcy.

The start-up focused on commercial EVs and was working to bring its first electric van to market under the moniker Urban Delivery. Now it plans to liquidate its assets and shed its workforce immediately. This company’s collapse is a cautionary tale for the raft of EV start-ups that went public in 2021 via special purpose acquisition companies (SPACs).

In the height of the pandemic, SPACs became a popular method for EV start-ups to get a large influx of cash without undergoing the normal rigor of an initial public offering. Few of these start-ups had ever introduced a vehicle to market or earned a dime of honest revenue and some went a long way to conceal warning signs about their financial well-being. Fast forward a year and the Securities and Exchange Commission (SEC) has launched investigations for malfeasance, improper reporting or insider trading, which has led to plummeting investor confidence and delisting from the Nasdaq, among other demerits. Electric Last Mile Solutions faced all of these hurdles within the past six months and ultimately could not overcome them.

Its demise could foreshadow a similar fate for the likes of Lordstown Motors, Nikola and Faraday Future, highlighting the fact that SPACs weren’t the panacea that they were presented as a year ago. The SEC has already proposed new rules that would make going public via a SPAC more burdensome than a traditional IPO, rather than a cheat code. However, the downfall of Electric Last Mile Solutions is about more than just the shadiness of SPACs. It also speaks to the broader, more befuddling market dynamics surrounding EVs today.

Consider this: consumers want to buy EVs in record numbers; carmakers want to make EVs in record numbers; investors want to invest in EVs in record numbers and politicians want to support EVs in record numbers. Yet, somehow, EVs remain a struggle for nearly everyone involved.

Last week Tesla hiked its prices across its lineup by between $2,500 and $6,000 per vehicle, according to price sleuthing by Electrek. That’s its third price hike this year owing to materials getting more expensive, supply chains more cramped, delays longer out of China and inflation higher around the world. The company is facing a number of mandatory recalls and federal investigations for its semi-autonomous driver assistance technology.

Other EV makers are in the same boat. Ford hiked its prices for its Mustang Mach-E by about $2,000 in December 2021 but reported last week that, despite selling record numbers, it’s still not making a profit. To manufacture a single Mach-E has become $25,000 more expensive in the past year, the company’s CFO said. The company is recalling 49,000 Mach-Es because of microchip problems that could cause battery overheating.

Rivian has hiked the price of its electric trucks by more than $10,000. Audi, Mercedes, General Motors, the list of price hikes goes on and on. The average sticker price across the whole EV segment is now north of $60,000, squarely in the luxury vehicle segment. So much for EVs becoming a car for the masses.

The irony is that owing to record gas prices, with most places in the US now are above $5 per gallon ($11.46 an imperial gallon in the UK – Ed), consumers are still flocking to EVs but carmakers can’t meet the demand. Manufacturing bottlenecks have them falling further behind production and delivery goals. Start-ups are folding or falling more into debt. It feels like everyone is losing, when everyone associated with the EV revolution should be winning.