The future of electric vehicles (EVs) is at a critical juncture, with emerging challenges facing pure EV manufacturers Rivian and Lucid. As these companies prepare to unveil their Q3 results, the spotlight is on their ability to navigate a complex and rapidly evolving landscape.
The Race for EV Dominance: A Tale of Two Companies
Amidst record-breaking EV sales in the third quarter, both Rivian and Lucid are expected to showcase notable revenue growth and improved earnings. However, the real test lies in their ability to address investor concerns about future growth prospects and the impact of challenging market conditions.
RBC Capital Markets analyst Tom Narayan cautions that while these companies may show signs of improvement, the underlying profitability remains a key concern. Both automakers have already reduced production guidance due to market challenges, with Rivian also revising its earnings and gross profit expectations for 2025.
But here's where it gets controversial...
The EV industry faces a perfect storm of issues, including rising costs from tariffs, slower EV sales forecasts, and company-specific challenges. The removal of federal incentives by the Trump administration has dealt a significant blow, impacting not only sales but also the ability of EV manufacturers to sell credits to legacy automakers.
Rivian, for instance, has had to cut its expected earnings from credit sales, and the company's CEO, RJ Scaringe, acknowledges the complex and evolving policy environment. Tariffs are costing Rivian and Lucid thousands of dollars per unit, impacting their profit margins.
And this is the part most people miss...
The third quarter is expected to be the peak of EV sales for the foreseeable future, with customers rushing to buy new models before the federal credits ended in September. As a result, the focus of these companies' Q3 calls will likely shift towards future products and technology, rather than their core EV businesses.
Rivian's R1R electric truck and Lucid's Gravity SUV are at the forefront of this strategy, with both companies aiming to revolutionize the market with their innovative vehicles. Rivian's R2, a midsize vehicle expected to launch next year, is seen as a game-changer, with CEO Scaringe expressing confidence in its potential to drive significant demand and sales.
However, the market is ripe with competition, and analysts like Barclay's Dan Levy question the company's bullishness given the risks of weaker EV demand and a more competitive landscape.
Lucid, too, is placing its bets on future technologies, including ADAS and personal autonomous vehicle capabilities, despite a history of underwhelming performance in its luxury models. A recent deal with Uber showcases Lucid's ambition to enter the ride-hailing market with its Gravity SUVs equipped with autonomous technology.
As investors await the Q3 results, the key questions revolve around the companies' production timelines, cash flows, and profitability outlooks. The race for EV dominance is far from over, and these companies' ability to adapt and innovate will be crucial in determining their long-term success.
So, what do you think? Are Rivian and Lucid poised for a comeback, or are they facing an uphill battle? Share your thoughts in the comments below!
