As Rivian And Lucid Struggle, Elon Musk Says Volume Production, Achieving Positive Cash Flow Are 'Insanely Hard'
Amid production pangs experienced by electric vehicle startups that include Lucid Group, Inc. (NASDAQ: LCID) and Rivian Automotive, Inc. (NASDAQ: RIVN), Twitter users recently discussed the ability of such companies to survive. EV pioneer and Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk chimed in with his thoughts as well.
What Happened: “Reaching volume production & achieving positive cash flow is insanely hard,” Musk tweeted on Thursday. The billlionaire's comments came in response to an old video shared by Twitter user @teslaownersSV in which Musk said that, in order to survive, a new company should able to solve autonomy and electrification while also making a vehicle that’s extremely "compelling" and reaching volume production where the cost of a car is low enough that the price that does not exceed affordability.
“If it costs more than people can afford, they can’t buy it no matter how great it is,” Musk explained in the video.
Referring to Rivian, the Tesla CEO said that the rival company needed to solve its pricing predicament since the cost of its cars had gotten to the point where only a select number of people could afford to buy them.
“They either need to fix it or they are in deep trouble,” he said of Rivian in the video, while noting that the same principle applied to every car manufacturer.
See Also: Best Electric Vehicle Stocks
In a separate tweet, a Tesla influencer tweeted that there was a “real possibility Tesla is the only publicly traded mass-market automaker that’ll be cash flow positive by 2026.”
Musk seconded his opinion by saying “true.”
True
— Elon Musk (@elonmusk) April 14, 2023
Why It’s Important: Tesla has been cutting car prices in China and has announced multiple rounds of price deductions in other countries as well.
The company's move aligns with Musk’s belief in making cars affordable but has put other automakers in a tough spot. If Tesla's rivals choose to keep their prices intact, they risk losing market share; on the other hand, if they follow suit, they may see their margins slim down. This holds especially true for startups, many of which have not reached the scale that would allow them to cut prices.
In related news, Lucid reported this week sub-par production and deliveries for the first quarter, sending its shares sharply lower on Friday.
Photo: Wikimedia Commons
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