American EV startups hit speed bumps due to lack of funds
After raising large sums from investors to grab a slice of fast expanding electric vehicle (EV) market, a number of American startups are suffering speed bumps as need more funds to pursue next-generation vehicles. Ohio-based Lordstown Motors Corporation is perhaps the best example of the EV startups that enjoyed a swift debut but hit big potholes and speed bumps in the recent past. Lordstown Motors Corp. recently announced the departure of two senior executives. The two top executives departed around a week after the startup warned that it was in dire need of more funds to keep its business going on.
The startup is now planning a series of events dubbed “Lordstown Week,” which will take place later this month to encourage investors to pump more funds into the struggling business.
However, local government officials aren’t sure what they would do in case the startup gets closed. Local officials are concerned that as the closure of the EV startup would result in loss of nearly 2,000 jobs in a region that is already dogged by several business closures.
Similar issues and shakeups are being felt in at least two other EV companies, which recently went public. Jessica Caldwell, executive director of insights at Edmunds.com, pointed out that heavy funding is required to build and maintain electric auto factories. Underlining the difficulties that startups face in operating in the capital-intensive industry, Caldwell added that the situation is particularly more challenging for small companies. Caldwell stressed that Tesla didn’t get success overnight.
Commenting on the situation, Caldwell said, “It’s definitely more challenging for a small company. It does seem like Tesla is an overnight success story, which is not really the case. But they came in and disrupted the space amongst automotive companies that have been around for decades.”
EV startups that went public through the SPAC route are now suffering turbulence and uncertainty. EV startup Nikola suffered a big crisis last fall when its founder suddenly departed following fraud allegations. Similarly, the CEO of Canoo resigned in April.
Lucid Motors also suffered its own crisis in February when various reasons forced it to delay production of its electric sedan. Industry experts noted that going public through the SPAC route might have resulted in some businesses getting funds much before they deserved
Lordstown and other startups’ woes came in the wake of major EV announcements by US President Joe Biden, and several well-established automakers, such as Ford General Motors, intensifies competition in the EV space.
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