What The Chip Shortage Means for EV Upstarts

In the wake of the Covid pandemic electric vehicle upstarts like Canoo, Rivian, Lucid, and Fisker are find themselves under the gun do to mounting supply chain pressure and labor shortages — what’s more the entire auto industry is missing production goals because of the global chip shortages. For EV upstarts, the timing couldn’t be worse. Last year many of these EV upstarts found themselves awash in private equity and institutional cash and debt, many of these companies opted to go public through special purpose acquisition companies, making them attractive wagers for large investors. The simple thesis was this: Tesla won’t own the whole market and legacy auto manufacturers are moving too slow.

Today even with EV start-ups sitting on mountains of funding and investment support, supply chain fulfillment challenges are going to put them at an immediate disadvantage with incumbent auto manufacturers. Tesla is not exempt from this phenomenon as consumers are reporting increased delivery delays by as much as 5 months with added surcharges to the tune of $10,000 for one customer.

It begs the question, if established auto manufacturers are having trouble sourcing parts, where does that leave newcomers in terms of meeting delivery deadlines and revenue expectations. The supply chain environment remains only one factor in the survival of these newcomers as established brands are now rolling out their own EV’s. Jeep recently announced the electric Wrangler Unlimited, and Ford just launched the F150 Lighting, variants of two of the most popular vehicles in North America.

Fords electric truck debut may confine Tesla’s bold Cyber Truck design back to the shelf of science fiction next to the DeLorean as well as putting further pressure on Rivian. Both Lucid and Fisker have both struggled to develop and staff their manufacturing processes, with the add pressure of a supply chain squeeze these companies may be left near motionless for a minimum of 6 months — which ultimately will require them to raise more money. However, one company does stand out as the potential anomaly with a strong moat against legacy manufacturers as well as the other upstarts.

Canoo this week announced that their electric lifestyle vehicle microbus was now available for purchase. Canoo is playing niche — looking away from cars and trucks and primarily towards multi-purpose vans. Its van seems to have its eye on small businesses and commercial-delivery fleets. Its vehicle build is also incredibly simple and scalable. While it’s focus and model may be commercially viable, the company is not without its share of challenges. SPACs have been under fire from the SEC as of late to determine the scope of facts and intent behind promises these companies made to investors. One of Canoo’s investors Tony Aquila and now Chairman and CEO led the shift away from lifestyle vehicles to a commercial focus. In a recent regulatory filing, the company disclosed that it was working with regulators to understand the nature of its operations and it’s financial structure.

The EV space is no longer the frontier, it’s here and it will be a marathon to win immediate market share and long-term market dominance — only time will tell what companies will survive.