Trouble in EV Land: Fisker’s Stock Hits 8 Cents per Share While Lucid Group Receives a Fresh Cash Injection From the Saudis

This is not a recommendation for investment. The writer does not hold any positions in the mentioned stocks.

Despite the entire industry facing sluggish demand and intense competition, particularly from China, EVs are rapidly becoming the market’s underperformers. In this challenging environment, companies such as Lucid Group are relying on their wealthy backers, including the Saudis with their seemingly endless funds, while others like Fisker are at risk of failing as the market targets its weaker players.

What a day in EV land…$TSLA downgraded as delivery estimates drop.$LCID gets another $1 billion from the Saudis.$FSR says the automaker that could have entered a saving transaction has bailed.

— funwithnumberz (@funwithnumberz) March 25, 2024

Fisker (FSR) on the Brink of Bankruptcy

Fisker’s stock was now halted at $0.08 after plummeting by 30% due to reports indicating the absence of a deal with another automaker. Wow. pic.twitter.com/IlJXC96Lxv

— Afonso (@AfonsoEV_) March 25, 2024

Only a few moments ago, Fisker’s stock reached 8 cents per share and was paused as the company prepared to make an announcement.

In its latest submission to the SEC, Fisker revealed that the lifeline agreement it had made with a “major car manufacturer”has collapsed.

“After the market closed on March 22, 2024, Fisker Inc. (the “Company” or “Fisker”) received notice from the large automaker with which the Company had been in negotiations for a potential transaction that the automaker terminated the negotiations. Following such termination, the Company continues to evaluate strategic alternatives.”

Fisker is currently considering various possibilities, such as filing for Chapter 11 bankruptcy, restructuring its debt, and seeking additional liquidity through the financial markets.

Consequently, what led Fisker to reach this low point in terms of finances? The company’s financial sustainability has been jeopardized by a string of ill-advised choices it made in the past:

1. The product mix is limited to only one electric vehicle currently available for purchase, the Fisker Ocean SUV. This model, which can be found for approximately $40,000, is the sole offering in the company’s lineup.
2. The more affordable, $30,000 Fisker Pear SUV is facing inordinate launch delays
3. The outsourcing of manufacturing to contract EV manufacturers such as Magna-Steyr has largely neglected logistics aspects such as quality checks, parts delivery, and customer service.
4. Despite switching to a dealer-partner model, the company was unable to meet its 2023 delivery targets, falling short by over 50 percent. Unfortunately, this change seems to have been implemented too late.
5. The internal software is experiencing a high number of bugs.
6. Failed over-the-air updates.

As of March 15th, Fisker’s cash and cash equivalents totaled only $121 million. Additionally, its unrestricted cash, which can be readily accessed, was a mere $32 million, as reported by TechCrunch. As a result, the electric vehicle company recently halted production for six weeks in order to consider potential strategic alternatives.

Saudi PIF Affiliate Invests $1 Billion in Lucid Group (LCID)

Despite Fisker’s uncertain future, Lucid Group is still receiving support from its major shareholder, the Saudi PIF. In particular, Lucid Group has signed a deal with an affiliate of the Saudi PIF, the Ayar Third Investment Company. This agreement allows the electric vehicle company to sell up to $1 billion in convertible preferred stock through a private placement.

Currently, the only model offered by Lucid Group is the high-end electric sedan, Lucid Air. In late 2024, the company plans to introduce a new electric SUV, named the Gravity.

We previously mentioned that Lucid Group would require additional funding from Saudi Arabia in order to sell the Gravity SUV at a starting price of approximately $80,000.

Despite successfully lowering its quarterly cash burn rate from approximately $1 billion to about $700 million, Lucid Group still faces challenges with the slow adoption of its expensive Lucid Air sedan. This has resulted in low sales volume and high inventory levels. Given this situation, the company would likely require a significant infusion of funds to revamp its production line for a new model, especially considering that production costs for the Gravity model are expected to be much higher than the $80,000 base price for the Lucid Air.

Today’s progress presents yet another chance for Lucid Group to demonstrate its capabilities. This is not the initial instance of the Saudis stepping in to assist the struggling company, as they have previously provided financial support through the PIF and have also collaborated with the Saudi state to secure a decade-long supply order of up to 100,000 EVs. As part of this agreement, a dedicated EV manufacturing facility, known as the AMP-2, will be established in the King Abdullah Economic City (KAEC) in Jeddah.