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The Ukraine crisis may cause many electric car companies to go bankrupt

The supply chain of raw materials has a devastating effect on electric vehicle production, which can drive up the price of cars by $2,000, and push startups to the brink of bankruptcy.

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Even before the Ukraine crisis reduced access to metals important in battery production, electric vehicle startups were already counting on a multitude of supply challenges (Image: Rivian).

Disruptions to the global supply of key raw materials for electric car battery production due to the crisis in Ukraine have affected electric vehicle manufacturers, including those in the industry, auto observers said. startups like Rivian, Lucid.

Compared with competitors like General Motors or Ford, the new electric car companies do not seem to be well prepared to adapt in the supply chain crisis, which has caused heavy damage in the past. electric vehicle (EV) production is still “nascent”.

One of the worrying disruptions for these companies is the new threat to nickel supplies. The price of this component has spiked, which could lead to an increase in the price of an electric car by $1,000-2,000, according to a Morgan Stanley analyst.

This disruption comes at a critical time for electric vehicle startups, as they rush to prove their worth in an increasingly competitive market.

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Electric vehicle companies are planning to cut production due to a lack of material supply (Image: Rivian).

Currently, the two companies Rivian and Lucid have both started production of their own electric vehicle models, with the ambition to achieve their goals with their products in the market, as well as build a customer base. .

Depending on the severity of the supply chain disruption in the near term, the lack of access to battery materials and weaker supplier relationships could cause a lot of “pain”, or even pain. even lead to “bankruptcy” for these startups.

“The problem is that these companies have the process and the ability to access the supply chain,” said Brett Smith, chief technology officer of the Center for Automotive Research in Ann Arbor (Michigan, USA). And for investors, they want to know if these companies have enough cash to weather this crisis.”

An important link is in crisis

Even before the Ukraine crisis reduced access to metals important in the production of electric car batteries like nickel, EV startups were already beginning to account for a multitude of sourcing challenges. bow.

“Lithium prices are at record highs, cobalt prices are at multi-year highs. Besides, copper is also very high,” said Caspar Rawles, chief data officer at Benchmark Minerals. lack of semiconductors has not yet been overcome.”

In the last week, the Lucid company has slashed its 2022 production target from 20,000 vehicles to the 12,000 to 14,000 range, and Rivian has raised the prices of its flagship EVs. Supply chain problems were cited as the main reason for the change of plans, and it left the company’s shareholders unhappy.

One expert said that if supply chain issues keep Rivian and Lucid from maintaining lean production, “the company’s finances could dry up and investors will walk away.”

While investors often praise electric vehicle startups for their flexibility in entering the “green” car industry, the established, giant automakers have advantage in this crisis. The big part is, they don’t depend on electric vehicle sales to stay in business.

“The major automakers have an incentive to weather this crisis, given their history of more than a century of production,” said Sam Fiorani, VP of global vehicle forecasting at Auto Forecast Solutions. internal combustion engine vehicles and most of their profits still come from that goal.”

Ford CEO Jim Farley recently said that profits from the automaker’s gas-powered vehicle division will fund the company’s cash-intensive electric vehicle development over the years. next.

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Besides affecting the auto industry, the Ukraine crisis also caused global fuel prices to reach record highs (Photo: Business Insider).

This is part of Ford’s new strategy to separate its electric vehicle and internal combustion engine powertrain divisions. At the same time, both divisions will be under the auspices of Ford, a decision Farley made despite mounting pressure to phase out the company’s electric vehicle business.

On the other hand, says Fiorani, startups are more dependent on investors’ money and the goodwill of potential customers. As a result, electric vehicle manufacturers continue to delay production and increase vehicle prices, which will cause investors to spend more money and this will discourage them.

“They’re relying on the bank statements they’ve got from IPOs or venture capital to help them get through this fragile vehicle development phase,” he said. , financing could dry up and investors would walk away.”

Most auto companies buy batteries today, not Russian nickel, and the price of the metal is more of a short-term concern than other parts of the supply chain, Rawles notes.

According to Dan Tri

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