Did Foxconn Just Breathe Life into US EV Makers?

Ohio-based electric vehicle maker Lordstown Motors Corp. (NASDAQ: RIDE) said late Wednesday that it had completed the $230 million sale of its Lordstown, Ohio, assembly plant to Hon Hai Precision Industry, aka Foxconn. The news could not have come at a better time.

Lordstown’s stock had traded down by about 80% over the past 12 months. The company’s CEO said that the relationship with Foxconn gives Lordstown “a flexible and less capital-intensive business model, access to broad supply chain and software capabilities and an effective vehicle development platform to bring EVs to market faster and more efficiently.”

Shares of Lordstown traded up more than 52% in the late morning Thursday and, it is probably fair to say that Lordstown towed other U.S. EV makers, like Fisker, Lucid and Rivian Automotive Inc. (NASDAQ: RIVN) along with it.

In a research note Thursday morning, Morgan Stanley auto industry analyst Adam Jonas maintained his Overweight rating and $85 price target on Lordstown’s rival EV pickup truck maker, Rivian. What is interesting about Jonas’s report is that much of what he has to say about Rivian also applies to Lordstown.

First, Jonas states the obvious: “Investors appear less inclined to fund negative EBITDA ‘growth’ companies than they used to.” Now that real money is needed, companies that burn through cash are less likely to find more cash being tossed around.

A second issue is the still-weak global supply chain. Lordstown is expected to deliver about 500 of its all-electric Endurance pickup this year. The company reported cash and equivalents of $203.6 million at the end of the March quarter. That total will rise now that the sale to Foxconn is completed, but far short of Rivian’s cash hoard of more than $17 billion.

Rivian delivered 1,227 EVs in the first quarter at a production cost of approximately $1.2 million per vehicle, according to Jonas. The company blamed the high cost on supply chain issues that have limited the company’s ability to run its assembly line faster. The company reiterated its target of 25,000 deliveries this year, while noting that missing that number may deliver fewer as a way of burning more cash.

When Rivian reported March-quarter results Wednesday, the company said it expected an adjusted EBITDA loss of $4.75 billion for the year and $2.6 billion in capital spending. That implies what Jonas calls an “adequate financial run-way measured in years rather than quarters.”

Lordstown has managed to shed those major capital spending costs, but the question remains whether the $203 million in cash will be enough to avoid another capital raise. Given the current economic environment, that could be quite costly.

Lordstown stock traded up by around 44% in the early afternoon Thursday. The stock’s 52-week range is $1.50 to $15.80, and the low was posted Wednesday. The company’s market cap is around $425 million, and its enterprise value is about $223 million.

Rivian’s 52-week range is $19.25 to $179.47, and its low also was posted Wednesday. Shares traded up nearly 18% early Thursday afternoon, at around $24.35. Rivian’s market cap is $21.9 billion, and its enterprise value is about $7.1 billion.

Shares of both Fisker and Lucid were also up by more than 12%. It is noteworthy that Foxconn also will assemble Fisker’s Ocean EV at the Lordstown plant, while Lucid has built a new assembly plant in Arizona and has begun the process of getting funding for a production facility in Saudi Arabia.

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