Rivian Deliveries Surged in Q2 2023 as More EV Startups Impressed

Tough External Environment

The auto industry has been facing a challenging external environment over the past several months. Elevated inflation squeezes consumer income and pushes prices higher, high interest rates makes loans for cars purchases more expensive and corporate funding harder, while economic uncertainty puts prospective customers on hold. Meanwhile, the economic recovery in the world's biggest electric vehicle market is sputtering, as reveled by a series of poor data from China over the past couple of months.

CEO of EV leader Tesla Motors, had spoken in mid-May of a "challenging twelve months" ahead, due credit tightening and rate increases ^[1]. Startups are more vulnerable to these headwinds, since they are often unprofitable, have limited pricing power and increasing production is costly endeavor.

The negative impact has already been evident in weak demand for electrified vehicles and underwhelming financials. However, the EV market continues to expand and many of the aforementioned adversities are dissipating recently. Inflation in the US and other regions is decelerating, the Fed has slowed the pace of tightening and expects to reach the terminal rate within the year, while Chinese authorities are taking action to prop the economy.

The latest delivery and production figures from many electric for the second quarter, offer reasons for optimism.

Rivian

Rivian Automotive comes from a difficult first quarter when sales and output registered a sequential decline, with a sizeable gap between the two figures persisting, in a clear sign of weak demand. This difference did not go away in the second quarter, but the firm roughly tripled its deliveries and production form a year ago, to new record levels. ^[2]

The company handed over 12,640 vehicles during that period, marking a 183% y/y increase. It manufactured 13,992 units, rising 218% y/y. Although the output/delivery gap sustains concerns around demand, the figures are very strong and bring Rivian closer to its production target of 50,000 units in 2023.

Rivian Automotive is one of the electric vehicles startups i highlighted in my recent EV report, which specializes in electric offroad cars, with the R1T truck and the R1S SUV. It has the first mover advantage in the electric truck segment, but already faces competition. The Ford Motor Company launched the highly successful F-150 Lightning, while Tesla is looking to deliver its first Cybertrucks as early as this quarter.

Rivian plans to extend its lineup with smaller and cheaper models. These will be based on the new R2 platform, of which CEO RJ Scaringe offered a small glimpse recently, but sales are not expected for another two-three years. ^[3]

XPeng

China's XPeng (XPEV.us) has an impressive lineup, with its latest model – the G6 Coupe SUV – having launched just a few days ago. More to it, it unveiled a few months back a next-generation manufacturing platform ^[4]. With the Smart Electric Platform Architecture (SEPA) 2.0, the firm aims to reduce costs, which will allow it to offer appealing prices amidst increasing competition.

The EV startup is also doing leading work on assisted driving technology, or Advanced Driver Assistance System (ADAS). Its has been offering its Navigation Guided Pilot (NPG) on its vehicles in an expanding number of Chinese cities. Last month it reached another milestone, as it got approval to roll out its assisted driving system in Beijing, the country's capital. ^[5]

Despite its impressive model lineup and the ADAS progress, XPENG sales have been dwindling non-stop over the past several quarters, after the Q4 2021 record of 41,751 units. However, the company returned to growth in the second quarter of this year. It delivered 23,205 vehicles, marking a 27% sequential increase. ^[6]

These results are encouraging and show that the company's efforts to turn things around are bearing fruits. There are still some worrying aspects though, as deliveries are far from their record levels.

Li Auto

Rival Chinese startup Li Auto (LI.us), has been on opposite trajectory from XPeng recently, since its deliveries have been increasing over recent month and quarters. It handed over 86,533 electrified cars in the second quarter of the year, increasing for third straight quarter to new records. It broke one more threshold, since deliveries surpassed the 30K threshold in June, for the first time in the firm's brief history. ^[7]

Li Auto is one of my Top 10 Stocks to watch during the current quarter, partly due its aggressive expansion. Although its deliveries trump local competitors such as Nio and Xpeng, its worth noting that its vehicles are hybrids. It recently announced plans to nearly triple its lineup by 2025, with the inclusion of five pure battery electric cars (BEVs). ^[8]

Conclusion

Many electric vehicle startups have struggled over recent months and pitfalls still loom. In spite of that, the latest delivery and production figures provide reason for optimism and are particularly important, given recent price cuts by Tesla. The EV leader's action came after demand concerns and appears to be working as its deliveries rose to new record highs in Q2.

Rivian, XPeng and Li Auto were some of the startups the stood out. We will now be looking forward for a deeper look into their state with the full quarterly results, as the latest earnings season gets underway this month.