Starting an automotive manufacturing company from the ground up is obviously not an easy task. Regardless, a number of startup EV makers have popped up in recent years. While some are still seemingly in good shape (Rivian, Lucid Motors), others are teetering on the verge of bankruptcy (Lordstown Motors) or mired in controversy (Nikola). However, the recent reveal of vehicles like the 2022 Ford F-150 Lightning is making life difficult for electric vehicle SPACs, according to a new report from CNBC.
A number of EV startups went public through SPAC (special purpose acquisition company or blank-check company) deals recently, including Lordstown, Canoo, Nikola, and Electric Last Mile. However, it seems that these hyped-up companies are starting to wear on investors following some early excitement and heavy trading, particularly as none of them have produced an actual, saleable vehicle yet.
SPAC deals have become increasingly attractive in recent years, as they present an alternative to a traditional initial public offering (IPO) that doesn’t require a company to have any actual operations or real assets other than cash. The idea is that a company can raise funds just like an IPO, then merge with a privately-owned company to go public.
The luster of electric vehicle SPACs is beginning to wear off, however, particularly amid a number of Securities and Exchange Commission (SEC) investigations and inquiries into companies like Lordstown and Nikola in recent months. As a result, the CNBC SPAC 50 Index is down 4 percent year to date, while the CNBC SPAC Post Deal Index has fallen 10 percent. But as we saw specifically with Lordstown and its Endurance EV pickup, the reveal of electric vehicles from established automakers is also having a big impact on unproven startups.
The F-150 Lightning, for example, secured 100,000 reservations in just three weeks, while the E-Transit and Ford Mustang Mach-E have enjoyed heavy consumer interest as well, as have a number of future General Motors EV products like the GMC Hummer EV and Cadillac Lyriq. But both of these automakers have a demonstrated history of bringing vehicles to market – something that startups may or may not be able to do.