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 investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

EVs are quickly becoming the market's perennial laggards as the entire industry continues to contend with sluggish demand and a veritable onslaught of competition, particularly from China. Against this stark backdrop, while some companies such as Lucid Group are relying on their cash-rich benefactors, particularly the Saudis and their virtually bottomless pockets, others like Fisker are likely to go belly up as the market's scythe hones in on its weakling entities.

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) is Likely to Go Belly Up Now

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

Just moments back, Fisker's stock hit the 8 cents per share level and was halted, pending an announcement from the company.

Then, in a new filing with the SEC, Fisker announced that its lifeline deal with a "large automaker" has fallen through:

"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 exploring a range of options, including Chapter 11 bankruptcy, debt restructuring, and tapping the financial markets for additional liquidity.

So, how did Fisker end up at this financial nadir? Well, the company made a series of poor decisions that have now come to haunt its financial viability:

1. A narrow product mix with just one EV currently on the market: the Fisker Ocean SUV, which starts at around $40,000.
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 while largely ignoring logistics such as quality checks, parts delivery, and customer service.
4. After missing its 2023 delivery targets by over 50 percent, the company switched to a dealer-partner model. But this change appears to have come too late.
5. Internal software that is quite buggy.
6. Botched OTA updates.

As of the 15th of March, Fisker had just $121 million in cash and cash equivalents. What's more, its readily accessible unrestricted cash amounted to just $32 million. Accordingly, the EV player paused production for six weeks a few days back to explore strategic options.

Lucid Group (LCID) Receives $1 Billion From an Affiliate of the Saudi PIF

While Fisker's days appear numbered, Lucid Group continues to benefit from the largesse of its biggest shareholder - the Saudi PIF. Specifically, Lucid Group has entered into an agreement with a Saudi PIF affiliate, the Ayar Third Investment Company, whereby the EV player will sell up to $1 billion worth of convertible preferred stock in a private placement.

Lucid Group currently sells just one model on the market: the premium Lucid Air electric sedan. It intends to launch an electric SUV, dubbed the Gravity, in late 2024.

We noted a few months back that Lucid Group won't be able to sell the Gravity SUV at a starting price of around $80,000 without additional Saudi cash.

While Lucid Group has managed to reduce its quarterly cash burn rate from around $1 billion to roughly $700 million, it continues to contend with the sluggish uptake of the pricey Lucid Air sedan, which keeps its sales volume low and inventory elevated. Against this backdrop, the company likely could not afford to rejig its production line for another model without another significant liquidity influx, especially as Gravity's production costs are likely much higher than the $80,000 price tag for the base variant.

Today's development gives Lucid Group another opportunity to prove its mettle. This is, of course, not the first time when the Saudis have come to rescue the embattled company. Apart from repeated cash injections from the PIF, the Saudi state itself has played an important role in propping up Lucid Group's flagging order book by inking a decade-long supply order for up to 100,000 EVs in return for a dedicated EV manufacturing facility, dubbed the AMP-2, in the King Abdullah Economic City (KAEC) in Jeddah.

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