Shares of online auto retailer Carvana have been falling sharply in recent days, with iPhone maker Foxconn spending $175 million on struggling Lordstown Motors and another aerospace billionaire filing a lawsuit. All this and more Morning shift For Tuesday, November 8, 2022.
1st Gear: Carvana is in trouble after dropping 50 percent in two days
After announcing this lost more than half a billion dollars just last week, online car retailer Carvana had a terrible couple of days of trading, with its share price down more than 50 percent. Bloomberg saysmeanwhile, its shares are down 98 percent from their peak in early 2021.
According to CNN, the downward trend came hot on the heels of the company’s third-quarter results released last Thursday. CNN reports:
Shares fell 15% on Monday to close the day at $7.39, the company’s worst one-day performance of 39%, continuing the downward trajectory that began on Friday. The decline began after disappointing earnings due to lower-than-expected sales.
A sharp drop in stock prices prompted a brief suspension of sales on Monday “due to market volatility.”
According to CNN, Carvana’s fall from grace indicative of the wider used car market. As car prices have been high for months due to rising interest rates and the threat of a recession, the cars Carvana has bought in recent weeks to add to its inventory may soon be cheaper than expected.
Carvana isn’t the only one in trouble, CNN adds, with CarMax shares down 50% since the start of the year.
2nd Gear: iPhone maker Foxconn backs Lordstown
From one struggling startup to another, let’s talk about Lordstown Motors. The loss-making EV maker F-150 Lightning, Hummer EV and even Tesla’s Cybertruck for years now. But rising costs and numerous setbacks delayed the launch of the Endurance truck.
Now, in an attempt to turn the company around, iPhone maker Foxconn has increased its investments at the struggling automaker. The BBC reported on this “tech giant spends up to $170m (£147.8m) on shares in Lordstown Motors”. According to the website:
The major cash injection comes as the company aims to ramp up production of its debut model, the Endurance.
Lordstown recently began production of the car at the former General Motors plant in Ohio, USA.
Under the deal, the world’s largest contract electronics manufacturer bought more than 18% of Lordstown, making it the largest investor in the company.
Finally, in addition to putting the Endurance pickup into production, the tie-up between the two companies will also see them jointly develop a new electric vehicle. Foxconn already has a hand construction of electrical agricultural equipmentand recently said he hopes to one day building electric cars for the likes of Apple.
But this tie-up with Lordstown will see it move away from past contract manufacturing to co-develop new products. Excited.
Speed 3: Another space billionaire goes to court
yesterday, We shared the news that the head of Space X, Elon Musk, went to court More than his salary at Tesla and now we know of another space race billionaire who is headed to court. This time it’s the turn of Richard Branson, the head of Virgin Galactic, who has been accused of fraud by the company’s shareholders.
Forbes reports Virgin Galactic shareholders alleged that “Branson hid problems with the space program and sold nine-figure shares at inflated prices.” The homeowner’s claims against Branson were dismissed by U.S. District Judge Allyne Ross in Brooklyn, but she said shareholders could sue Branson and Virgin to prove “he tricked them into paying an inflated price for Virgin Galactic stock.” Forbes informs:
Shareholders could sue Virgin over claims in July 2019 that the company had made “huge progress” in achieving commercial spaceflight, even though its rocket plane Unity was seriously damaged during a test flight just five months earlier.
The class may also sue over Branson’s July 2021 statement that his flight in Unity was “flawless,” even though the Federal Aviation Administration said the rocket deviated from its intended flight path.
Virgin Galactic and Branson’s lawyers tried to dismiss the case, arguing that there was “no evidence of intent to defraud shareholders.” Despite their claim that space travel was “undoubtedly a high-risk proposition,” their arguments fell on deaf ears.
The claim applies to shareholders with shares from July 10, 2019 to October 14, 2021.
4th Gear: Nikola and ChargePoint to Improve EV Infrastructure
While being an electric truck manufacturer Nikola continues to miss production and delivery targets, it was decided that it needed a new area to focus on for a while: charging infrastructure. The company, which hopes to introduce a range of EV delivery vehicles, has partnered with Chargepoint to test and improve EV infrastructure in the US. This is reported by Reuters:
Many fleet operators are keen to use more electric vehicles as they aim to reduce carbon emissions and meet sustainability targets, but have been hampered by a lack of appropriate infrastructure.
Nikola said that with access to ChargePoint products, it can reduce the time required to build infrastructure projects that will help its customers manage vehicle charging, plan schedules and streamline delivery routes.
No financial terms of the partnership were shared, but Nikola warned that infrastructure issues will continue to hit EV truck sales unless the issues are confronted head-on.
The first step in the project to improve charging infrastructure in the US will be Nicola’s purchase of ChargePoint’s fast charging solution called E-Skids. Deliveries are expected early this month, but there’s no word on where the hardware will be installed.
5th Gear: Net income rises
If Nikola is struggling to sell its trucks, fellow EV startup Lucid isn’t facing the same problem as it’s poised to post $200 million in third-quarter revenue. Lucid, which launched its $100,000 electric Air sedan, is expected to see revenue growth in the third quarter due to increased production and shipments.
Automotive News reports revenue for the firm is expected to be about 10 times higher than the same period last year. According to the website:
Analysts forecast Lucid’s third-quarter revenue at $209 million, compared with just $232,000 a year earlier, according to an average of four analysts based on Refinitiv data, Reuters said. The company is also expected to post a net loss of about $500 million.
It reportedly delivered 1,398 vehicles in Q3 compared to Lucid a total of 679 cars in the second quarter. Automotive News adding that “production in the third quarter reached 2,282, compared to 1,405 in the second quarter.”
The company is also expected to introduce a more “budget-friendly” version of the Air sedan in the coming weeks. Cheaper versions of the Air It is expected to start at $87,400 and will premiere on November 14.
Reverse: Fire at Ford
Neutral: Car prices
The big problems facing Carvana are explained by falling prices in the wholesale used car world. But if prices are falling so much there, how long does it take for those savings to be passed on to consumers? And does that mean we are approaching the end of the sky second hand market?