Tesla‘s (NASDAQ:TSLA) announcement of cutting 10% of its global workforce shook the electric vehicle (EV) market and EV stocks. Amid softening demand for electric cars, Tesla suffered an 8% drop in deliveries in the first quarter. That was the first time it shipped fewer cars in over a decade.
But it means Tesla can’t justify employing so many people and over 14,000 workers are losing their jobs. With competition here and abroad intensifying, the leading EV maker will not be alone in firing employees. There’s a shakeout coming to the electric car market. Fisker (OTCMKTS:FSNR) teeters on the precipice of bankruptcy, though it recently said it has been in talks with four potential buyers.
Others might soon follow Fisker into the abyss. These three EV stocks could be next to announce their employees are on the chopping block.
Rivian Automotive (RIVN)
Rivian Automotive (NASDAQ:RIVN) has already announced two rounds of layoffs, and we’re only four months into the year. The electric SUV and pickup truck maker also said it is postponing plans to open a new factory in Georgia that was supposed to create 7,500 jobs. Yet, with sales far worse than expected, Rivian workers could see more pink slips flowing.
Earlier this month, Rivian said it produced 13,980 EVs in the first quarter while delivering 13,588 of them. That was essentially flat from the fourth quarter, and it reiterated its goal of producing 57,000 total vehicles this year. Yet Rivian still loses money on every vehicle produced. Despite promises of achieving gross profitability later this year, it has had to cut prices like every other EV maker.
Rivian unveiled its smaller R2 SUV with a starting price of around $45,000. Tesla recently cut the price of the Model Y to under $45,000 and said a new, cheaper EV was in the works for this year. By making their vehicles less expensive, manufacturers are hoping to jumpstart sales. That will cut into plans for profitability for everyone, including Rivian, which may have to fire more employees to stay in business.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) is in an even tighter spot than Rivian because it makes luxury EVs that cost way more than anyone wants to spend. When manufacturers can’t even move cheaper models, trying to offload pricey ones becomes impossible. Lucid actually delivered more vehicles than it produced, though it was only about one-tenth of what Rivian made.
According to the EV stock, Lucid delivered 1,967 vehicles in Q1 while producing just 1,725 vehicles. It’s just another manifestation of declining demand. It produced all of 6,000 vehicles in 2023 and pinky swears it will make 9,000 vehicles this year. Lucid is “laser-focused” on growth, it says.
While the EV maker manages to stay afloat via cash infusions from the Saudi Arabian government, that won’t count for much on the factory floor. It had a big round of layoffs last year and though the Saudi Public Investment Fund is pumping billions of dollars into the company, dwindling sales will make its workforce superfluous.
Lion Electric (LEV)
Yes, Lion Electric (NYSE:LEV) just announced it was cutting 120 jobs, but I don’t think that will be the last of them. The electric bus and truck maker is trying to save about $40 million annually. It will have 1,150 employees at the end, over 600 of whom will be on the manufacturing side.
Lion, a Canadian manufacturer with a factory in Illinois, blamed that country’s government for delaying handing out funds from its Zero Emission Trust Fund for the layoffs. The fund subsidizes production of zero-emission school and transit buses. However, it underscores many of the problems faced by all EV makers. They can’t sell vehicles without government subsidies, whether via cash payments, sovereign fund investments or tax incentives. While carmakers are cutting prices to entice buyers because most are not profitable, it may accelerate the need to fire more workers to save money.
As several governments cut back on industry incentives, the risk of collapse looms for many manufacturers.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.