The future of electric vehicles (EVs) is at a critical juncture, with two leading pure EV manufacturers, Rivian and Lucid, facing mounting challenges. These challenges come at a time when both companies are set to report their third-quarter results, which could provide a glimpse into the industry's future.
A Tale of Two EV Manufacturers
As the sun sets on a promising third quarter for US EV sales, Rivian and Lucid find themselves in a delicate position. While both companies are expected to report revenue growth and improved earnings, the market's expectations are high, and the road ahead is filled with obstacles.
The Challenges Mount
Both Rivian and Lucid have had to adjust their vehicle production guidance due to a tougher market environment. Rivian, in particular, has had to lower its adjusted earnings and gross profit expectations for 2025. These challenges are not unique to these companies; the entire EV industry is grappling with increasing costs due to tariffs and a slowdown in EV sales forecasts.
And here's where it gets controversial: the removal of federal incentives by the Trump administration has dealt a significant blow to EV manufacturers. The end of consumer federal incentives and the practice of fining automakers for failing to meet fuel efficiency rules has left EV companies reeling.
Rivian, for instance, had to cut its expected earnings from credit sales, and the company has also conducted layoffs to cut costs.
The Impact of Policy Changes
Rivian CEO RJ Scaringe acknowledged the complex and rapidly evolving policy environment, noting that changes to EV tax credits, regulatory credits, trade regulations, and tariffs are expected to impact the company's results and cash flow.
And this is the part most people miss: while Rivian maintains it has enough cash to launch its new "R2" product next year, the ongoing policy changes are a significant headwind. Tariffs, for example, are costing the automaker "a couple thousand dollars per unit" this year, according to Rivian.
Lucid is facing similar challenges, with tariff costs hurting its profit margins, including a $54 million hit during the second quarter.
The Third Quarter: A Peak or a Plateau?
The third quarter is expected to be the peak of EV sales for the foreseeable future, with customers rushing to purchase new models before the federal credits ended in September. As a result, both companies are expected to focus more on future products and technology opportunities during their third-quarter calls, rather than their core businesses of producing and selling EVs.
A Glimpse into the Third Quarter Results
Rivian reported vehicle deliveries of 13,201 during the third quarter, a 32% increase from the previous year. Lucid, on the other hand, reported deliveries of 4,078 units, up 47% from the third quarter of 2024.
Despite the sales uptick, both companies are expected to report notable losses, although narrowed from the previous year and smaller than the second quarter.
Rivian is expected to report an adjusted earnings per share loss of 72 cents on revenue of $1.5 billion, while Lucid is anticipated to report a $2.27 adjusted EPS loss for the third quarter, down from $2.80 a year earlier.
The Focus on Gross Profits
Analysts like Tom Narayan from RBC Capital Markets have been closely watching the gross profits of these companies as a key indicator of their progress. Gross profits provide a glimpse into a business's profitability before operating expenses, interest, and taxes are deducted.
Narayan notes that investors will be keen to see the gross profit numbers in Q3, but they also have a high bar to meet with where consensus already stands.
The Promise of Future Products and Technologies
Both Rivian and Lucid are banking on their future vehicles and technologies to save them from continued losses. Rivian's future heavily relies on its new "R2" vehicles, expected to begin production for customers in the first half of next year. The company believes the R2 will cut build material costs, reduce production complexity, and significantly grow demand and sales.
However, the R2 will face a challenging market with plenty of vehicle competition, many of which are expected to have longer EV ranges at similar or lower prices.
Lucid, too, is placing significant importance on the launch of its Gravity SUV and a future midsize vehicle platform to broaden its market reach. The company's interim CEO, Marc Winterhoff, emphasized that they are not just building electrical vehicles but pushing the boundaries of what EVs can be.
Lucid has also signed a deal with Uber to supply more than 20,000 Lucid Gravity SUVs equipped with autonomous vehicle technology from startup Nuro over the next six years.
What's Next?
Investors will be watching for updates on Rivian's R2 production timeline and Lucid's Gravity SUV production, as well as cash flows and profitability outlooks for both companies.
The future of these pure EV manufacturers is uncertain, but one thing is clear: the challenges they face are significant, and their ability to navigate these obstacles will determine their success in a rapidly evolving market.
