Subsidies are the name of the game when it comes to manufacturers and governments looking to cash in on the electric vehicle (EV) market. In the minds of corporate executives and politicians eager to create jobs and shake hands, there is no better way to jumpstart economic growth than to take money out of the public coffers and put it in the hands of companies that promise to be job creators.
In September 2020, such a confluence of goals occurred in the factory town of Lordstown, Ohio. General Motors, the former operators of a massive assembly plant for compact cars in the town, decided in 2018 to shutter it the following year, transferring all production to Mexico. It had been battling the Trump Administration and the state government in Columbus that were demanding the company repay $28 million in tax credits it had received after leaving a 30-year operation commitment unfulfilled. New operators came forward to operate the plant. One of them was to be called Lordstown Motors, and would produce all-electric powered trucks like the Endurance.
Part of the company’s new scheme upon opening the plant in 2020 was to use a $200 million loan from the U.S. Department of Energy. Ten bipartisan members of the state’s congressional delegation led by Senators Rob Portman and Sherrod Brown lobbied the Energy Department to approve this loan. To their small credit the Trump budget policymakers refused to push for the loans, even though the president was a vocal cheerleader of Lordstown Motors. Ohio’s government, however, was not as smart, greenlighting $20 million in tax credits to the new plant as well as $4.5 million in new grants from its job creation incubator JobsOhio.
But since going public in September 2021 Lordstown Motors has consistently underperformed and has seen its stock plummet from a high of $29 to just over $1 per share as of this writing. What went wrong? According to a report released by short-sellers from Hindenburg Research, a lot of the pre-order claims that went into launching Lordstown Motors were promotional hype that could not feasibly be executed, and the pre-order announcements were non-binding and did not include a paid deposit. The company has also attracted negative attention since its CEO Steve Burns had previously helmed Workhorse Group EV manufacturer, which at one point was a major shareholder in Lordstown before dumping 11.9 million shares in September 2021. In March 2022 Burns himself dumped 5.2 million shares of Lordstown stock valued at $13.5 million immediately after General Motors sold 7.5 million of its own shares in the company.
Unsurprisingly, Lordstown isn’t the only nascent EV manufacturer that is showing major growing pains. When Americans think of environmentally friendly companies that rise and then plummet thanks to government subsidies, we usually think of solar panel maker Solyndra which blew through $500 billion before folding in 2011.
Fisker, Inc. is another example. This manufacturer of all-electric SUVs seeks to expand into sedans and shuttle buses. Its Danish-born founder Henrik Fisker previously founded Fisker Automotive, which went bankrupt in 2013 and was sold to a Chinese company. But this was not before it received $192 million in green technology loans from the Obama Administration during the same period when another start-up competitor, Tesla Motors, had received $465 million that it eventually paid back. Only $53 million of Fisker’s loans was recovered before it folded and was bought out by the Chinese conglomerate Wanxiang.
The new Fisker has attracted more funding from venture capital funds and other private investors, but may benefit indirectly from the $7500 EV tax credits under the Inflation Reduction Act. At $39,000 the Fisker Ocean is the cheapest model available from the Irvine, California manufacturer. Also this year, Fisker purchased the Lordstown plant from Lordstown Motors, and is having the Fisker PEAR manufactured there in partnership with Taiwanese conglomerate Foxconn.
Finally, there is electric pickup truck manufacturer Rivian, headquartered in Irvine, California. It has been called by the Wall Street Journal the “government unicorn.” Thanks to the hype of its potential sales and the driving force of tax credits, the company’s market capitalization shot up to over $120 billion after going public in 2021. In July the losses for the carmaker’s shareholders Amazon and Ford were reported at $19 billion as the company laid off 6 percent of its workforce.
As 2022 draws to a close, all four of these EV startups have experienced dramatic declines in their stock values as of this writing:
- Workhorse Group (WKHS): -64 percent
- Rivian (RIVN): -81 percent
- Fisker (FSR): -55 percent
- Lordstown (RIDE): -68 percent
The Big Three automakers General Motors (-43 percent), Ford (-46 percent), and Stellantis (formerly Chrysler; -27 percent), which have invested billions of dollars into the EV market, are all experiencing their own difficulties in hitting goals in adapting their vehicle offerings to all-electric models. The Ford 150 Lightning all-electric truck model has seen its prices increase from below $40 thousand in 2021 to more than $58 thousand with the latest price increase, a total of 31 percent.
The hope was that electric vehicles would be a foundational basis for a fourth industrial revolution, with EVs rebranding the Lordstown area as the “Voltage Valley.” But the celebrations may have been premature. In July, as Congress was passing the Inflation Reduction Act, Stellantis chief manufacturing officer Arnaud DeBoeuf warned that the climbing prices of EVs and internal combustion engine (ICE) vehicles alike could tank the auto market. As the new year begins, all evidence shows that this warning would have been well heeded.