Two years ago, a wave of electric vehicle, battery and mining companies went public with boasts of coming profits. Today, things look very different. Just this week, Lordstown Motors filed for bankruptcy protection, the U.K.’s Cornish Lithium warned that it might go bust, and Ford, whose EV division will lose $3 billion this year, reportedly plans to lay off 1,000 workers on top of the 6,800 it has already let go.
In short, many of the companies are mired in what the technology industry calls the “valley of death”—the challenging period between developing a product and large-scale production, when a company isn’t earning much if any revenue, but operating and capital costs are high. Often the business runs out of money. Some 90% of startups fail, many of them in the valley of death.
The companies engaged in the EV transition are disparate—some make vehicles, others the batteries that will power them, and still others mine the raw materials and components that go into the batteries. But all require immense amounts of capital for equipment, buildings and technology. Wall Street has become generally intolerant of startups that don’t earn revenue but has shown especially little patience for the EV sector, whose companies often require a decade to begin producing commercial revenue.
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