2 of Tesla’s most promising rivals are picking up steam

Rivian R1T
The Rivian R1T pickup.

  • Lucid and Rivian are two of the startups best suited to challenge Tesla.
  • They both seem to be hitting their stride.
  • Both companies are on the brink of delivering their first vehicles.
  • See more stories on Insider’s business page.

Tesla has dominated the US electric car market for years as the sole startup that’s managed to mass-produce EVs and keep the lights on. Today, Elon Musk’s automaker hardly qualifies as an startup anymore (it’s worth some $750 billion), but a growing number of new manufacturers think they can replicate Tesla’s success.

Two contenders have risen to the top of the heap as their years-long efforts finally start to pay off. Lucid Motors and Rivian have both been making strides as of late and are set to start delivering their debut vehicles in 2021.

Rivian, which is working on a pickup truck and a Range Rover-esque luxury SUV, announced Tuesday that its vehicles are certified for sale in all 50 states and that its first customer-ready R1T pickups rolled had rolled off the production line in Normal, Illinois. Rivian’s first saleable vehicle comes more than a decade after CEO RJ Scaringe founded the company in 2009.

Earlier in September, the Environmental Protection Agency rated Rivian’s SUV and pickup at an impressive 316 and 314 miles of range, respectively.

Lucid Air exterior_5
The Lucid Air.

Rivian plans to start shipping R1T Launch Edition trucks to preorder holders by the end of September, followed by its first R1S SUVs later this fall. It confidentially filed for an IPO in August and is aiming to go public around November, Bloomberg reported.

It’s reportedly seeking a valuation of roughly $80 billion, more than Ford or General Motors.

Lucid, for its part, recently made good on its longstanding promise to build the longest-range EV on the market. The EPA on Wednesday gave its debut vehicle – the Air Dream Edition R sedan – a range rating of 520 miles. It’s a staggering rating, and no production EV has even come close to delivering that sort of mileage between charge-ups.

The Tesla Model S, which has led the market in battery range for years, can travel 405 miles on a full battery, according to EPA estimates.

Lucid has already begun building preproduction cars at its factory in Arizona and says it will start shipping the $169,000 Air Dream Edition to preorder holders later in 2021. The company is taking a page out of Tesla’s playbook by starting with a super-premium vehicle and working toward more affordable offerings, including a $77,400 base model of the Air and a small SUV called the Gravity.

Some on Wall Street are optimistic about Lucid’s potential to challenge Tesla and legacy automakers alike. In a Wednesday note to investors, Bank of America analysts called Lucid potentially the next Tesla or Ferrari, noting that it is “a relative competitive threat to the universe of incumbent automakers, with innovative technology, attractive product, compelling brand, clean sheet manufacturing approach, and impressive management experience.”

Shares of Lucid have risen 18.5% since Wednesday, and are up some 130% year-to-date.

Still, mass-producing cars is a notoriously tricky and expensive business. And just because Lucid and Rivian are able to start delivering vehicles to customers, that doesn’t necessarily mean they’ll be able to do it for long. Tesla famously had numerous brushes with failure and financial disaster on its way to the top.

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Lucid is the Tesla of electric-vehicle startups, and the stock is set to soar nearly 60%, Bank of America says

Lucid Air.
  • Bank of America initiated coverage of Lucid Motors on Wednesday with a “buy” rating and price target of $30.
  • Analysts led by John Murphy compared the newly public company to Tesla and Ferrari.
  • Lucid has fallen nearly 25% since going public through a SPAC merger with Churchill Capital in July.
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In the vast universe of electric vehicle startups, Lucid Motors is one of the most legitimate.

That’s according to Bank of America, which initiated coverage of the EV maker on Wednesday with a “buy” rating and price target of $30. That’s a 58.3% price jump based off of Lucid’s close on Tuesday.

Analysts led by John Murphy compared the newly public company to Tesla and Ferrari, noting that Lucid’s business model “takes a page out of” the books of the two established auto makers.

“We are initiating coverage of Lucid (LCID) with a Buy rating and $30 PO, based on an EV/Sales of ~3.0x and EV/EBITDA of ~37x on our 2025 estimates,” said the analysts.” These are a premium to TSLA’s early trading multiples and to average multiples from EV OEM SPAC peers, but still a notable discount to TSLA’s recent trading multiples (forward five-year basis), reflecting our view of LCID as one of the most legitimate start-up EV automakers.”

Lucid supplies components for Formula E, the motorsport championship race for electric cars. That part of their business model is similar to Ferrari, which supplies parts for Formula 1, said BofA. Meanwhile, Lucid’s business strategy also mirrors Tesla’s, the analysts said, in that it launches early vehicles at the luxury level before expanding into the mass market.

Lucid jumped to 5.6% to an intraday high of $20.02 Wednesday. The stock has fallen nearly 25% since Lucid went public through a SPAC merger with Churchill Capital in July.

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The Lucid Air is almost here. Here’s how it stacks up to the Tesla Model S.

The Tesla Model S and Lucid Air.
The Tesla Model S (below) and Lucid Air.

  • Lucid Motors is on the brink of delivering its first electric vehicle: the Air.
  • It’s up against the Tesla Model S, the king of luxury electric sedans.
  • Here’s how the two models compare in terms of their price, range, performance, and interiors.
  • See more stories on Insider’s business page.

All the big guys are coming for Tesla. But don’t forget about the scrappy upstarts also vying for a slice of the soon-to-be-massive electric-vehicle market.

Lucid Motors, founded by former Tesla chief engineer Peter Rawlinson, is one of the startups closest to delivering its first vehicle: the Air. Packing tons of performance and range, a sleek design, and a tech-laden interior, the Air might give the king of luxury EVs something to worry about.

The Air Dream, the most expensive debut model, is set to hit buyers’ driveways later this year, followed by cheaper Airs down the line.

Here’s how Lucid’s first vehicle compares to the top-dog Model S.

Range

Range is the most important consideration for many potential EV buyers, and it’s one area where Lucid has Tesla beat. The Tesla Model S Long Range is currently the longest-range electric car you can buy, promising 405 miles of driving on a full battery, according to the Environmental Protection Agency.

Lucid Air exterior_6
The Lucid Air.

Lucid says the Air Dream delivers more than 500 miles of range, blowing Tesla and every other manufacturer out of the water. That’s in the Range trim. No word yet on how far the Dream Performance can go.

It appears this isn’t all talk, seeing as the Air Grand Touring has already achieved an EPA range of 517 miles. Lucid says the base Air Pure will get 406 miles of range.

Price

Lucid is taking Tesla’s approach to new vehicles, starting with an expensive, upmarket car and working down toward a more economical model. The Air Dream, which is already pre-sold out, costs $169,000. For comparison, the Model S Plaid, Tesla’s fastest and highest-end Model S, starts at $130,000.

Tesla Model 3
The Tesla Model S.

The base price for an Air will be $77,400, while the Model S currently costs $89,990.

Two other Air trims will be available: a $95,000 Touring version and a $139,000 Grand Touring model.

Performance

The sportiest Air will be the Dream Performance, which promises 1,111 horsepower, well over 700 pound-feet of torque, and a 0-60-mph time of 2.5 seconds. The Dream Range claims to produce only 933 horsepower. Lucid says it’ll sprint to 60 mph in 2.7 seconds.

Both Dream models, by the numbers, are outrageously quick and powerful. But they don’t beat the Model S Plaid, Tesla’s latest and greatest sedan that has nabbed the title of the world’s quickest production car.

Lucid Air exterior_1
The Lucid Air.

The Plaid’s three motors put out a claimed 1,020 horsepower, enabling the sedan to rocket to 60 mph in around two seconds. The base Model S Long Range is no slouch either, promising to hit 60 mph in 3.1 seconds.

Here’s what the rest of the Air lineup promises in terms of power: 480 horsepower for the Pure, 620 horsepower for the Touring, and 800 horsepower for the Grand Touring. All Airs will have all-wheel drive, like all Model S cars.

Interior

Both the Air and Model S have minimalist interiors packed with screens. But each manufacturer has taken a slightly different approach.

The Model S, which pioneered the massive in-car screen, comes with a giant central touchscreen that owners use to control most aspects of the car. It also has a smaller display in front of the driver and a touchscreen for rear passengers.

Tesla Model S interior
Tesla Model S interior.

The Air comes with a 34-inch curved screen for the driver, along with a smaller touchscreen near the center console. The Air has a few physical buttons for the climate controls.

Lucid Air interior_3
The Lucid Air’s interior.

We’ll take a deeper dive into the Air’s interior, features, and on-road performance once we get in one for a test drive.

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Lucid Motors drops 19% ahead of the EV maker’s first share lockup expiration since SPAC merger

Lucid Air.
  • Lucid Motors tumbled as much as 19% on Wednesday as the share lockup period expired for some shareholders.
  • It’s the first day some of Lucid’s biggest stakeholders can sell their stock since the company’s SPAC merger in July.
  • Lucid is trading roughly 30% lower than the close on its public debut day.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Lucid Motors fell as much as 19% on Wednesday, the first day of expiry for shareholder lockups. Some investors can now sell stock following the closure of the electric-vehicle maker’s SPAC merger in July.

Many of the company’s largest stakeholders – like affiliates of BlackRock, Fidelity Management and Research,
Franklin Templeton, and Neuberger Berman – were kept from from selling their shares before September 1.

Lucid Motors is setting up for its 14th straight day of declines. The electric vehicle company has fallen roughly 30% since going public through a SPAC merger with Churchill Capital in July.

Lucid is seen as a Tesla competitor with its high-end luxury electric vehicles, and CEO Peter Rawlinson told CNBC over the summer that his company is well positioned to compete with the undisputed leader.

The company’s first car, the Lucid Air, is a luxury sedan that is projected to have a range of over 500 miles on a single charge. Lucid Motors restated on Tuesday that it is planning to begin customer delivers of the Lucid Air in 2021.

LCID chart
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Lucid says its first electric car drove 445 miles from Los Angeles to San Francisco without charging, easily besting Tesla’s range

Lucid Air
Lucid Air.

  • In a range test with Motortrend, the Lucid Air drove 445 miles on a charge with energy to spare.
  • Tesla has led the range game for years with the Model S, which has an EPA range of 405 miles.
  • Lucid claims its $169,000 Air Dream can travel up to 517 miles on a full battery.
  • See more stories on Insider’s business page.

Electric-vehicle startup Lucid Motors is on the cusp of delivering its first vehicle: the Air sedan. But it still faces the daunting task of convincing shoppers to go with an untested upstart over a proven EV maker like its biggest rival, Tesla.

There’s one key edge that Lucid may have over Elon Musk: range. Lucid proved that the Air gives Tesla’s best cars a run for their money and then some during a recent journey in the car with Motor Trend.

Lucid claims the limited-run Air Dream Edition, its first vehicle, can travel up to 517 miles on a full battery, over 100 miles more than the Tesla Model S, which has dominated the range game for years.

Motor Trend drove an Air 445 miles from Los Angeles to the Bay Area on a single charge and noted 30 miles of range remained, a feat that would have been unthinkable just a couple of years ago. (Tesla crossed the 400-mile-range threshold just last year). The outlet took the trip with Lucid CEO Peter Rawlinson, whose identical vehicle showed 72 miles of charge left, adding up to a total range of 517 miles.

Read more: Rivian rival Lucid’s CEO says he delayed his $77,000 EV by nearly a year because he can’t gamble on quality control: ‘We have one shot at this’

Range is a top consideration for EV buyers who want to comfortably take long trips even as charging infrastructure in the US lags. That Lucid can produce a vehicle with a range so far ahead of the competition (albeit at a high price) bodes well for its future in the cutthroat and increasingly packed EV space.

Motor Trend and Rawlinson made the journey in a pair of Dream Edition Range models, which Lucid announced on Wednesday would be an available trim in addition to Dream Edition Performance models. The Performance version promises 1,111 horsepower and a 2.5-second 0-60-mph time, while the Range variant is more geared toward squeezing out mileage. It still claims a bonkers 933 horsepower.

Both vehicles start at $169,000, but Lucid has more affordable cars in the pipeline. Lucid delayed the Air’s launch from the spring and plans to start shipping Airs by late 2021.

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Churchill Capital shareholders approved the SPAC’s merger with Lucid Motors after CEO Michael Klein appealed directly to retail investors

Lucid Air.
Lucid Motors plans to go public in a $24 billion tie-up with a SPAC

  • Churchill Capital Corporation IV is set to close on its merger of EV start-up Lucid Motors on Friday.
  • The closing of the merger was delayed earlier this week after not enough shareholders had cast a vote on the deal.
  • It took a personal appeal to retail investors from Churchill chairman Michael Klein to get approval.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Shareholders of Churchill Capital Corporation IV approved its merger with EV start-up Lucid Motors following a personal appeal by Churchill chairman Michael Klein to retail investors using trading apps like Robinhood.

The merger deadline was extended on Thursday after not enough shareholders had voted.

“We welcome all of the new shareholders,” Klein said in an investor call on Thursday. “However, we need you to participate in the election process. In particular, if you are participating from the new trading platforms, the new apps that may not necessarily be directing you clearly to a voting service, we need your vote,” Klein said, adding that it “literally takes one minute.”

Churchill Capital has been a popular SPAC stock with retail investors, but it is likely less so after falling 63% from its mid-February peak of $64.84. The SPAC was often a top-mentioned name on Reddit’s Wall Street Bets forum.

Klein also said that e-mail spam filters could have played a role in so few shareholders participating in the scheduled vote and approving the deal on time.

“It should have been mailed or emailed to all stockholders. I know this is technical. And I know that some of those emails may have gone into your spam folder or otherwise. But it’s critical and important to vote and to have the tools to vote,” Klein said. “I need to remind you to check your emails, and check your spam emails.”

Ultimately, 98% of votes cast were in support of the proposed merger between Churchill and Lucid. Shares of the company were up as much as 7% in Friday trades.

Lucid Motors will delist from the New York Stock Exchange and trade on the Nasdaq under the symbol “LCID” beginning on July 26.

Churchill Capital stock chart

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2 of Tesla’s most promising rivals keep getting delayed

Lucid Air exterior_8
Lucid’s Air sedan is set to hit streets this year.

  • Lots of startups are aiming to take on Tesla in the ever-growing electric-vehicle space.
  • Rivian and Lucid Motors are two of the most promising contenders.
  • Both have delayed their debut vehicles due to the pandemic but plan to start deliveries in 2021.
  • See more stories on Insider’s business page.

Tesla has reigned supreme as the lord of electric vehicles for years, even as established manufacturers and scrappy startups attempt to come for its crown.

Two of the most promising upstart EV makers – Rivian and Lucid Motors – were on the brink of launching their first vehicles onto the US market this year. But the pandemic had other plans.

Rivian earlier this month told customers who had reserved Launch-Edition models of its adventure-focused SUV and pickup that they’d have to wait a few extra months to take delivery. The R1T truck’s launch was postponed from July to September, while the R1S SUV will now arrive later in the fall, Rivian CEO RJ Scaringe told customers in an email.

“The cascading impacts of the pandemic have had a compounding effect greater than anyone anticipated. Everything from facility construction to equipment installation, to vehicle component supply (especially semiconductors) has been impacted by the pandemic,” he said.

Rivian R1S
The Rivian R1S was delayed to the fall.

Rivian first pushed R1T deliveries by a month in May due to hurdles like shipping delays and the ongoing microchip shortage, a spokesperson said.

Read more: Rivian-rival Lucid’s CEO thinks the EV industry is due for a brutal shakeout because startups are missing one key ingredient

Similarly, Lucid in February delayed the launch of its debut luxury sedan – the Air – to the second half of 2021. Customers were supposed to receive their cars in the spring. In a letter, Lucid CEO Peter Rawlinson chalked up the delay to the pandemic’s impact on the startup’s testing activities, supply chain, and its preparations for sales and service.

That was the second time Lucid shifted its plans due to the pandemic; the startup first planned to start producing the Air in late 2020.

With a claimed range of more than 500 miles and a starting price of around $77,000, the Air is set to give the Tesla Model S a run for its money when it hits streets – on paper, at least. Tesla has led the industry in range for ages with its 400-plus-mile Model S.

Rivian R1T
Rivian says customers will start receiving their R1T pickups in September.

Lucid and Rivian represent two of the EV startups furthest along in their development. Both have operational factories, showrooms, and heaps of binding preorders, which can’t be said of most new companies trying to replicate Tesla’s success. Rivian has amassed several billion in funding from investors like Amazon and Ford. Lucid is preparing to go public through a reverse merger in a deal that will give it $4.5 billion in fresh funding.

Although Lucid is on track to start shipping cars this year, the pandemic has made the final stretch more difficult, Rawlinson told Insider. Lucid has run up against quality issues with some of its suppliers – problems that, under normal circumstances, would’ve been addressed long ago with trips to suppliers. The pandemic ruled that out.

But Rawlinson wants to get every detail spot on, and that’s why he pushed the Air’s launch.

“This is a one-shot deal to get it right. Why don’t we go really conservative?” he told Insider.

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Ford-backed EV battery producer to go public via SPAC merger at a $1.2 billion valuation

Solid Power Inc batteries
  • Solid Power announced it is going public via a SPAC merger in a deal that would value the entities at $1.2 billion.
  • The company is expected to have $600 million in cash, including $165 million from private investors.
  • Ford Motors and BMW recently participated in the $135 million Series B funding of Solid Power in May.

Electric-vehicle battery producer Solid Power on Tuesday announced it’s going public by merging with blank-check firm Decarbonization Plus Acquisition Corporation III in a deal valued at $1.2 billion.

The company is expected to have approximately $600 million in cash, including $165 million from investors such as Koch Strategic Platforms, Riverstone Energy Limited, Neuberger Berman funds, and Van Eck Associates Corporation. The capital will be used to fund operations and growth.

Ford Motors and BMW recently participated in the $135 million Series B funding of Solid Power in May. The two companies also expanded partnerships with Solid Power to secure all solid-state batteries for future electric vehicles.

Solid Power produces rechargeable batteries for electric vehicles and mobile power markets. The company claims its production mirrors lithium-ion manufacturing processes while eliminating certain expensive and timely steps.

Upon closing of the transaction, which is expected to be completed in the fourth quarter of 2021, the combined company will trade under the Nasdaq ticker “SLDP.”

Solid Power is expected to have a nine-person board composed of a majority of independent directors and will continue to be led by Solid Power’s existing management team.

Other electric vehicle makers went public via SPAC this year such as Lucid Motors and Nikola Corp.

SPACs, shell companies seeking to merge with private companies with the intention of taking them public, have exploded in popularity in the last year.

In 2020, a total of 248 SPACs raised $83.3 billion according to SPAC Analytics. But in the sixth month of 2021 alone, data already show 340 SPACs that have raised $106 billion, comprising 61% of initial public offerings.

Read more: A client portfolio manager at Cathie Wood’s Ark Invest shares which of its ETFs are projected to see the most growth over the next 5 years, and explains the recent downturn in the broader family

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Several of Tesla’s EV competitors advertised their products during Elon Musk’s ‘SNL’ appearance

Miley Cyrus Elon Musk SNL
Miley Cyrus was the musical guest on “SNL,” while Elon Musk hosted.

  • Tesla competitors Lucid Motors, Ford, and Volkswagen advertised during CEO Elon Musk’s “SNL” gig.
  • Lucid used the hashtag “#Firstto500,” saying its EV will have more range than Tesla’s top model.
  • “I drive a Prius,” Musk said during his monologue.
  • See more stories on Insider’s business page.

As Tesla CEO Elon Musk took to the “Saturday Night Live” stage, competing electric vehicle makers saw an opportunity to advertise.

Lucid Motors, Ford, and Volkswagen each advertised their electric vehicles during the NBC broadcast, according to multiple reports. The Verge reported that the commercials all aired within the first half-hour of the show.

Musk during his opening monologue said he’d “reinvented” electric cars. He also poked fun at Toyota’s Prius.

“One reason I’ve always loved ‘SNL’ is because it’s genuinely live. A lot of people don’t realize that,” he said. “We’re actually live right now, which means I could say something truly shocking, like, ‘I drive a Prius.'”

Volkswagen advertised its VW ID.4, while Ford advertised its Mustang Mach-E, according to USA Today.

After Musk’s opening monologue, there was an ad for Lucid Motors’ upcoming Lucid Air, which is expected to travel up to 500 miles without a charge, Fox Business reported.

CNET reported on Friday that Lucid Motors, founded by a former Tesla employee, had posted a tweet about the commercial. The tweet used the hashtag “#Firstto500.”

Lucid Air’s specs place it as a challenger to the high-end Tesla Model S, which starts at $69,420. Lucid Air’s pricing is expected to start at $77,400, according to the company.

On Saturday, the company’s ad voiceover for the Lucid Air said: “Introducing luxury electric.”

Insider reached out to Tesla, Lucid Motors, Ford, and Volkswagen for comment.

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A 2017 lawsuit shows how electric car startup Lordstown paid outside workers to gin up 10,000 pre-orders per year

Vice President Mike Pence at the Unveiling of the Lordstown Endurance_June 25, 2020
Vice President Mike Pence at the unveiling of the Lordstown Endurance.

  • A 2017 lawsuit shows how Lordstown Motors banked some pre-orders for its upcoming pickup truck.
  • The case reveals the company paid outside workers to generate up to 10,000 pre-orders per year.
  • Experts warn pre-orders and reservations are flawed measures of a startup’s potential.
  • See more stories on Insider’s business page.

Electric vehicle startup Lordstown Motors has been paying salespeople to secure pre-orders of its battery-powered truck prototype for at least five years – a practice that is outside the bounds of most startups without a sellable product – a little-noticed lawsuit from 2017 reveals.

In the suit, a former employee accused Workhorse Group, which Lordstown spun out of in 2019, of failing to pay him commissions he earned by logging over 8,000 pre-orders for the Endurance pickup truck now being offered by Lordstown. A recent report by Hindenburg Research noted the suit, but Insider is the first outlet to report its details and its implications both for Lordstown and the host of startups racing to meet growing demand for EVs.

Commissioning pre-orders is not illegal, but it should raise a major red flag for investors, said Gartner analyst Michael Ramsey.

While Lordstown’s practice appears unique in the EV startup world, experts warn that no matter how they’re collected, pre-orders and reservations aren’t great tools for predicting which young automakers will prosper. Because they’re typically non-binding, they don’t necessarily indicate what level of demand a vehicle will generate when it enters production. A startup’s success is better determined by its technology and talent than by a metric that hinges more on interest than intent.

Lordstown’s pre-order list ‘obviously does not indicate real demand’

Even with the electric vehicle market starting to grow, deep-pocketed investors are crucial to any startup. It takes billions of dollars to launch an automaker. The industry’s history is littered with failures, and most of today’s startups will likely flounder before their products hit the market, according to risk consulting firm Guidehouse.

To attract capital, many fledgling automakers use pre-order figures as a proxy for the demand their future vehicles will command. Tesla in particular has a long history of doing this. The problem is that these orders represent a consumer’s interest in actually buying the vehicle once it reaches the market – not their commitment to do so.

The fact that Lordstown paid commissions for bringing in these orders further undermines the figures’ credibility, Ramsey said. “It obviously does not indicate real demand,” he told Insider.

Lordstown Motors has been commissioning pre-orders for years

The idea for Lordstown Motors originated at Workhorse Group. In 2019, Workhorse CEO Steve Burns left the startup. He bought the patent for its electric pickup, along with thousands of pre-orders for it, and made it the basis for a new company, Lordstown.

Workhorse Truck
Workhorse Truck

Today, Lordstown boasts more than 100,000 pre-orders for the pickup. That’s impressive when compared to those for similar EV startups like Lucid Motors and Fisker, which have about 8,000 and 14,000 pre-orders, respectively.

In March, short-selling firm Hindenburg Research became the first to report on the questionability of Lordstown’s pre-orders, calling them “largely fictitious” and an attempt to “mislead” investors. The company’s stock fell 16% the day after the report was released and continued to slide.

At the time, Burns responded that the company has been transparent with the status of its orders. He also reiterated Lordstown’s plans to release the electric pickup truck in September.

Pre-orders were heavily incentivized

The 2017 lawsuit was filed against Workhorse by its former director of fleet sales, Jeffrey Esfeld. When he was hired in 2016, Esfeld said, he was tasked with securing up to 10,000 pre-orders per year. In just over a year, he logged more than 8,000 pre-orders, according to the court document. That number alone would account for over 8% of Lordstown’s current pre-orders to date. A Lordstown spokesperson would not confirm whether signatures gathered by Workhorse Group in 2016 are part of that total. (Esfeld declined a request for comment from Insider.)

Esfeld received a commission of roughly $30 per vehicle for each signed pre-order, according to the suit, on top of his $100,000 base salary. He would also receive a commission of 0.14% of the vehicle’s sale price for pre-orders that officially became sales. He was one of several employees that worked specifically on obtaining pre-orders for the truck.

During his time at the company, Esfeld was paid commissions for 3,050 vehicle pre-orders, from companies including Duke Energy and American Electric Power. (The case also notes Esfeld had been working to win over Amazon, which ultimately agreed to buy 100,000 electric delivery vans from Lordstown rival Rivian.) But, he alleged, after laying him off in 2017, Workhorse failed to pay him $440,707 he had earned in commissions, representing about 5,000 pre-orders, including from Ryder, one of Lordstown’s biggest pre-order signees to date. (He ultimately won the suit, and Workhorse paid him an agreed upon amount of $87,000 in damages and $32,245.02 in attorneys’ fees and costs.)

Steve Burns Workhorse
Steve Burns at Workhorse Group

The practice continued at Lordstown. In 2020, the startup hired consulting group Climb2Glory to commission orders, according to Hindenburg Research. On a page that was deleted after the short-seller’s report was released, Climb2Glory referenced how it helped Lordstown generate pre-orders.

Workhorse Group, Lordstown Motors, and Climb2Glory did not respond to requests for comment from Insider.

A questionable spin on a questionable practice

The Workhorse and Lordstown policy of paying commissions for pre-orders appears rare. “This is the first time I’ve heard of a start-up in that space doing anything like that,” Pitchbook analyst Asad Hussain told Insider. Comparable electric car startups, including Rivian, Lucid Motors, Fisker, and Nikola, do not pay commissions for pre-orders or contract workers to secure them, Insider found.

In recent automotive history, Elon Musk set the standard of using pre-orders to preview sales figures. “Tesla’s reservations taught the industry that this is a way to develop credibility with investors,” Ramsey said. But while it once charged $50,000 to pre-order a Roadster, it now asks a mere $100 from someone who wants a Cybertruck. That’s comparable to (usually refundable) reservation fees charged by the likes of Fisker ($250) and Lucid Motors ($300).

That lesson isn’t necessarily a good one, Ramsey said. “Investors need to think long and hard about the viability of the pre-orders that any of these startups are touting.”

Hussain told Insider that investors need to focus more on technology and execution, rather than “propaganda.” He thinks the Wall Street trend of using special-purpose acquisition companies to go public has put a lot of companies, like Lordstown Motors, in a position they’re not mature enough for yet.

Endurance electric pickup truck by Lordstown Motors
Steve Burns with Lordstown’s Endurance.

“The ability for early stage startups to go to market, even without revenue, creates a double-edged sword,” Hussain told Insider. “It allows everyday people to gain access to disruptive technologies like electric cars, but it also puts new companies and investors in a precarious position – how can they prove there will be demand for their product, without revenue? That’s where pre-orders can get tricky.”

For Lordstown, reliance on pre-orders has put it in the crosshairs of notorious short-seller Hindenburg Research. Just last fall, the same group released a damning report on Nikola that caused the company’s stock to plummet and its CEO Trevor Milton to step down. Currently, Lordstown is under investigation by the Securities and Exchange Commission for its pre-order practices. Its stock is trading at around $9, down from a high of $30 in February.

“A lot of these companies tout non-binding pre-orders or reservations,” Hussain said. “But, if you’re actually paying for them [the pre-orders] it does bring up some questions and it is not characteristic of the space.”

“The key question mark for many of these startups is: Can you actually get your factories up and running? Can you actually manufacture those vehicles?”

Mark Matousek contributed reporting.

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