The four largest domestic automakers (GM, Ford, Chrysler, and Tesla) all have some iteration of an electric truck either on the marketplace or in development. It stands to reason that the mass adoption of electric passenger cars will lead to electric trucks edging out their gas-powered equivalents. Given the use case for electric trucks, this space carries a lot of potential opportunity for investors.
That being said, many of these early-stage electric truck companies will likely fail in their pursuits. With the need to develop the right combination of power, range, reliability and price point, only a few companies will ever capture meaningful market share. This is critical to success as it indicates both that the vehicle is attractive to consumers and that the offering can reach a production scale that lowers per-vehicle costs. Lower costs imply profitability which then attracts more capital.
These electric truck companies started with a single idea, which over the months and years has been tweaked and modified based on engineering and market research. Like life in nature, the ones that survive aren’t the strongest, but the ones that adapt the most effectively to changes in the environment. Those that stay on the losing track will eventually fail.
As specialists in turnaround investing, we focus on companies that have “the right stuff,” but whose shares are currently out of favor with investors for what we believe are temporary reasons. We often look for a catalyst that will reverse the company’s direction back on track toward prosperity.
Turnarounds in an industry as early-stage as electric truck manufacturing are notoriously difficult. Yet, investing in some electric truck companies may be worth the exceptional risk (which could result in a total loss of value) if the odds of an exceptional return are favorable enough.
The Electric Truck Company with the Highest Upside
One electric truck maker in turnaround mode is Lordstown Motors (RIDE). Based in northeastern Ohio in a sprawling former General Motors vehicle factory, this company has aspirations to build the Endurance, billed as “the world’s first all-electric commercial pickup.” The future initially looked bright, with RIDE shares surging from their SPAC merger price of 10 to over 31 by September 2020. However, a scathing report this past March by Hindenburg Research cast doubt on Lordstown’s ability to start production in September 2021, the viability of its unique drive technology, and the reliability of its pre-orders. The report, followed by investigations by the Justice Department and the SEC, late regulatory filings, a shrinking cash hoard, and executive suite disarray, drove the shares down to as low as 6.
However, with the August arrival of Daniel Ninivaggi as the new CEO and board member, Lordstown has a chance to survive. Ninivaggi is a long-time auto industry executive who previously was CEO of Carl Icahn’s Automotive Group – a $2.5 billion (revenues) business – and has considerable board-level experience with struggling public companies. He brings immense strategic, leadership and capital markets savvy to Lordstown, all of which are critically needed immediately. The company has also added several capable new executives to its leadership team, including a former head of Tesla’s manufacturing, and we anticipate the arrival of a permanent CFO. Lordstown is in dire straits, with its unproven technology, numerous direct and well-funded competitors and dwindling cash balance. Survival is not certain (the shares, which have a 20% short interest, could go to zero), but with its aggressive changes, Lordstown makes for a fascinating turnaround opportunity.
Which electric truck companies or electric car companies do you think have the highest potential?