Maybe Wait Before Giving Money to an EV Startup

Building a concept vehicle is hard; building thousands is nearly impossible

I don’t want to be cynical. I’d like to walk into an auto show, see the offerings from a young company and say to myself, “there’s a very good chance that will be in someone’s garage in five years.” That scenario would be great. More companies mean more competition, which means better selection for consumers. 

Sadly, though, reality has a way of making sure I’m suspicious of anything new. And you should be, too. 

Electric car parked at charging station

Viaframe / Getty Images

Let the Good Times Roll

We’ve all seen it again and again: a new company bursts onto the scene with a vehicle that looks like nothing else on the road. It has the range of a Tesla; it’ll charge in a few minutes; the stereo only plays your favorite songs. The doors are made from recycled cans collected by children in a far-off country that are now millionaires thanks to the massive metal order from the startup. The owner has game show host teeth and the bravado that puts potential customers at ease.

What could go wrong?

Well, everything.  

"Reality has a way of making sure I’m suspicious of anything new. And you should be, too."

But at that moment, when the sheet comes off the vehicle at the show, it seems like everything is right in the world. If you’d like to be part of this automotive revolution (somehow, it’s always a revolution), just scan this QR code and put down a deposit to secure your own slice of automotive heaven. 

Except I’m here to tell you, don’t. 

We Built This Car on Thoughts and Rainbows

There are new automakers that have survived their initial launch. The most famous is Tesla. Currently, Rivian and Lucid are actually building and delivering EVs to clients. Not a lot initially, but the machines are running, and both companies have started the near-impossible task of scaling production. Meanwhile, other companies are struggling or crumbling, or, in one case, it’s just a ridiculous hype machine. 

In 2017, Rivian and Bollinger both revealed their electric trucks to the world. Rivian is delivering its vehicle. Bollinger, on the other hand, recently announced it was no longer bringing a consumer pickup to market and would focus on commercial applications. Fortunately, according to the company, those that put down deposits will receive a refund. How that plays out with potential customers getting checks is yet to be seen. 

Bollinger Motors' B1 and B2 electric trucks in black and white

Bollinger Motors

Then there’s Faraday Future. An automaker that’s seen wave after wave of bad news. Executive shakeups, massive delays, financial troubles, and just generally always seeming to be on life support after an initial showing of their vehicle back at CES 2016. 

The company is back, sort of. But after a torrid history, would you give them money for a vehicle? Because you can. You can send Faraday Future $1,500 and $5,000 deposits for future vehicles. But also, you shouldn’t. 

For those looking for something that’s wrapped in a maze of mystery and confusion, there’s Alpha Motor Corporation. A company that’s using two former baristas as spokespeople and has some cool renderings of vehicles. That’s pretty much all we know for sure. Fortunately, they’re not asking for money to place a reservation, just your name and email. But if you do sign up, don’t be surprised to see an email appear asking for some cash. Again, keep your money.

GoFundMe, but for Cars

Automakers, both new and very old, use deposits to judge the potential demand of a vehicle. If 100,000 people put a few hundred dollars down on a just unveiled piece of machinery, it’s likely a good sign for that product. 

The deposit scheme also helps create hype. After opening reservations for the Chevy Silverado EV, GM CEO Mary Barra announced the following day that the​​ Silverado EV First Edition sold out in 12 minutes. No word on how many were actually available for pre-order, but the news is out there, and the hype cycle for the pickup got another boost. 

Rivian R1T electric truck at night with headlights on

Rivian

Startups need the hype way more than the established players. They also need to show investors there's demand. It also helps that all that deposit money can now be used to build cars. Or at least keep people on the payroll and continue to pay a public relations person to keep them in the news. 

That's where it gets a little weird. Deposits are investing in a company's potential. They've done the song and dance, and you think they've got what it takes to make it all the way to the top. Except, like a GoFundMe for a movie, album, company, etc., you're not an investor. You don't reap the benefits like an actual investor. You're putting a car on layaway, hoping the store doesn't shut down before they can build it.

It’s Your Money

Of course, you’re also an adult. And having your enthusiasm for the latest shiny EV that’s not real yet be squelched by me isn’t very helpful. I want people to be excited, and if that EV exhilaration means you want to send a new company money (and you can afford it), go for it. 

I’m just saying don’t hold your breath and be prepared to maybe never see that cash again. Most of the EV startups out there are built by passionate people who really think they’re going to make it. They want to be part of the transportation revolution (there’s that word again). They should know, however, that the process can be financially devastating to a company, its founders, and investors. They started down this path with the knowledge that it could all go wrong. 

I just want to make sure you know that, too.

Want to know more about EVs? We have a whole section dedicated to electric vehicles!

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