Here's why so many electric vehicle startups fail

As the electric vehicle industry faces a string of high-profile failures, several startups that have surfaced in recent years have underestimated their capital needs by billions of dollars, industry insiders said.

Many of the companies that have tried to bring products to market or go public, especially through Special Purpose Acquisition Companies, or SPACs, are struggling. At least 30 EV companies have either suspended their operations, gone quiet or faced the risk of bankruptcy in the last decade, according to AutoForecast Solutions, an industry research and forecasting group.

"Tesla, outside of the Chinese, is kind of the first automaker to start in half a century," said Mark Wakefield, managing director at AlixPartners. "Rivian and Lucid are sort of the next two closest of the Western ones. Both of them have eviscerated $10 billion. So it's interesting to see these other small startups who raise $1 billion or $2 billion and they think that's enough. It's not even close."

The growing EV market has benefited from the support of governments seeking to meet climate goals, and captured the attention of Wall Street. Tesla saw so much success with investors that many skeptics called it a "cult stock."

Tesla controlled more than 50% of the EV market in the U.S. in 2023, sold more than 650,000 vehicles in the country and raked in more than $82 billion in vehicle sales worldwide.

EVs made up 8% of U.S. new car sales that year — and their share of the market is set to grow despite slower-than-expected adoption. EVs are expected to be 46% of new vehicle sales by 2030 — nearly 8 million units.

"Startups, by definition, love vast addressable markets," said Pavel Molchanov, managing director at Raymond James. "This is venture capital