No, you are not dreaming. The collapse of the Silicon Valley bank evokes memories of George and Mary Bailey barely keeping Building and Loan afloat amid the bank run that plagued financial institutions (and more importantly, the people who had their money) before the onset of the Great Depression. While we know running on a bank isn’t great, many are left wondering what this will do to the industry. Will this affect automakers? ?
What happened with the Silicon Valley bank collapse?
News networks around the world cover Depression-era images of long lines winding around bank branches. The queues are full of anxious and even panicked people trying to withdraw all the money from their account into their account before anyone else does.
, SVB held more than $200 billion in assets before the end of last week. It has since experienced the second-worst bank failure in history. Part of SVB’s steep ups and downs is due to the fact that the majority of its business has been from tech startups and venture capitalists.
Have any car companies banked with SVB?
MotorTrend decided to investigate if SVB works with any of the auto companies. While some car startups have worked with SVB, there haven’t been many. MT found that TrueCar, OTTO Motors, Clearpath Robotics, Beepi, AutoLeap, Trucker Path and DRIVIN have all secured SVB funding.
Most people may not recognize all of these names, but many will recognize one; , which received $340 million from SVB. Most of the other companies wrapped up in the drama are heavy tech-based companies like Clearpath Robotics, which is developing self-driving vehicle technology. Trucker Path is another service-based app that helps drivers plan trucking routes efficiently.
What does this mean for companies that have dealt with SVB?
In TrueCar’s case, the company has already secured its funding. So, they’re fine, at least until they need more funding, at which point SVB will be more than just a memory.
For businesses or other individuals who have funds with SVB, the Fed took control of the bank. The biggest ripples to come from this will be the Fed getting close and personal with many corporate finances affected. This likely makes some companies sweat a little.
The auto industry is only beginning to recover from all the problems caused by the coronavirus. Now they have to grapple with inflation and bank failures. Even all the automakers that have nothing to do with SVB are sweating because the entire finance world is sweating.
MotorTrend cites predictions by auto industry financial experts that things could get worse in the future, but for now it sees companies like TrueCar grappling with cash flow issues. “TrueCar is a good example of this. They charge dealers a set amount of money to do business, but most of the money they used to run their operations comes from investors,” Lopez said. “They need a huge cash injection.”
Will more banks fail?
No one can answer this without a crystal ball. However, for now, lending is likely to get tighter across the board. Even for offline companies, the actions of SVB and its investors will have widespread implications for the overall market. Of course, a very complex industry like the automobile industry will be affected.
