Tencent technology news on November 12, electric vehicle manufacturer rivian completed its listing on Wednesday. With the stock price soaring, its market value exceeded US $100 billion, surpassing old auto giants such as Ford (US $78 billion) and General Motors (US $87 billion). This is also the largest initial public offering (IPO) of a US company since Facebook in May 2012.
Rivian’s great attraction to investors may come from their trust in the company’s supporters, the most important of which is Amazon founder Jeff Bezos. Amazon’s support for the business potential of electric vehicle manufacturers has made other investors, including Ford, optimistic about its prospects, despite its competition with rivian in the field of electric pickup trucks.
However, for rivian, which has produced only 12 cars so far this year, is this valuation too high? Many analysts believe that the valuation of the newly listed company looks incredibly high, and its revenue in the last quarter was less than $1 million.
The stock price trend is uncertain
These investors hope rivian will become the next Tesla, but to really understand its future, it is necessary to study the stock price trend of other electric vehicle companies after IPO. Rivian shares closed at $100.73 a share on Wednesday, up 29%, higher than its IPO price. However, for the IPO of electric vehicles, the sharp rise in share prices on the first day of trading is not unheard of.
The experience of Tesla, ideal and Xiaopeng shows that their share prices rose by more than 40% on the first day of trading. Lucid motors and Weilai motor had little increase, but their shares were 10% and 12% higher than the IPO price respectively.
If they can prove their ability, their share price will get a greater boost. Lucid Motors’ share price has remained stable for many years, but its share price soared after the $169000 airdream edition sedan began to be delivered to customers. Two weeks after the announcement, lucid’s share price reached $47.53 a share, the highest price since the company announced its backdoor listing in July. If rivian delivers 100000 delivery trucks to Amazon by the 2025 deadline, its share price may also soar.
Ideal and Xiaopeng’s share price fluctuate slightly. Both companies had strong vehicle delivery in the last quarter, but faced a lot of competition. They not only need to compete with Tesla and Chinese electric vehicle peers, but also have to deal with the attack after the transformation of veteran American carmakers such as Ford, general motors and Volkswagen. Weilai’s market value has reached US $64.2 billion. Although it has not yet achieved profitability, it is promoting three new electric vehicles. Last year, its share price exceeded $50 highs several times.
Of course, Tesla is still a unique overlord. In October, the company became the first carmaker with a market value of more than $1 trillion. Whether this figure is reasonable remains to be discussed, but the company plans to deliver nearly 1 million vehicles in 2021, with a higher profit margin than its peers. Tesla not only produces and delivers cars, but also provides software services, such as charging, maintenance, insurance, transmission system and battery, and sells carbon credits to other manufacturers.
Obviously, rivian still has a long way to go. An important test is when the 2023 exclusive contract with Amazon expires. To continue to grow, the package will need more transactions. Considering that the demand for electric vehicles will only be higher and higher, this should not be difficult.
Whether cash can be converted into actual business is questioned
Although rivian is not even close to profitability, Tesla has not been profitable for more than a decade since its establishment. Based on the previous rounds of financing of billions of dollars, rivian raised $11.9 billion through an initial public offering (IPO), but it is still unknown whether it can turn all this cash into a healthy real business.
Rivian has just begun to produce actual vehicles for public sale, but it is far ahead of most electric vehicle start-ups. Its first model, the $67500 electric pickup r1t, has brought many new things to the extremely popular pickup market.
Compared with Tesla, rivian models cater to people who prefer adventure and outdoor activities. In the test, r1t is amazing with its series of unique functions and super off-road ability. But it needs to produce pickups on a large scale to satisfy investors. From September to October this year, the company shipped 156 pickup trucks. Rivian plans to start producing and delivering R1 SUVs at similar prices in December.
RJ scaringer, CEO and founder of rivian, said the company hopes to increase its manufacturing capacity to 1 million vehicles a year by 2030. As Tesla has experienced numerous financial collapses and the so-called “production hell” period, mass production of new cars from scratch can be very challenging. Rivian has an ambitious plan to have all customer vehicles repaired and recharged. But before that, it needs to convince people to buy them.
Jessica Caldwell, executive director of Edmunds insight, said that rivian has received nearly 50000 advance orders, but will face fierce competition in the next few years, especially from Ford and general motors, both of which have electric pickups coming on the market.
“Although Detroit automakers are often depicted as dinosaurs by Silicon Valley people, the reality is that they have decades more experience in truck development than their start-up competitors and have the resources to mass produce at a lower cost,” Caldwell said in an e-mail statement
Rivian’s future also depends on businesses other than consumer trucks and SUVs. The company promises to build 100000 delivery vans for major investor Amazon by 2030. The company’s goal is to sell other commercial models from 2023, as well as fleet management software and charging solutions.
Investors undoubtedly hope that rivian can follow Tesla’s footsteps and become the next automobile company with a market value of $1 trillion. But the startup still has a long way to go.
Not blindly copying Tesla
Bezos recently called rivian founder RJ scaringer “one of the greatest entrepreneurs I’ve ever seen”. Then he asked, “now, RJ, where is our delivery truck?”
Bezos’s comments captured the core of the huge hype around rivian and the biggest concern about the company’s expectations. Rivian has just started producing electric vehicles for a few months, and the company expects to ship slightly more than 1000 vehicles this year. However, Amazon’s ordering 100000 electric delivery vans by 2025 and rivian fashion pickup trucks may attract the same enthusiasm as Tesla sports cars and cars, adding attraction to the company’s prospects.
Rivian hopes to raise funds through IPO to increase production based on its current capacity at its normal plant in Illinois. The plant used to belong to Mitsubishi, where the annual production capacity was 150000 vehicles. Rivian plans to build more production facilities internationally.
Prior to the cash raising, rivian had raised amazing funds in the private market. Since the establishment of the company in 2009, investors have invested US $11.15 billion, of which US $10 billion is invested after 2019. Rivian is not the only company to benefit from investor enthusiasm for mobile startups. According to pitchbook, the industry has received more than $75 billion in investment in the past year alone.
Pitchbook analyst Asad Hussain said: “the story of electrification is not just about moving people around. Investors pay more and more attention to logistics. Mobility and supply chain are at the confluence of innovation, and rivian is really at the center of this.”
Rivian was founded by RJ scaringer in 2009. It was originally named mainstream motors. It was expected to start manufacturing a small electric sports car, but the project was soon abandoned. RJ scaringer later wrote in a letter to investors that “it is becoming increasingly clear” that this car will hardly play a role in addition to Tesla’s achievements.
On the contrary, RJ scaringer decided to create an adventure brand in the mode of north face or GoPro. He spent ten years quietly developing battery technology and design, and then launched two models at the 2018 Los Angeles Auto Show: r1t pickup truck and R1s SUV.
Galileo Russell, a renewable energy investor and a member of the board of directors of arcimoto, an electric vehicle manufacturer, said this shift should be commended. He recalled: “rivian has their own vision. I think it’s great. They don’t just want to copy Tesla. But I also think Tesla’s success has raised rivian’s valuation. People think Tesla’s actions can be easily copied.”
In this regard, rivian has attracted the attention of Jeff Bezos, then CEO of Amazon. Bezos visited rivian’s Michigan headquarters in late 2018 and met with RJ scaringer. By February 2019, Amazon led a round of $700 million investment. The company later revealed that delivery truck orders would be a key part of its commitment to eliminate carbon emissions.
Pitchbook analysts estimate that the agreement is worth up to $4.5 billion for rivian if after-sales revenue such as maintenance is included. In a regulatory filing, Amazon was disclosed to hold 22% of rivian, followed by a series of exclusive rights to rivian technology. Rivian hopes to provide delivery vans to other companies, but it will not be done until at least 2023.
The prospect of domestic and foreign aggression is worrying
Amazon’s participation is the best recognition of rivian’s business potential, triggering a new wave of investor boom. This includes Ford, although there are overlapping and competitive products between the two sides. GM was also an early supporter and held intensive negotiations in the hope that rivian could help it compete with Tesla.
However, after the exclusive negotiation window between the two companies passed, Ford took action under the leadership of Joe Hinrichs, then chief operating officer. RJ scaringer had dinner with Hinrich and finally settled most of the deals on a private flight from Seattle to Detroit on a Ford commercial jet. Meanwhile, GM is still preparing a press conference to announce its investment plan.
In April 2019, Ford invested $500 million in rivian (later rose to $1.2 billion) and occupied a seat on the board of directors, which greatly annoyed its Detroit competitors. A person familiar with the matter said that Ford, led by Jim Hackett, the former boss of Steelcase, was in a state of “panic” about its electrification ability. “All the start-ups were hyping, and Ford panicked and thought we needed to be part of it,” the person familiar with the matter recalled
One of the terms of the agreement is that Ford will use rivian’s own architecture to build a car, the so-called “skateboard”, which consists of batteries and components that can power many different types of cars. However, according to several people familiar with the matter, Ford has now abandoned its plan to let Lincoln use the technology and greatly reduced its contact with the start-up. People familiar with the matter said that since then, Ford has increased its internal electrification efforts and unveiled the F-150 lightning truck and Mustang mach-e, both of which use proprietary systems and are under development when Ford invested in rivian.
With such fierce competition looming, cautious analysts worry that rivian’s valuation includes success factors, which can not be guaranteed. Laura Schwab, former vice president of sales and marketing at rivian, said she had warned the company that its delivery goals were “unattainable”. Schwab is currently suing rivian, who claims she was illegally dismissed two days after filing a gender discrimination complaint.
Of the 100000 delivery vans ordered by Amazon, only a few test vehicles have been on the road so far, and production is expected to begin by the end of this year. At the same time, rivian’s pickup was praised for going offline before its competitors, but the company said that of the pre purchase orders for r1t and R1s models slightly higher than 50000, so far only 156 have been delivered, and “almost all” have been delivered to rivian’s employees.
In contrast, Ford’s F-150 lightning is the first electric version of its best-selling pickup. It has received more than 160000 advance orders and will start delivering to customers this spring. Analysts say this leaves little room for rivian to make mistakes, and new carmakers often encounter quality control problems, especially in the context of supply disruptions related to the epidemic.
Ivan Drury, senior analyst at Edmunds, said: “it’s hard enough for established carmakers, let alone newly established carmakers. In addition, the whole industry is dealing with new problems, such as chip supply crisis, which will only increase complexity.” (reviewed by Tencent technology / Jinlu)