Michael M. Santiago / Getty Images
The electric car manufacturer Rivian hit the public markets with a big spray.
Rivian shares rose on their first trading day on Wednesday after the company completed one of the largest IPOs in U.S. history.
They have settled down a bit after the first pop, but the company is still valued at close to $ 100 billion – a greater market value than Ford or General Motors has, though not as high as Tesla’s astonishing valuation of $ 1 trillion.
That’s a lot for a company that has only built a few hundred vehicles and has not yet made a profit. But Rivian hopes to repeat Tesla’s staggering rise from car startup to mass market maker.
It plans to sell pickup trucks, SUVs and a delivery vehicle, and it counts Amazon and Ford as some of its key shareholders.
Here’s why Rivian attracts so much buzz.
Electric cars are hot
Companies may disagree on how quickly a transition to electric vehicles will happen, but the entire industry embraces the idea that battery-powered vehicles are the future.
At the COP26 climate negotiations on Wednesday, dozens of governments and companies embraced a goal of selling only zero-emission vehicles by 2040 – or 2035 in major markets. This basically means replacing all new gas or diesel powered vehicles with a battery electric one.
Spencer Platt / Getty Images
The scope of this transition is enormous, which poses a major challenge for existing car manufacturers – and an opening for new players in the market.
“There are many opportunities,” said Stephanie Brinley, an analyst at IHS Markit. “And of course, Tesla’s sharp rise has whetted the appetite for who can do it again.”
Tesla is currently the world’s most valuable automaker, despite producing fewer vehicles than its competitors.
Rivian won the race to build the first electric pickup
Americans love pickup trucks and throw a lot of money at them, then car manufacturers competed to bring the first battery-powered truck to market. Rivian won that race and started deliveries of its R1T this fall.
The R1T starts at $ 67,500 and is marketed to outdoor enthusiasts. An optional feature is a pull-out kitchen with induction hob and a sink designed for cooking on campsites. It pairs adventure-oriented specs with a luxurious interior; CNN called it a “glampers dream truck”.
Rivian may have been the first electric pickup on the market, but it will not be the last.
Established automakers are launching electric versions of their pickup trucks, including Ford, the maker of the best-selling pickup in America.
“It will be challenging for Rivian to compete with the larger, cheaper Ford F-150 Lightning when it becomes available, and competition in space will be even tougher as GM is also expected to unveil its all-electric Silverado at CES next year,” says Jessica Caldwell, executive analyst at Edmunds, referring to a popular trading conference.
Jeff Kowalsky / AFP via Getty Images
It is also aimed at the commercial supply market
Rivian has another big advantage: It has a huge deal with Amazon to build electric vans. Amazon invested a lot of money in the startup and owns a significant stake in Rivian.
The retail giant has committed to buying 100,000 delivery vehicles from Rivian – a big deal for the young carmaker.
That’s as many vehicles as Tesla must deliver to the rental car company Hertz in a deal that sent the shares in the electric car manufacturer up significantly.
Other electric car manufacturers have stumbled
A bunch of startups have tried to recreate the Tesla magic, with spotty success.
Hydrogen truck company Nikola and electric pickup maker Lordstown have been investigated by the Securities and Exchange Commission over allegations of fraud, while other companies have just disappointed with repeated delays in their promised vehicles and with their underperforming stock.
Some analysts believe that Rivian is better positioned than its competitors, especially because it has actually shown that it can build its product.
“Rivian has mostly been a little more nose for the grindstone and done the work and get it done,” says Brinley, from IHS Markit.
Another electric start-up might say the same thing: Lucid, which was listed earlier this year via a different route, also started deliveries of its luxurious electric sedan. It currently has a market value of about $ 70 billion.
Patrick T. Fallon / AFP via Getty Images
Still, it will be a huge challenge for Rivian to upscale
Delivering a vehicle to consumers was actually a big achievement for the startup, but the quantities are still small.
Rivian has tens of thousands of pre-orders, but expects to deliver only 1,000 vehicles by the end of 2021. The company’s plant in Normal, Ill., Can hypothetically produce hundreds of thousands of vehicles, but Brinley says the Rivian needs to be truly sustainable expanding to more plants.
“Let’s not put the cart before the horse,” said Asad Hussain, a mobility analyst at Pitchbook. “I think the real challenge will be to increase that production capacity.”
The listing should help. Its IPO brought in nearly $ 12 billion to Rivian, a cash infusion that the company will use to tackle the challenging problem of upscaling.