Following in Tesla's footsteps, there's another electric vehicle company that's been making a name for
itself, with a unique twist.
Rivian is probably the most well-backed and important startup outside of Tesla.
And what makes them very unique is that they're focusing right now on SUVs and pickup trucks, which are
obviously in high demand in the United States.
We've called them sort of the Patagonia of electric vehicles, very much an outdoorsy lifestyle positioning.
Before even shipping a single vehicle, the company secured major investments from Ford and Amazon.
The timing of those investments were really important because they were from independent large companies that
said, hey, we have enough faith in this that we're going to invest pretty significantly.
Even more impressive, the new company was trusted with the largest electric delivery vehicle order ever,
100,000 custom-built vans for Amazon's last-mile fleet by 2030.
Amazon's an incredibly important partner to us, it's allowed us to think really big around a complete reset
of what is a commercial vehicle, what is a fleet vehicle.
Our focus is really on sustainability.
We designed this vehicle to be fully electric and have zero emissions.
I think it's a game changer and there's no vehicle like this on the road today.
That commitment is really good for them in the sense that it helps secure a future.
There will be revenue coming in because they have a deal.
When Rivian went public in November 2021, it was one of the largest IPOs in U.S.
History.
When they did their IPO, which was, by the way, that was a traditional IPO, not a SPAC deal like we've seen
with some of the other EVs. They raised a ton of money.
That's everything in the auto business if you want to be successful.
But the turbulent economy has cast a shadow over its rocketing success.
As the market responded to inflation and fears of a recession, the stock took a big hit.
The biggest problem when share price falls for a company like this is that it reduces the number of
bullets in their holster.
But with the Amazon deal in its back pocket, some are confident the EV maker can weather the storm.
When Amazon invested in them and put real money in them, but more importantly, put a commitment to buy all
those vehicles from them, they changed the market dynamic around that company.
We'll see over the next couple of years as these are out in the field.
How do they hold up? How does this work out?
It could be longer term, a really interesting business for Rivian.
I started the company in 2009, and the mission and the purpose of me starting the business was to have as much
impact around how we think about transforming our energy and transportation system towards a carbon
neutral future.
Rivian had been around for several years before anybody really knew that they were.
They hired engineers and designers and project people from the automotive industry.
It didn't necessarily try to reinvent it themselves.
Rivian launched its first vehicle, the R1T electric truck, at the end of last year.
It's been working to scale up production and is planning to ship its SUV, the R1S, built off of the
same platform, later this year.
It was a long process to get them to market.
They've had some production snags early on.
Volumes aren't huge yet, but they're doing pretty well.
When we were touring the factory with Rivian earlier this year in Normal, Illinois.
It was moving at a slow pace and it continues to move at a slow pace.
Something like our R1T has more than 2000 components in it, from more than 400 suppliers, and the orchestra of
getting all those parts produced and ramped at the same rate and into the right location at the right time
and in the right sequence. It's a complex process.
Even with a starting price of $73,000, its vehicles are in demand.
In its 2022 second-quarter earnings, the company said it has around 98,000 net preorders of its R1 vehicles.
People who have been in their vehicles like them.
That may sound like an oversimplification, but the reality is that's a pretty big benefit.
The company had a long and arduous road leading up to production, but it had some serious help.
Receiving $700 million from Amazon in 2019 and $500 million from Ford a few months later.
When Ford first invested in Rivian, the intent was that they would share a platform with Rivian, that there was
going to be more product collaboration between those two companies.
What Ford Motor Company did for them was production help.
For a while, their production chief was on Rivian's board.
They had talked about doing a product together with Rivian.
Despite working together to develop a joint vehicle, the companies ended up canceling those plans.
That kind of fell apart once Jim Farley, the CEO, decided that we're going to do this on our own.
But Rivian's partnership with Amazon has been big for the company.
The scale of Amazon just made this such a big deal, you're going to be seeing these vans everywhere over
the next couple of years.
One of the biggest benefits for Rivian is the ability to get scale.
Scalability for the automotive industry is huge.
It brings down costs.
It gives you a little bit more leverage with suppliers, something that Rivian definitely needs right
now.
This was a big part of the success of their IPO, that they had this deal in their pocket, that it was a big
customer who was obviously very well funded and was going to give them exposure and wasn't going away.
First announced in 2019, Amazon recently began making deliveries with the Rivian EDV 700.
We've taken feedback from drivers, from the team at Amazon, to really understand how do we not only
electrify Van, but importantly, how do we rethink the driving experience, the safety of the vehicle and the
usability of the vehicle?
We're beginning to roll these out across a dozen cities in the United States.
By the end of the year, we'll have thousands delivering packages to more than a million customers
across 100 major U.S.
cities.
It went through a number of different changes over the last nine months or so as they built prototypes and
Amazon beat on them and then they came back.
And this is how vehicles are developed, especially for a specific customer with specific needs.
The van, coming in two sizes, is a last-mile vehicle that will help Amazon reach its goal of a zero-emission
delivery fleet by 2040.
Rivian, and once we met them and met RJ, it was very clear to us that they shared in that mission and we
could work together to build a brand new type of sustainable fleet.
As years went by, we had an opportunity to talk to this with a number of different potential partners and found
an amazing partner in Amazon where we had this wonderfully aligned view around what we can do in terms
of demonstrating a path to carbon neutrality in a really scaled way.
Last mile delivery, this is seen as a promising area for EV technology.
There are a number of little companies that have tried to get into this space.
We also have Ford coming in with their own electric transit van.
The close collaboration allowed Rivian to integrate technology, including cameras and fleet systems usually
added aftermarket.
There's a whole separate sort of industry around converting vehicles and making sure that they outfit
easily. And that's something that Amazon and Rivian are working together on to get this vehicle to be
exactly what it is.
Fleet sales have become big business for automakers.
For the startup, the revenue from Amazon's order is critical to helping with operations.
Ford says that something like 30% of its pickups go to commercial and government fleets.
These fleet deals are incredibly important.
They're good margin, and they actually provide an interesting way for the operator, in this case Amazon,
plan ahead with the manufacturer and actually make interesting innovations as part of their product
development.
Things like charging can be solved more easily where you set up the charging at a fixed location where the
day begins and ends in the same spot from a charging point of view.
Total cost of ownership and sort of uptime and lower cost of maintenance over time.
We're expecting all of those things to be true.
You expect that over time it'll be cheaper to maintain because there are fewer parts.
Rivian says it intends to use mobile service to support its Amazon vans.
We have a mobile fleet of service vehicles that go out and service vehicles on site.
In Amazon's case it may be at a delivery center or fulfillment center.
I do think that that is a big challenge, but not just for them, it's for any company that has this
direct-to-consumer model.
Amazon's the partner, largest shareholder, I'm sure that they're going to be on the top priority and
they're probably going to be working together to not only service the vehicles at Rivian facilities, but
also at Amazon facilities going forward.
Supply chain challenges are still a problem, forcing the automaker to increase prices of its consumer EVs
and reduce its 2022 delivery target from 50,000 to 25,000 vehicles.
And costs are mounting, in its second-quarter earnings the company reported a net loss of $1.7 billion and
shared that it expects that number to grow to $5.45 billion for the full year.
Covid and the resulting consequences of the pandemic have turned the automotive industry upside down.
I mean, it's unprecedented for the industry.
It's never had to go through this before.
The company will need to pick up the pace if it hopes to reach its 25,000 production goal.
For the first half of the year, the company produced less than 7,000 vehicles.
Managing that complete orchestra of activities across the four vehicles, produced on two production lines,
with the global pandemic and with some of the supply challenges has been challenging, to say the least.
But we're really optimistic about what the remainder of this year looks like.
And it must do this while also meeting Amazon's massive order.
I don't see any real reason why they can't meet that 100,000.
More likely than that, they're going to get there a bit sooner than what they had been projected to and
what they actually contracted to do.
After that, it'll be interesting to see exactly how much more Amazon goes to.
For now, the company seems to be in a secure position.
At the end of June, it said it had about $15.46 billion in cash and cash equivalents.
Which is, a big automaker level of reserve or close.
They say that it can carry them to 2025, give or take, even if things go awry between here and there to some
extent.
But it's started to make some cuts.
Rivian has been obviously doing some layoffs, and they're not unique.
The auto industry is laying off workers.
Rivian I think just might have built up a little bit too quickly in certain areas where they might not have
needed to.
They didn't cut anybody on the manufacturing side, as far as I know, or not meaningfully.
It was in a lot of these sort of product teams and so forth.
They did come out earlier this year and say, okay, our stock is down, the economy is looking iffy, we're going
to scale back our spending a little bit and get a little tighter control on costs.
Rivian will have to contend with increasing competition.
The EV market is being flooded with new models from legacy automakers, but it thinks its adventure-oriented
brand will help it stand out.
We've been very focused on what's our brand, what's our philosophy, making sure it's unique, provides something
that's interesting and compelling to customers.
Rivian, as of right now, is more of a threat to Jeep than they are the F-150 pickup truck from Ford, or the
Chevy Silverado.
They're going for a free outdoors brand.
And that is something that Jeep has catered to for decades.
With its R1 vehicle deliveries underway, the company has set its sights on developing its next products.
Referred to as the R2 platform, these are expected to be cheaper models that will be manufactured at a new
plant being built in Georgia.
We're continuing to focus on our R2 product, this is our smaller SUV platform that will ultimately be
produced in Atlanta.
This is the Rivian idea of the Model 3 and Model Y.
And with Rivian trying to add a second plant now in Georgia, when they announced this, RJ Scaringe kind of
said, we need this to be able to scale more.
Many analysts actually at the time were questioning whether they needed to build this facility right now or
if they could wait.
Building on its experience working with Amazon, Rivian seems likely to expand in the fleet business.
There's nothing really, I think, that would stop Rivian from being able to sell, once it has enough capacity,
this type of van to every other package delivery company.
They need to expand more than just Amazon if they want to actually continue to grow.
So down the line, they will definitely be going into other segments of vans, they'll be going into other
markets. I couldn't see them just focusing singly on Amazon.
I like their future because they have a product that's appealing.
If you look back to their competitor, Tesla, that was the thing, that was the thing that really pushed it
over the edge. It wasn't that they were just an EV company, it was that they had a cool car that was
interesting. And I think that Rivian passes that test, at least on the consumer side.
And on the commercial side, they've got that deal, it needs to perform as well.
I think it's a win-win for both of the companies and as long as the production kind of continues to go and they
continue to make vans, we're going to see a lot of these on the road this year.
I think once these things are out there, people are going to be seeing them all the time, just like we see
UPS vans all the time. And that is a longer-term play for them as well.
Just the visibility of this, raising awareness.
Who's Rivian? Wait. Oh, they make those funky trucks, right?
Yeah. Let's go look at
them.