“Rivian Is The Biggest Company With No Revenue In The U.S.” (Jalopnik) provides a little background on what is now the world’s third most valuable vehicle maker (Tesla #1, Toyota #2, Rivian #3, just ahead of VW).
Readers: Please educate me! What does Rivian know how to do that makes it worth huge $$ despite zero revenue? Wikipedia doesn’t describe any innovations other than maybe putting in four motors (but so what? A C8 Corvette has only one motor and it gets down the road and around corners).
It can’t be battery chemistry because the company buys batteries from Samsung (InsideEVs).
It can’t be that nobody else can make an electric pickup truck because the Ford F-150 Lightning will be here soon.
It can’t be that nobody else can make electric commercial vehicles because Mercedes promises the eSprinters to Americans starting in 2023 (Car and Driver).
I don’t see how it can be the case that Rivian will flood the market before the legacy companies, the way that Tesla has remarkably done, because Rivian is only just struggling to get its first vehicles out to consumers. If things go perfect, Rivian will deliver 40,000 units in its first year (source). Ford sells nearly 1 million F-150s per year.
An electric pickup enthusiast will have to wait his/her/zir/their turn for either a Rivian or a Ford. Why wouldn’t the typical buyer prefer to order a Ford? The price for Ford’s electric truck is lower than Rivian’s price and the reviews of the Ford are positive (example).
Ford is an investor in Rivian, so presumably there is a rational answer to why Rivian is worth a lot (since Ford knows the industry!). But what is that answer?
(Investors take note: I thought and wrote pretty much all of the above about Tesla when the company was young. I think it is safe to say that I have been proven wrong! But on the third hand Tesla didn’t arrive on the scene at the precise moment that the legacy car makers were going all-in on electric vehicles while Rivian is arriving after Ford already demoed the electric F-150.)
vs.
The stock market can remain irrational longer than you can remain solvent. –Keynes
I, for one, am waiting for Cybertruck. I don’t want to get a vehicle from the company that haven’t shipped couple generations of EVs already, and it will be time to replace wife’s Model X anyway. Also Tesla is ahead in FSD game.
Lucid is another startup electric car company. Its market value is $90 billion. Its first car, the Lucid Air, was named MotorTrend car of the year. It costs about $140,000. No, I do not know what edge Lucid has.
Theranos?!
A wishful thinking alternative to crazy uncle Elon?
As explained in “Silicon Valley” the TV show, smart startups avoid shipping products and booking revenue, because as soon as they do so, they can be valued with boring old methods like discounted cash flow analysis that any kid with Excel can do. The large gap between market valuation and underlying value then becomes apparent and starts to subside.
If they can’t be valued with those boring old methods, the sky is the limit, as they can sell a rosy vision of innovative technology that will surely lead to a solid moat protecting ever increasing revenue.
What’s remarkable with Rivian is that it went as far as IPOing without shipping product or booking revenue. That’s great execution of the “don’t book revenue” startup playbook, much further than most can take it.
Another question for readers: Will EV only manufacturers have an advantage over traditional manufacturers during the transition to EVs since they do not have the maintenance issues over legacy fleets? Longer, term, will traditional manufacturers benefit because they have a mature maintenance and service structure?
You probably could go back in time and ask similar questions about the first Honey Dew Donut franchise in 1975. Dunkin Donuts had been in business for 27 years in 1975. Wikipedia indicates Dunkin Donuts had 100 locations by 1963. By 1975 they likely had more than double that. The Wikipedia page for Honey Dew indicates that Richard J. “Dick” Bowen, a customer, became the first Honey Dew franchisee. Why would he have not singed on as a Dunkin franchisee at the time? Dunkin would have had a more mature business model by then and had the economies of scale on supply chain, marketing and advertising.
David: Thanks for the analysis. I am not sure that the analogy holds up, though, because not too much engineering or capital investment is required to make donuts. It is possible for a startup or independent donut shop to survive. I guess you could argue that the big chains have the ability to flood the market with advertising, which a single shop can’t do, and spread the cost of national ads across lots of shops (cheaper per customer reached than a local ad).
Pets dot com
This is not surprising if you take a long-term view. As Warren Buffett has pointed out, throughout the early 1900s there were “at least 2000 companies that entered the auto business because it clearly had this incredible future.” By 2009 there only three were left, two of which then went bankrupt.
Competition is ruthless.
Konrad: But isn’t it still surprising that investors would be willing to pay for Rivian as though it had already prevailed and become one of the three winners? How do they know that Rivian isn’t one of the 1,997 entrants that will fail? And the playing field right now is not level. Ford, GM, Dodge, and Toyota already have a lot of customer loyalty in the pickup market, no?
As they say, when you’re wearing rose-colored glasses all the red flags just look like flags. I suppose it’s no more surprising than the fact that airline stocks still exist, i.e. a hugely unprofitable industry where investors on the whole have suffered a net loss even without accounting for inflation. Who keeps buying this stuff? Not I.
1) Bob is correct.
2) OC is also correct.
3) As a sub-explanation or further explanation to the above obviously correct answers, Rivan represents a fresh alternative to the evil, polluting, Gaea destroying traditional auto companies. This allows the woke to bid up the stock and demonstrate their moral superiority over the companies that have profited from Gaea’s destruction without having to even own an EV.
And the Ford F-150 is totally plebeian as a brand. Smelly people like plumbers, carpenters, electricians, farmers, and factory workers drive them. Academics, web startup entrepreneurs, vegan chefs, and diversity consultants, not so much.
The only question that remains is why Tesla does not also qualify for an environmental purity premium. Perhaps it’s Musk’s politically impure pronouncements over time. Perhaps it’s a generational change. Maybe Tesla has that old, musty early 2000’s smell about it.
If the legacy carmakers are as rumored pension funds that also build cars, pivoting to new brands might be a way to keep your gold away from the pension pit.
GB: That’s a good point. If a new medicine is found that can cure COVID-19, heart disease, cancer, and diabetes (in Maskachusetts, maybe it will turn out this this medicine is essential medical marijuana, which folks there consider to be an all-powerful healing agent) and humans start living 15 years longer, Ford could be forced into bankruptcy and, even if the company continues, the shareholders would be wiped out. I’m still not sure how that makes Rivian super valuable. As long as Ford goes through Chapter 11 with the F-150 factory still humming, Rivian will have to fight for market share with Ford and the rest of the light truck makers.
Pensions are not Toyota or Honda problems.
Given the number of people buying NFTs and cryptocurrencies, there seem to be a lot of people out there who will invest in anything with a good story. This works out great…for the sellers, that is. Ponzi schemes and tulips, if you ask me.
G C: What happens to NFTs if the owner loses all of his/her/zir/their passwords and private keys? Or suppose the owner of NFTs dies and takes necessary access info with him/her/zir/them? How do heirs of the deceased owner then re-sell the NFTs?
Phil, this is why custodian services exist. Serious/institutional crypto investors don’t store their bitcoins on a flash drive under the pillow, they use Gemini or such. Then it’s the same process as with bank or brokerage account.
Good reminder not to feel bad about missing out on penny stonks. Every stonk was a penny stonk before quantitative easing though.
If you read the “about” on their website you’ll note that they strongly emphasis DEI and green concerns.
Also, less snarkily, their plan is to have a base “skateboard’ for their (and other companies?) vehicles.
> “Ford is an investor in Rivian, so presumably….”
Hmm. I’m thinking of coining a new term for these types of startups: “Samsara Companies.”
Trillions of dollars are being created out of thin air. They end up somewhere.
Rivian’s advantage is that its products are quite ugly. This seems to work on “more social consciousness than taste or brains” crowd. (Certainly worked for Tesla.)
Doug DeMuro reviews an 800 horsepower Rivian R1T and goes nuts – which isn’t a very long trip for DeMuro – but you can watch the whole freakoutshow:
“The Rivian R1T Is the Coolest Pickup Truck Ever Made”
https://www.youtube.com/watch?v=CYrunRy8hmw
He posted the review on Friday and it already has 840,000+ views. Let’s see what the stock price does tomorrow.
For comparison, he also posted a review of the F-150 Lightning electric truck on November 23, three days prior to the Rivian, and it has only garnered 624,000+ views in 2x the time.
So the Rivian is clearly killing the F-150 Lightning among the Doug DeMuro demographic, which I think comprises a cross-section of the Nerdloin and Douchebag parts of the cow, boy. (forgive me)