Ford Is Hedging Against Itself With Rivian Investment

Source: Medium, Dylan Hughes
Photo: Courtesy of Rivian

Rivian has burst onto the scene in November and that may be having an impact on the prior deal it had with a major investor: Ford.

Rivian was first introduced to many after announcing that it would supply Amazon with 100,000 electric delivery vans. That was the largest EV order to date — and Rivian now shares that crown with Tesla after its recent deal with Hertz.

Now, Rivian is a public company and the fifth-most valuable automaker in the world. It also just started delivering its first vehicle: the R1T pickup truck. It has also promised to begin delivers of its R1S electric SUV by the end of the year.

It’s hard to argue Rivian is a better long-term investment than companies like Tesla, GM, and Ford. Those companies have the money and scale to research, develop, and produce for a long, long time.

Rivian hopes to produce a million cars per year by 2030. That’s just about five percent of Tesla’s goal. GM plans to sell five million while Ford plans to sell 1.5 million.

Sales aren’t everything, as Tesla has shown: it has yet to sell a million vehicles per year and still blows away every other automaker’s valuation. But Tesla has become the EV giant that it is because competition has been relatively underwhelming (plus, it has a blossoming energy storage business).

The lack of real competition is changing … fast.

All of the companies already named, plus others, will be vying for the market share Tesla has dominated for years now.

The segment of the EV market that could help determine the leader of the pack is trucks and SUVs. That’s why Rivian has a chance to succeed — and why Ford is betting that it will.

The companies’ plans to build a vehicle together are now spoiled. Why? They are both focused on their own things.
Translation: they are now officially competitors.
Will Ford sell its 12% stake in Rivian, though? Probably not. Rivian is targeting that key segment: trucks and SUVs.
It should not be underestimated how important this market is; 46% of U.S. drivers own a crossover SUV, which is essentially an SUV Lite. Traditional SUVs are driven by another 8.8% while pickup trucks clock in at 17.6%.
That means nearly three-fourths of Americans are driving something larger than the typical sedan.

With R1T deliveries underway, Rivian has beat Tesla and basically every other big player to the market for an electric pickup truck — though those competitors are not far behind.

This doesn’t make Rivian an automatic winner, but it does give the company a chance to gain what all the other automakers already have: consumer trust.

Most automakers can expect between 45% and 60% of their customers to come back for future purchases. That trust has been built for decades, however, and Rivian is just starting now.

Rivian is the cool kid on the block now, which gives it somewhat of an edge on legacy automakers. Their vehicles are interesting and offer some unique features. Higher earners that can afford Rivian’s lofty price tag may be swayed in that direction over the same old same old.

And when I say the same old same old, I’m talking about Ford.

So why should Ford hold onto a competitor’s stock? It’s a hedge against itself, giving the company time to prove it can one day lead the EV pack before having to go all-in on itself.

Rivian may not carry much market share 10 or 20 years from now. But today, it is one of the most valuable automakers in the world and is one of the hottest names in the space.

Ford could, and probably will, crush Rivian in the future. But for now, it’s a worthwhile hedge against itself.

https://medium.com/geekculture/ford-is-hedging-against-itself-with-rivian-investment