Electric SUV maker Rivian stalls after hot IPO

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After Buying shares of Rivian — the electric vehicle maker that has promised a highly anticipated SUV or truck version of a Tesla — at $72 a share, San Francisco tech program manager Carter Gibson wasn’t thrilled when the price fell to an all-time low of $19.25 last week.

A Wall Street darling, backed by Ford and Amazon, the latter of which placed an order for 100,000 electric delivery trucks, Rivian Automotive Inc. made the biggest IPO of 2021. The company was valued at more than General Motors and Ford, with shares offered at $78 before climbing to a high of $179.47 – then falling back to earth.

“It’s not great,” admitted Gibson. But as one of the few owners of Rivian’s first product, the R1T Launch Edition with a starting price of $79,500, his enthusiasm for the five-seater pickup he’s been driving for almost a month – his first electric vehicle – eased his anxiety about his stock portfolio.

“The truck itself is better than it has any right to be. The build quality is superior to similarly priced (or more expensive) electric vehicles,” he said.

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After the company’s stellar debut, the stock market took a dim view of Rivian’s prospects – and supply chain disruptions slashed its production estimates. Additionally, in a letter to the National Highway Traffic Safety Administration, the company said it is recalling 502 of its RT1 trucks, about 10 percent of its total production to date, for a defect in its airbag deployment that could injure a child in a car accident.

But during an earnings call on Wednesday, Rivian CEO RJ Scaringe said the startup electric truck maker was confident that he can overcome production hurdles and put the worst of his problems in the rearview mirror. Rivian reported 90,000 pre-orders for its R1-series truck and SUVs as of May 9, signaling continued strong demand.

“Let’s call it what it is, Rivian has been a train wreck since its IPO and a black eye for the electric vehicle industry,” Wedbush analyst Dan Ives wrote in a research note. Wednesday evening. “The company has the potential to change the electric vehicle and automotive industry with a lot of hype, and has instead been a huge disappointment.”

Frustrations aside, Ives is still optimistic about the company, noting a lot of interest expressed in pre-orders.

“This quarter hasn’t been without its challenges, but it finally looks like Rivian is on the right track,” he wrote.

The Irvine-based start-up’s rollercoaster ride culminated with the stock price plummeting last week after Ford sold about 8% of its holdings, or 8 million shares, when the stock expired. the post-IPO lock-up period.

Ford still owns about 94 million shares. Amy Mast, director of corporate communications for Rivian said, “It’s not uncommon to see investors seizing an opportunity like this after a successful IPO. We are grateful to them for supporting our journey to bring the first electric truck to market.

However, Ford’s dumping of some of its Rivian stock comes just as the first batch of customers are receiving their own iteration of the electric pickup truck, the Ford F-150 Lightning. Developed in-house, the truck comes to market at about half the price of its startup competitor.

On Wednesday, Rivian reported lower-than-expected revenue of $95 million for the first quarter, compared with a loss of $1.6 billion.

In March, the company missed announcing major price increases for its R1T trucks and R1S SUVs – $12,000 and $14,500 respectively – to buck the trend after severe backlash from customers who had already deposited deposits of $1,000. Rivian was quick to say he would honor the original award for these customers.

In the same month, the company announced that it would only produce half of its planned 50,000 vehicles this year due to logistics and supply chain issues.

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Still, even after price increases and production delays, the company received more than 10,000 R1T pre-orders in the United States and Canada, despite a relatively high average price of more than $93,000, Scaringe said during of the call for results.

“We accomplished all of this in one of the toughest operating environments in decades. We have $17 billion in cash and believe we have a clear path to launch R2 in Georgia in 2025 with our current cash flow,” Scaringe said, referring to the company’s midsize SUV.

The company also hoped to ramp up its Normal, Ill., plant to full capacity of 150,000 vehicles per year, Scaringe said. From January to March, the company produced 2,553 vehicles and delivered 1,227 to customers like Gibson.

“We’ve really seen the worst, or sort of a valley if you will, of supply constraints,” Scaringe said. mentioned.

Like other automakers during the pandemic, Rivian has been hit with huge supply chain issues, rising material costs affecting battery production, and logistical hurdles.

But Jessica Caldwell, executive director of knowledge at Edmunds, noted that shortages of semiconductors and microchips over the past year have been particularly humiliating for startup automakers.

While automakers and manufacturers in general have struggled to cope with pandemic disruption, it’s been much more difficult for smaller companies like Rivian still trying to ramp up production.

In addition to starting the process from scratch, a start-up would not necessarily have the clout or relationships with producers or the promise of large volumes from the more established players.

“Production in general is grossly underestimated — it almost bankrupted Tesla when they started ramping up and trying to get into the mass market,” Caldwell said. mentioned.

“For someone like a Ford or a Toyota, it might seem pretty easy and simple, but only because they’ve been doing it for decades,” she said.

Meanwhile, another flashy electric vehicle maker bursting onto the scene, Lucid Group Inc., suffered similar setbacks, leading to lower production forecasts and also having to raise prices for its luxury sedans. , which were originally set to directly compete with Tesla.

“A lot of start-ups are going to realize that it’s pretty cool to create this concept and a niche vehicle that has low volumes and is very expensive,” Caldwell said. “But frankly, for a company to survive in the long term, it has to appeal to the mass market. It means producing thousands and thousands of vehicles,” she said.

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Rivian debuted with strong backers like Ford, Amazon, T. Rowe Price and BlackRock.

Ford initially invested $500 million in Rivian. Amazon has a roughly 20% stake in the company and has placed an initial order for 100,000 bespoke commercial delivery vans from Rivian. (Amazon founder Jeff Bezos owns The Washington Post.)

But as startups like Rivian and Lucid struggled to deliver on their sleek promises, mainstream automakers were developing their own electric trucks and SUVs. These are now coming to market in greater numbers and at generally lower prices, Caldwell said.

“Ford has a lot to do in the truck market. They’ve been the kings of it for years. So they don’t want the newcomer to come and take their crown away from them,” she said.

Its first electric pickup, the Ford F-150 Lightning, is on its way to dealerships at around half the price of the Rivian RT1. But this is not the only competition. General Motors Silverado EV is slated for release in early 2023, GMC’s Hummer EV is currently available, and General Motors plans to launch both the Chevrolet Equinox EV and Blazer EV next year.

“A lot of people in the United States can’t afford that price tag over $70,000. But maybe a Ford 150 Lightning for $40,000 is something they can afford,” she added.

Gibson, a senior executive at Google, stays all-out on Rivian. He said he had no regrets for the $85,392.99 he spent (minus his $1,000 deposit and before factoring in the $7,500 federal tax refund).

The large size comes in handy when moving into a new home and for storing snowboarding and camping gear, as well as traveling with a husband, Great Dane and Weimaraner. He is also the moderator of the subreddit Rivian.

As for the future of the company and his own actions, he has a long-term view: “It may be a bumpy ride, but the product itself is amazing.”

About Melanie Tweed

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