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Tesla Competitor Rivian Delivers Bad News
Rivian and other EV startups are battling a variety of issues as they try to carve out a market share. It’s a difficult time to be a startup. Newcomers to the electric vehicle industry face a number of obstacles, including out-of-control inflation, supply chain delays, and Russia’s invasion of Ukraine.
Rivian Automotive (RIVN) is apparently postponing delivery of its long-awaited SUV, the R1S, by one to nine months.
Getting a Glimpse of a Tight Supply Chain
Rivian did not immediately respond to a request for comment, but the business claimed in a statement to clients on RivianForums that “we’ve continued to navigate a tight supply chain, we’ve had to reduce complexity wherever possible, including prioritizing certain build combinations over others.”
“We continue to prioritize deliveries in locations where service infrastructure is in place so that we can provide the full ownership experience to Rivian owners from day one,” Rivian said.
One buyer stated, “My R1S Launch Edition moved from April-May 2022 to August-September 2022.” “Not as bad as I was expecting.”
“Was July-Sept now Oct December – groundhog day in these delay emails but falling into the trap thinking OK… This is a legit final delay,” another poster remarked, alluding to the 1993 Bill Murray film.
Ford (F) announced last month that it sold Rivian stock in a Securities and Exchange Commission filing, a move that was perceived as a setback to the fledgling electric car producer
Obstacles on the road
According to the statement dated May 10, Ford, which owned 102 million Rivian shares, sold 8 million of them on May 9.
DA Davidson analyst Michael Shlisky commenced coverage on Rivian earlier this month with an underperform rating and a $24 price target.
While the company’s electric pickup truck and SUV cars are more expensive than conventional mass-market models, Shlisky wrote in a research note that the “high-performance and feature-rich vehicles may be able to justify the premium cost.”
Shlisky said he “liked” the truck he examined, but he is concerned that bad stories would outnumber favorable news in the coming months.
“There have been bumps in the road,” he noted, as with most electric vehicle startups.
Rivian CEO RJ Scaringe wrote to shareholders in a June 6 regulatory filing, saying that “since raising $13.7 billion of gross proceeds in our IPO last November, the capital markets have changed dramatically.”
‘Our Roadmap Has Been Focused’
“We have focused our roadmap to ensure that the $17 billion of cash we had on our balance sheet as of March 31, 2022, can support the 2025 launch and ramp of our R2 vehicle platform,” he stated.
Amazon (AMZN) is another key shareholder in Rivian, in addition to Ford.
“Our strong partnership with Amazon and its initial order of 100,000 vehicles enables us to work with one of the most sophisticated fleets in the world to demonstrate how electrification and connectivity fundamentally improve the operating costs for commercial fleets,” Scaringe wrote in his letter.
“On the consumer side,” he said, “the R1T and R1S establish the brand and lay the foundation for us to grow and expand our portfolio globally across different price points and form factors, the first of which will be our R2 platform.”
“The journey ahead won’t be easy,” Scaringe told shareholders, and other EV businesses are presumably feeling the same way.
GOEV (Canoo)Another EV start-up, has warned that it may run out of money in the next months, noting that “there is substantial doubt about the company’s ability to continue as a going concern.”
Recently, Electric Last Mile Solutions (ELMS) filed for bankruptcy, claiming that “there were too many difficulties for us to overcome.”
Is there any reason to believe that electric vehicle start-ups are on the verge of extinction? Professor of business and sustainability at Cardiff University, Peter Wells, disagrees.
“The automobile industry has historically been a difficult terrain for new entrants to fight against existing firms’ established advantages of large economies of scale, strong brand awareness, and sophisticated supply chain and distribution networks,” he said.
“The industry has been continuing a trend of the worldwide growth of markets and, in parallel, consolidation of ownership – albeit facilitated by governments” prior to the introduction of EV technology, Wells continued.
Is There an Exception to the Rule?
“Tesla (TSLA) has managed to break this tendency, according to Wells, “but it risks becoming the exception that proves the norm.”
“The automotive industry has long been a difficult territory for new entrants to compete against the established advantages of the incumbent majors able to deploy vast economies of scale, strong brand recognition, and mature supply chain and distribution structures”
“The established incumbents have, to varying degrees, turned their considerable corporate resources to bringing EVs to market in scale,” Wells noted.
“Hence the window of opportunity for companies to leverage the EV moment seems to be closing pretty fast,” he said. “It is not over for sure…. However, I anticipate that new entrants will increasingly need ‘tech’ company backing with resources and technologies and different ways of reaching customers.”
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