Electric SUV maker Rivian stalls out after hot IPO

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After buying stock in Rivian — the electric-vehicle maker that promised a much-anticipated SUV or truck version of a Tesla — for $72 a share, San Francisco technical program manager Carter Gibson was unhappy as the price plunged to an all-time low from $19.25 this past week.

A Wall Street treasury backed by Ford and Amazon, the latter of which placed an order for 100,000 electric vans, had Rivian Automotive Inc. the largest 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 plunging back to Earth.

“That doesn’t feel great,” Gibson admitted. But as one of the rare owners of Rivian’s first product, the R1T Launch Edition with a starting price of $79,500, his enthusiasm for the five-seat pickup he’s been driving for nearly a month — his first EV — has fueled his fears about his stock portfolio.

“The truck itself is better than it can be. The build quality is head and shoulders above comparably priced (or more expensive) EVs,” he said.

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Following the company’s scintillating debut, the stock market has taken a dim view of Rivian’s prospects — and supply chain disruptions have lowered production estimates. In addition, the company said in a letter to the National Highway Traffic Safety Administration: it is recalling 502 of its RT1 trucks, or about 10 percent of total production to date, for an airbag deployment defect that could injure a child in a car accident.

But in an earnings call on Wednesday, Rivian CEO RJ Scaringe said the startup EV truck manufacturer is: confident that it can overcome production hurdles and stop the worst problems in the rearview mirror. Rivian reported 90,000 pre-orders for its R1 series trucks and SUVs on May 9, indicating continued strong demand.

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

The frustrations aside, Ives is still optimistic about the company and noticing a lot of interest as evidenced by the pre-orders.

“This quarter was not without its problems, but it finally looks like Rivian is on the right track,” he wrote.

The rollercoaster ride for the Irvine-based start-up culminated in last week’s staggering price drop after Ford sold about 8 percent of its holdings, or 8 million shares, as the post-IPO lock-up ended.

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

However, Ford’s dumping of some of its Rivian stock comes just as the first batch of customers receive its own version of the electric pickup truck, the Ford F-150 Lightning. The truck has been developed in-house and will hit the market at about half the price of its entry-level competitor.

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

In March, the company botched the announcement of significant price increases for its R1T trucks and R1S SUVs — $12,000 and $14,500 respectively — to change course after severe backlash from customers who had already made $1,000 in deposits. Rivian was quick to say it would respect the original price for those customers.

In the same month, the company announced it would produce only half of the 50,000 vehicles it had planned for this year due to logistical and supply chain concerns.

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But even after the price hikes and production delays, the company received more than 10,000 R1T preorders in the United States and Canada, despite a relatively hefty average price of more than $93,000, Scaringe said in the earnings call.

“We did all this in one of the most challenging operational 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 on hand,” Scaringe said, referring to the company’s mid-sized SUV.

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

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

Like other automakers during the pandemic, Rivian was hit by massive supply chain problems, higher material costs affecting battery production and logistical hurdles.

But Jessica Caldwell, executive director of Insights at Edmunds, noted that the shortages of semiconductors and microchips in the past year have been particularly humbling for start-up automakers.

While automakers and manufacturers in general have struggled to cope with pandemic disruptions, it has been much harder for smaller companies like Rivian still trying to ramp up production.

Besides starting the process from scratch, a start-up doesn’t necessarily have the clout or relationships with producers or the promise of large volumes from the more established players.

“Production in general is largely underestimated — it nearly drove Tesla out of business as they started taking off and trying to enter the mass market,” Caldwell says. said.

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

Meanwhile, another flashy EV maker to hit the scene, Lucid Group Inc., has suffered similar setbacks, resulting in lower production forecasts and also raising prices for its luxury sedans, which were originally poised to compete directly with Tesla. .

“A lot of startup companies will realize that it’s pretty cool to create that concept and a niche vehicle with low volumes and very expensive,” Caldwell said. “But frankly, if a company wants to survive in the long run, it has to rely on the mass market. That means thousands and thousands of vehicles to be produced,” she said.

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

Ford initially invested $500 million in Rivian. Amazon owns about 20 percent of the company and placed an initial order of 100,000 of Rivian’s custom commercial vans. (Amazon founder Jeff Bezos owns The Washington Post.)

But while start-ups like Rivian and Lucid struggled to deliver on their stylish promises, traditional automakers were developing their own electric trucks and SUVs. These are now coming to market in greater numbers and at usually lower prices, Caldwell said.

“Ford has a lot on the truck market. They’ve been king of it for years. So they don’t want the newcomer to come and take their crown,’ she said.

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

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

Gibson, a senior manager at Google, remains all-in on Rivian. He said he doesn’t regret the $85,392.99 he spent (minus his $1,000 down payment and before taking the $7,500 federal tax credit into account).

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

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

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