October 8, 2021
Photo: Atilgan Ozdil/Anadolu Agency/Getty Images
Richard Branson once said, "If you want to be a millionaire, start with a billion dollars and launch a new airline."
For a long time, conventional wisdom — the kind you picked up in MBA programs — said the same was true of the automotive industry. Why would anyone want to enter an industry with high fixed costs, fierce competition, supremely complex supply chains, stifling regulation and razor-thin margins? The answer, for a long time, was that nobody did.
Then Tesla broke into the automotive market and challenged this notion, but only to an extent. Despite its $779 billion market cap, Tesla only recently recorded a quarterly profit derived entirely from selling cars.
Since its founding in 2009, Rivian has set out to prove that there's room for more than one newcomer in the automotive industry (RIP Nikola). The company has a lot going for it, including over $10 billion in funding, backing from Amazon and Ford, a state-of-the-art manufacturing plant in Illinois and roughly 148,390 preorders. Rivian shipped its first batch of electric trucks in September 2021.
Even so, the road to profitability is long and winding (and did anyone see a sign for the next charging station?). Rivian posted a net loss of over $1 billion last year and is on track to nearly double that in 2021. In its S-1, Rivian said it expects to spend another $8 billion through the end of 2023. It also warned investors that it will likely "continue to incur operating and net losses in the future while we grow."
Rivian released its S-1 on Oct. 1, 2021 and went public via Nasdaq on Nov. 10. Just ahead of its public debut, it reportedly upped the offering price to $78 per share from the previous range of $72 to $74. On its opening day of trading, shares surged to $112, pushing Rivian's market cap over $100 billion, which is higher than that of legacy automakers General Motors and Ford.
Rivian was founded in 2009 by RJ Scaringe, who had just completed his Ph.D. program at MIT's Sloan Automotive Laboratory. The company initially set out to build an electric sports car, but in early 2012 switched focus to electric SUVs and trucks. Scaringe explained at the time that electric sports cars wouldn't allow Rivian to "deliver the level of change we felt we had the potential to drive." Rivian moved its headquarters from Michigan to California in 2020. It began production in its first factory in Normal, Illinois this summer and has reportedly kicked off the search for its second factory location.
Rivian is targeting two audiences with its vehicles: consumers with "adventure and active lifestyles" and enterprises seeking to electrify their fleets.
In the consumer space, Rivian has the R1T, a two-row passenger pickup truck, as well as the R1S, a three-row SUV. At the end of September, 48,390 customers in the U.S. and Canada had put down $1,000 refundable deposits for the R1T and R1S. Rivian began making deliveries for the R1T in September and said it hopes to start delivering the R1S in December 2021.
On the enterprise side, Rivian hopes to launch the RCV (Rivian Commercial Vehicle), an electric delivery vehicle that it designed in collaboration with Amazon. Amazon ordered 100,000 RCVs, which was the largest single order of EVs ever. In the S-1, however, Rivian discloses that its agreement with Amazon "may be terminated by either party with or without cause, subject to compliance with certain termination provisions."
Rivian's ambitions don't stop with becoming an EV OEM, though. It wants to create an entire "vertically integrated ecosystem." That includes designing and manufacturing vehicle components such as the electronics, battery and chassis. The company said it designed its vehicle platforms "for applications beyond the launch versions of R1T, R1S, and EDV," which could involve becoming an automotive supplier. The Rivian ecosystem also entails having an entire software suite — including autonomous systems — continuously updated through the Rivian Cloud. The company has already started building out an electric charging station network, with 145 Rivian Waypoints charging sites currently spread across 30 states. Rivian thinks it will eventually be able to launch "autonomous mobility as a service" and "energy as a service."
In Rivian's version of the future, all of these services will cost a pretty penny. Rivian defines LTR (lifetime revenue potential of services) as "the revenue we can generate from a vehicle throughout its lifetime if the owner(s) were to use and subscribe to all the additional services and accessory products that we offer." For consumer vehicles, Rivian estimates an LTR of $67,900. That includes $15,500 from software, $8,700 for insurance and charging services and $3,500 for vehicle servicing. Oh, and it also assumes that you'll only drive the vehicle for 10 years.
Rivian is burning through money quickly and, until September 2021, had no revenue to show for it.
Rivian finally began generating revenue with the launch of the R1T in September 2021. However, the company warns investors it "will continue to incur operating and net losses in the future while we grow."
Rivian faces three significant risks: over-reliance on Amazon, the complexity of automotive supply chains and potential for stunted adoption of EV trucks and SUVs in the U.S.
Rivian has a lot riding on its Amazon partnership, but Amazon has relatively little at stake and can reduce its exposure to Rivian if necessary.
Supply chains are a mess right now, and building an automotive supply chain from the ground up is already an extremely difficult task. These challenges could limit Rivian's output or result in increased production costs.
Finally, Rivian still has to prove that there's a market for EV trucks in the U.S. This will be particularly difficult for an unproven manufacturer.
Rivian didn't disclose its entire ownership structure, so it isn't possible to know exactly how much investors own in the company. We do know, however, the five entities that own more than 5% of the company and the aggregate amount invested by each entity in the series A-F funding rounds:
Update: This story was last updated on Nov. 10 to include new information on the IPO.