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Two ways GM and Amazon can make money on Rivian’s electric pickups

Why Rivian may be a threat to Tesla
2 Hours Ago | 02:28

The reported investment automaker General Motors and online giant Amazon made in an electric pickup truck major could yield two very different payouts for such different companies, say two auto industry analysts.

Neither Amazon nor General Motors commented on reports on Tuesday that each company had taken a stake in the Michigan-based startup that wants to be the first automaker to bring an electric pickup to market. GM and Amazon each may have its own unique uses for Rivian's electric platform. Their investments together would value the company between $1 billion to $2 billion, Reuters reported.

Investing in Rivian Automotive's planned electric pickup could help GM rapidly bring an electric powertrain into its top-selling and profitable pickup truck line, giving the automaker a better chance at selling an electric vehicle that can lure buyers and yield profits, said Edmund's analyst Jessica Caldwell.

Pickup trucks are one of the most successful types of vehicles in the market right now. Sales are growing and transaction prices are typically higher than those of cars and rising. In January, average pickup truck transaction prices were just below $50,000, Caldwell said.

“That's a lot of money,” she said. “So I think companies think there could be margins. We've seen electric vehicles not take off on the small vehicle side, so maybe the solution is something bigger, something we know that people will pay a lot more for.”

Meanwhile Amazon could use the company's platform for its extensive logistics needs, said Michelle Krebs, an analyst for Autotrader, an online marketplace for vehicles.

“We know that Amazon wants to reinvent its delivery system,” she said.

Pickup trucks are not a typical vehicle used for deliveries — cargo vans or heavier trucks are far more common. But underpinning the Rivian truck is a kind of “skateboard” platform that can carry a variety of different body shapes, she said.

“They could put any kind of body type on it,” Krebs said. “So it could be a van, a sport utility vehicle. They've talk ed about that. So it has a lot more flexibility in terms of body style.”

Ford issues 3 recalls covering about 1.5 million Ford and Lincoln vehicles, citing accidents

Mike Fuentes | Bloomberg | Getty Images
Ford Motor Co.'s 2013 F-150 pickup truck sits on display at an event in Bruceville, Texas, U.S., on Monday, June 4, 2012.

Ford is issuing three recalls covering about 1.5 million Ford and Lincoln vehicles, citing an unintended downshift to first gear in certain F-150 pickups that's caused at least five accidents, among other safety concerns, the company said Wednesday.

“Depending on vehicle speed, a downshift to first gear without warning could result in a loss of vehicle control, increasing the risk of a crash,” Ford said in a statement announcing the recalls.

Ford is issuing a safety recall on select 2011 to 2013 Ford F-150 vehicles with six-speed automatic transmissions, 2017 to 2019 Lincoln Continental vehicles, and select 2019 Ford Mustang, Lincoln Nautilus and Lincoln Navigator vehicles.

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The roughly 1.48 million F-150 trucks have a defect that can cause the truck to temporarily downshift into first gear. Ford is aware of five reports of accidents, including one report of “whiplash” potentially related to this condition.

About 27,000 Lincoln Continental vehicles may have a problem with silicon contamination in the door latch, which can prevent it from fully engaging. This means the door could open while driving. Ford is not aware of any accidents connected to this recall.

About 4,200 Ford Mustang, Lincoln Nautilus and Lincoln Navigator vehicles may have a defect that causes the instrument cluster to be blank while the video starts up. Ford is not aware of any of any accidents connected to this recall either.

Read Ford's full statement here.

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Ford executive raises doubts about VW deal for electric vehicles

Bill Pugliano | Getty Images
Jim Farley, Ford Motor Company Executive Vice President and President of Global Markets, reveals the 2020 Ford Mustang Shelby GT 500 at the 2019 North American International Auto Show during Media preview days on January 14, 2019 in Detroit, Michigan.

Ford and Volkswagen appear increasingly unlikely to pull together a deal to work together on battery-electric vehicles, a senior executive with the Detroit automaker said this week.

The two companies announced plans last month to team up on the development of light commercial vehicles and confirmed that other projects were under consideration. It has been widely reported that a key focus was on battery-electric vehicles, a move that could help Ford and VW save billions of dollars by sharing R&D efforts.

But their programs are out of sync, “almost like snowboarding and skiing,” Jim Farley, Ford's president of global markets, said Monday during a taping of the local TV show “Autoline Detroit.”

Automakers around the world have begun looking for ways to partner with erstwhile rivals in order to address an increasingly challenging environment. Many of these alliances focus on the development of new technologies, such as electrification and autonomous driving, areas in which Ford and Volkswagen aim to take a lead.

But the two carmakers are taking markedly different approaches with their electrification programs, said Stephanie Brinley, principal auto analyst with IHS Markit and a participant in the “Autoline” panel discussion.

“They have two very different strategies,” Brinley said, and the “timing issues that just won't mesh.”

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10:38 AM ET Tue, 5 Feb 2019 | 04:45

VW has committed over $50 billion to develop more than 50 pure battery-electric vehicles by 2025. They would be sold through the German automaker's dozen passenger car brands, including Porsche and Audi, as well as the flagship Volkswagen marque.

But the majority of the products will target mainstream markets using a high-volume vehicle platform known as the MEB. “This is meant to be a car for the millions, not millionaires,” Matthew Renna, vice president of e-Mobility for Volkswagen's North American Region, said during a media briefing last week at the Chicago Auto Show.

Ford was itself an early proponent of electrification but initially focused on hybrids, plug-in hybrids and relatively short-range battery-electric vehicles. It now plans to introduce its first long-range model in 2020, and then expand its lineup over the course of the coming decade.

While VW is primarily targeting low-cost, passenger car segments with its battery-car program, “Ford's bet is on commercial vehicles and performance vehicles,” said Farley.

There is still the possibility they could eventually find common ground, “if we could find platforms where it makes sense,” said Farley, but, at least for now, “we're in different timing.”

VW declined to comment about Farley's remarks.

Morgan Stanley: Why GM and Amazon may be investing in ‘the next Tesla’

Bloomberg | Bloomberg | Getty Images
A person places items into the front trunk cargo area of the Rivian Automotive Inc R1T electric pickup truck during a demonstration at a reveal event at AutoMobility LA ahead of the Los Angeles Auto Show.

General Motors and Amazon are reportedly in talks to invest in Detroit startup Rivian Automotive and that indicates a massive shift in the “next and potentially imminent” electric vehicle market of pickup trucks, Morgan Stanley said on Wednesday.

“The highly lucrative and US-dominated pickup truck market” is “an important area of investor focus” due to the “culmination of battery cost reduction, architecture, duty cycle, and price point,” Morgan Stanley analyst Adam Jonas said. Jonas earned a wide following on Wall Street due to his early calls on Tesla and the rise of electric vehicles.

Morgan Stanley featured Rivian earlier this week as the “next serious competition” for Tesla. The startup's “clean sheet” approach could make it “the next Tesla,” Jonas said.

“We have focused considerable research effort on the theme of electric pickup trucks in recent days,” Jonas said. Rivian emerged as the firm's top pick to challenge Tesla in the coming years, due to Rivian's “access to talent & capital focused on the fastest growing segments of pickup trucks & SUVs,” he said.

America is falling back in love with trucks and SUVs, and that's causing big changes at big car companies
10:38 AM ET Tue, 5 Feb 2019 | 04:45

Rivian previewed its R1T electric truck prototype in November. Rivian CEO R.C. Scaringe said the R1T will deliver 400 miles of range, with four individual motors allowing for all-wheel-drive. The R1T will be able to hit 60 miles per hour in 3 seconds and tow up to 11,000 pounds. Rivian is also building the R1S, an electric seven-passenger SUV. Rivian says the R1S will also have a range of over 400 miles.

Bloomberg | Bloomberg | Getty Images
RJ Scaringe, founder and chief executive officer of Rivian Automotive, speaks after unveiling the R1S electric sports utility vehicle (SUV).

The Amazon and GM deal would value Rivian between $1 billion and $2 billion, according to Reuters on Tuesday.

Morgan Stanley believes Amazon's involvement represents the e-commerce giant seizing the opportunity to use its own technology “to shape electric delivery vehicles to support its own logistics efforts,” the firm said.

“Amazon has spent the last few years building out and expanding its logistics network and recently invested in autonomous driving startup Aurora,” Jonas said.

As for GM's involvement, Morgan Stanley pointed to comments from GM CEO Mary Barra on electric pickup trucks. Barra said GM believes “in an all-EV future,” while GMC VP Duncan Aldred said an electric pickup truck is “certainly” an opportunity the company is considering.

In full, Morgan Stanley is very bullish on the future of electric pickup trucks.

“EV powertrains have yet to be applied to the most profitable segments where established US automakers generate profit and cash flow,” Jonas said. “We estimate the full sized pickup truck segment accounts for well over 100% of global auto profit for GM and Ford and the majority of [Fiat Chrysler]'s global profit.”

T esla's pickup truck plans

Tesla may unveil an electric pickup truck this summer, CEO Elon Musk said during the company's fourth-quarter conference call. In December, Musk talked extensively on Twitter about what he would like to include in a pickup truck design, including all-wheel drive with “crazy torque & a suspension that dynamically adjusts for load.”

The buzz Jonas has seen about Tesla's pickup truck “suggests there may be greater excitement around the” pickup than for Tesla's anticipated Model Y. Based on the luxury Model X SUV, the Model Y is an “entry-level” crossover that would be comparable in price to Tesla's Model 3.

Elon Musk plans a truck he says looks like something out of 'Blade Runner'
3:05 PM ET Fri, 2 Nov 2018 | 01:11

An explosion in auto debt threatens consumer finances, advocacy group warns

As Americans' appetite for new cars continues unabated, an advocacy group is sounding the alarm over the growing level of auto debt carried by U.S. consumers.

In a report issued Wednesday, U.S. PIRG warns that the continuing rise in auto debt is putting many consumers in a financially vulnerable position, which could worsen during an economic downturn.

The report comes on the heels of data released Tuesday by the Federal Reserve Bank of New York showing that at least 7 million Americans were in serious delinquency on their car loan — 90 or more days behind — at the end of 2018. That's 1 million more than at the end of 2010.

Daniel Acker | Bloomberg | Getty Images
The Key Auto Mall car dealership in Moline, Illinois.

“More and more people are buying too much car for what they can afford,” said Ed Mierzwinski, senior director of U.S. PIRG's federal consumer program.

The group's new report delves into the financial implications and policy-related aspects of Americans' reliance on cars. It shows that the aggregate amount of auto debt that consumers carry — roughly $1.27 trillion — is 75 percent more than the amount owed at the end of 2009 (it's 51 percent when adjusted for inflation).

Overall, auto debt accounts for about 9 percent of total U.S. consumer debt, up from 6 percent in late 2011, separate data from the Federal Reserve Bank of Kansas City show. Among subprime borrowers — those with credit scores below 620— the delinquency rate was 16.3 percent in mid-2018. In 2015, that figure was 12.4 percent.

Part of the overall growth in auto debt comes from consumers' shifting preference for larger, more expensive vehicles such as trucks and SUVs instead of sedans or compact cars. The average price of a new vehicle is now about $37,100, compared with $27,573 five years ago, according to auto research firm Edmunds.

For consumers — the bulk of whom finance their purchases — that means higher balances and loans that stretch longer. As of January, the average amount financed was $31,707 and the average loan length had reached 69.1 months, up from 61 in 2010, according to Edmunds.

Rising interest rates also make the cost of borrowing more expensive. The average rate on an auto loan is roughly 6.2 percent, compared with 5 percent a year ago. However, the lower a consumer's credit score, the more they can expect to pay in interest — even in the double digits.

To illustrate the difference that the interest rate makes: If you pay 4 percent on a $30,000 loan over 72 months, you'd pay about $470 a month and end up shelling out close to $3,800 in interest.

By comparison, the same amount financed for the same length of time but at 10 percent interest would result in monthly payments of $555 and interest totaling more than $10,000. And, the longer the loan term, the greater the chance you could reach a point where the amount you still owe on the loan is more than the value of the car itself.

Mierzwinski said the most important way consumers can keep the cost of their purchase down is to secure financing before heading to a dealership. If not, you'll be presented with options that could cost you more in interest, whether through the dealer's own financing arm or another lender that it works with.

Mistakes to avoid while car shopping
2:56 PM ET Fri, 29 June 2018 | 00:59

“Get preapproved at your credit union or bank,” Mierzwinski said.

Additionally, he said, add-ons offered at the dealership during the purchase process will only cost you more and line the pockets of the dealership.

“Avoid things like etching or undercoating or an extended warranty, or other products you don't need,” Mierzwinski said.

Additionally, you can explore other options to to reduce your costs, such as considering a used car.

“We're warning people not to buy too much car, not to take out too much of a loan or fall for any of the tricks and traps that dealers use to get you to pay more than you should,” Mierzwinski said.

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BMW adds models, boosts production in US

Luke Sharrett | Bloomberg | Getty Images
An employee installs interior accessories inside a BMW X4 sports utility vehicle on the assembly line at the BMW assembly plant in Greer, South Carolina.

BMW Group is rolling out two new models, X3 M and X4 M, high performance versions of the automakers popular SUVs. The models will go into production in April at BMW's plant in Spartanburg, South Carolina.

“The addition of these two all-new models — plus the first-ever BMW X7, which began production last December — is a testament to the performance, passion and pride of the more than 11,000 people working at Plant Spartanburg and serves to further underscore BMW's commitment in the U.S.,” said Knudt Flor, president and CEO of BMW manufacturing.

Those models, along with the seven others built at BMW's sole U.S. plant means the facility will increase production in 2019 and reach close to record levels last seen in 2016. Production this year is expected to top 400,000 vehicles after reaching 356,749 last year.

BMW's U.S. sales climbed 1.7 percent in 2018.

Questions? Comments? BehindTheWheel@cnbc.com.

Tesla’s charging stations are a massive ‘competitive moat,’ Morgan Stanley says

CNBC visits the only Telsa Supercharger station with a lounge
8:59 AM ET Sat, 27 Jan 2018 | 02:20

Tesla has built up a global network of charging stations, which Morgan Stanley analyst Adam Jonas pointed to as a possible “competitive moat” for the company compared to other electric vehicle makers.

“We estimate Tesla's chargers may account for 30 percent to 40 percent of total US charging outlets counted by the US Dept. of Energy,” Jonas said in a note to investors on Tuesday. Jonas is widely followed on Wall Street for his thoughts on Tesla and electric vehicles.

Tesla upped its network of global “supercharger” stations to nearly 13,000 by the end of last year, while also increasing its total “destination chargers” to more than 21,000. Superchargers refuel most Tesla batteries in about an hour, whereas destination charging stations provide longer charging times more suited for long stays at malls or overnights at hotels.

VCG/VCG | Getty Images
A Tesla supercharging station in Tianjin, China.

“Part of the strategic attraction to Tesla is its physical infrastructure footprint, which we believe, over time, can improve the customer experience, reduce friction points, and support the fleet management of many millions of Tesla vehicles on the road and in both captive and 3rd party commercial fleets,” Jonas said.

Morgan Stanley estimates Tesla will expand the supercharger network to 15,000 stations “by 2030 to support a Tesla on-the-road fleet size approaching 13 million units,” Jonas said.

Growth in Tesla's charging network “is far slower than the growth in Tesla's car population,” Jonas said he estimates. The network grew by about 40 percent year-over-year, he said, whereas the number of Tesla's on the road increased by 83 percent. Additionally, the Tesla fleet “has grown far faster than its physical store and service location network, raising investor concerns about strain on the system,” Jonas said.

“While Tesla has made efforts to address issues with service quality (such as increasing its Mobile Service fleet to 411 vehicles), the customer service experience appears to have significant room to improve,” Jonas added.

Tesla shares rose 1.3 percent in premarket trading from Monday's close of $312.84 a share. Morgan Stanley has an equal-weight rating on Tesla and a price target of $283 a share.

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Ford investing $1 billion, adding jobs at Chicago factories as it makes cuts overseas

Tim Boyle | Bloomberg | Getty Images
A worker assembles a 2011 Ford Motor Co. Explorer at a plant in Chicago, Illinois, U.S., on Wednesday, Dec. 1, 2010.

Ford is sinking $1 billion and adding more jobs to plants in the Chicago area to expand production of the redesigned Ford Explorer and Lincoln Aviator sport utility vehicles.

The expansion comes as the automaker makes cuts overseas and shifts its lineup to make more SUVs, crossover-utility vehicles and trucks and away from sedans and sports cars, which have fallen out of favor with American drivers.

The move will add 500 jobs at Ford's Chicago-area Assembly and Stamping plants, bringing the total number of employees at the two factories to 5,800, the company said Thursday. Ford is building a new body shop and paint shop at the assembly plants and plans to make major changes to the final assembly area. The company also plans to install some new manufacturing technology, including 3D-printing tools and robots.

America is falling back in love with trucks and SUVs, and that's causing big changes at big car companies
10:38 AM ET Tue, 5 Feb 2019 | 04:45

It's also spending $40 million to upgrade the facilities for employees, including new LED lighting and cafeteria updates, new break areas as well as parking lot security upgrades.

In addition to the Explorer and Aviator, the plants make Ford's Police Interceptor, an SUV modeled on the Explorer.

Ford is undergoing an $11 billion restructuring that will shrink its salaried workforce of 70,000. It is also cutting thousands of jobs in Europe, where Ford has struggled to maintain solid footing.

Ford is not the only automaker that has had to reshape its business in the face of a changing industry. Rival General Motors is in the process of cutting production at plants in the United States and Canada as part of its own turnaround plan.

GM has been faced with underutilized factory capacity in plants that had heavily focused on building less popular sedans and compact cars. GM said it has offered jobs to hundreds of hourly workers at new plants building vehicles in growing segments, such as SUVs and crossovers.

Paul Eisenstein/CNBC
Joe Hinrichs, Ford president of global operations, speaks with Chicago Mayor Rahm Emanuel after the automaker announced it was investing $1 billion in Chicago area factories.

One of Tesla’s largest investors just increased its stake

VCG/VCG | Getty Images
A Tesla Model 3 car is on display during the Auto China 2018 at China International Exhibition Center on April 25, 2018 in Beijing, China.

Tesla shareholder Baillie Gifford & Co. has just increased its stake in the electric car maker, according to a regulatory filing Friday.

The U.K.-based investment management firm, Tesla's second-largest institutional shareholder, bought 108,931 of the company's shares during the fourth quarter, according to the filing and data compiled by FactSet.

It now owns just over 13.2 million shares valued at roughly $4 billion. Its stake increased from 7.64 percent at the end of the third quarter to 7.71 percent as of Dec. 31.

Tesla's third-largest shareholder ready to pony up more capital
5:03 PM ET Mon, 29 Oct 2018 | 01:17

A partner at Baillie Gifford praised Tesla CEO Elon Musk in October, and said the firm “would be willing to back him” if Musk needed more capital.

Investors have kept a close eye on Tesla's cash position. The company has had to go to markets several times since its 2010 initial public offering to fund its ambitious plans to rapidly scale battery and auto production.

However Musk had said in recent months that he expects Tesla to be profitable and cash flow positive starting in the third quarter of 2018. So far, Tesla has hit that target, delivering two profitable quarters in a row for the first time in its history as a public company.

Neither Tesla nor Baillie Gifford were immediately available for comment.

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