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Electric truck start-up Rivian announces $700 million investment round led by Amazon

Source: Rivian
Rivian R1T electric pickup truck

Electric truck start-up and potential Tesla rival Rivian announced a $700 million investment round led by Amazon on Friday.

The announcement comes just months after the Michigan-based company unveiled both an electric pickup truck and sport utility vehicle at the LA Auto Show in November.

“This investment is an important milestone for Rivian and the shift to sustainable mobility,” said RJ Scaringe, Rivian Founder and CEO. “Beyond simply eliminating compromises that exist around performance, capability and efficiency, we are working to drive innovation across the entire customer experience. Delivering on this vision requires the right partners, and we are excited to have Amazon with us on our journey to create products, technology and experiences that reset expectations of what is possible.”

The news confirms a Reuters report on Tuesday that Amazon had invested in the firm. Reuters had also reported that automaker General Motors had made an investment in Rivian, but neither GM nor Rivian has confirmed this yet.

The round included investments from Rivian's existing shareholders. It will remain an independent company. Rivian currently has more than 750 employees located in several locations, including Plymouth, Michigan; San Jose and Irvine, California; Normal, Illinois; and Surrey, England.

It plans to launch its R1T pickup truck and R1S sport utility in the U.S. in 2020, and begin introducing them overseas in 2021. The company has modeled both vehicles on what it calls a “skateboard” platform, which it says it flexible enough to accommodate several different vehicle body styles.

Some industry analysts have speculated that Amazon could be interested in Rivian's platform for developing vehicles for its massive global logistics needs.

“We're inspired by Rivian's vision for the future of electric transportation,” said Jeff Wilke, Amazon CEO Worldwide Consumer. “RJ has built an impressive organization, with a product portfolio and technology to match. We're thrilled to invest in such an innovative company.”

This is Amazon's second investment in transportation this month. The online giant recently put money into Aurora, an autonomous vehicle technology company run by Waymo and Tesla alumni.

Trucks and SUVs are also increasingly more popular with U.S. consumers than cars, and customers seem willing to pay more for them, meaning more profits for automakers. The business case for an electric pickup or SUV could be stronger than one for a sedan, given how much money companies have had to sink into electric batteries and motors and how difficult it has been for companies to make money on electric cars.

Morgan Stanley analyst Adam Jonas said in a note this week that a successful electric pickup from an upstart such as Rivian or Tesla could pose a serious threat to Detroit automakers, who depend heavily on sales of truck-based vehicles.
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Morgan Stanley: An electric pickup from Tesla or Rivian is a ‘serious problem’ for Detroit

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The auto industry's electric vehicle revolution has only just begun, Morgan Stanley told investors in a note on Thursday, and the highly profitable pickup truck market is next.

“An electric pickup truck successfully launched by a new player (i.e. Rivian or Tesla) could be a serious problem for the Detroit based [traditional automakers],” Morgan Stanley analyst Adam Jonas said in a note to investors. Jonas is widely known on Wall Street for being one of the first to recognize the significance of Tesla and electric vehicles to the auto industry.

Jonas called reports that General Motors and Amazon are in talks to invest in Rivian, if true, “the biggest news in US autos so far this year.” Without such investments, he said, GM and Ford are losing the opportunity for a “first mover advantage” in producing all electric pickup trucks. Jonas also says Rivian has a competitive advantage from building its truck from the ground up, with little prior conception of an internal combustion engine truck to cloud its view.

“Both GM and Ford have the technical capability to develop and produce and all electric pickup … but we believe design, software, electrical architecture, and brand may be best coming from the 'outside,'” Jonas said.

Additionally, Morgan Stanley said “investors may find it surprising that nearly 9 years after Tesla's IPO there are only 2 pure play EV manufacturer stocks trading publicly in the US market.” The other electric vehicle company that Jonas is referring to is Nio, a Chinese company that listed shares on the New York Stock Exchange in September.

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.”

Phillip Faraone | Getty Images Entertainment | Getty Images
Rivian CEO RJ Scaringe attends and speaks at Rivian unveiling of R1T All-Electric Truck.

Rivian showed off prototypes of its R1T electric truck and its seven-passenger R1S sport utility vehicle in November. Rivian CEO R.J. Scaringe said the R1T and R1S 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.

Morgan Stanley had already featured Rivian twice this week: once as “the next serious competition for Tesla” and again when reports of Amazon and GM's investment surfaced. If GM does invest, Jonas said, it would be “another sign of GM's prescient strategic vision.”

“From an industrial strategy perspective, while many other [traditional automakers] are playing checkers, GM seems to be playing chess,” Jonas said.

Finally, even without the possible investment, Morgan Stanley believes Rivian represents one of the top challengers to Tesla's dominance in the global electric vehicle market.

“The increased legitimacy and capitalization of new/startup EV firms, like Rivian, pose a compounding competitive threat to Tesla. All else equal, a potential GM-Amazon-Rivian tie up could be a clear negative for Tesla in our view,” Jonas said.

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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.

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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

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.

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

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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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Tesla’s electric vehicle dominance is about to have ‘serious competition,’ Morgan Stanley says

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Tesla's domination of the electric vehicle market is “unsustainable” and will soon be disrupted by start-up Rivian, Morgan Stanley analyst Adam Jonas said Monday.

Jonas, whose thoughts on electric autos are widely followed on Wall Street, expects Rivian will be “the next serious competition from a 'clean sheet' start-up with access to talent & capital focused on the fastest growing segments of pickup trucks & SUVs.” He estimates that Tesla makes about 80 percent of the U.S. EV market, capturing as much as 90 percent of U.S. electric vehicle revenues.

Rivian, based outside Detroit, previewed its R1T electric truck prototype at the Los Angeles Auto Show in November. Rivian said the R1T will deliver 400 miles of range, with four individual motors allowing for all-wheel-drive. Additionally, Rivian CEO R.C. Scaringe said the R1T will be able to hit 60 mph in 3 seconds and tow up to 11,000 pounds.

Bloomberg | Bloomberg | Getty Images
RJ Scaringe, founder and chief executive officer of Rivian Automotive Inc., unveils the R1T electric pickup truck, left, and R1S electric sports utility vehicle (SUV) during a reveal event at AutoMobility LA ahead of the Los Angeles Auto Show in Los Angeles, California.

Rivian is also building the R1S, an electric seven-passenger SUV. Rivian says the R1S will also have a range of over 400 miles.

Jonas said Morgan Stanley has a “strong belief that all-electric vehicle architecture will need a truly 'clean sheet' approach” to take on Tesla, rather than “adapting existing legacy [original equipment manufacturer] architecture.”

“We believe companies like Rivian will take elevated importance in investors' minds as EVs become the focus of OEM investment and strategy,” Jonas said.

– CNBC correspondent Paul Eisenstein and CNBC's
Michael Bloom
contributed to this report.

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