Better Buy Now: Rivian vs. Ford

While many electric vehicle (EV) makers have aspirations for electric trucks (*cough* Tesla *cough*), only two electric trucks were produced: Rivian (RIVN 1.23%) and, starting April 26, wade through (F 0.59%). In the US, trucks are the most popular vehicles, with the Ford F150, Ram 1500, and Chevy Silverado 1500 consistently topping the best-selling vehicle lists year after year.

With the move towards EVs accelerating, savvy investors should look to electric truck manufacturers to see which will lead the market. With these three vehicles selling 1.8 million units combined last year, there is a broad market available. Of the two companies that manufacture trucks, which one is better to buy?

F-150 Lightning. Image source: Ford.

Two different companies and investment styles

Ford and Rivian are very different. Ford revolutionized the auto industry with a $5 workday, 40-hour work week, and assembly lines in the early 1900s. Since 1903, Ford has produced internal combustion engine (ICE) vehicles, but will end global production of ICE vehicles by 2040.

On the other hand, Rivian was founded in 2009 by current CEO RJ Scaringe and only designs and manufactures EVs. Its first truck (and the first electric truck anywhere) launches in September 2021, 118 years after Ford’s first vehicle.

These two companies are very different, and their investment styles are also different. Ford represents a value investment style, where you pay a low price for a stock now with the hope of achieving fair value in the future. Investing in Rivian is a bet on growth, as you pay a high price now and expect the company to grow past its current valuation in the future.

How did Rivian cause the two companies to become unprofitable?

Comparing the finances of companies is almost impossible, because they are in two different stages of life. Ford did well and produced 966,000 wholesale units in the first quarter of 2022, while Rivian only produced 2,553 units. A dive into Ford’s electric portfolio shows that the company sold around 36,000 electric vehicles in Q1. While neither of these are electric pickups, Ford’s EV capabilities are greater than the Rivian’s.

Despite Ford being a resourceful and much bigger company, it lost money during Q1, as did Rivian. Ironically, this loss was driven by Ford’s investment in Rivian, as it invested $1.2 billion into the company during the start-up phase. Now that Rivian’s stock has fallen, Ford has been forced to update its balance sheet to reflect the $5.4 billion paper loss that Rivian’s fall suffered (its stock is worth $10.6 billion at the end of 2021).

Ford has started selling its stake in Rivian, reducing about 8% of its total stake in the company in early May. Without this loss, Ford would be profitable for the quarter.

Rivian’s incompetence was real. It cost a fortune to get its factory up to speed to meet its 2022 production goal of 25,000 vehicles. It lost $1.6 billion on $95 million in revenue during Q1, but this loss will narrow once Rivian reaches full capacity. Since Rivian is so unprofitable, it is wise to see how long it can maintain its operations without requiring outside funding.

As of March 31, Rivian held nearly $17 billion in cash and equivalents. With a net cash change for Q1 of $1.5 billion, Rivian has sufficient funds to fund its operations through the end of 2024. This projection does not account for the increase in revenue from production, so in reality, Rivian could last much longer.

The R1T is housed in its frame on the assembly line.

The R1T is being assembled. Image source: Rivian.

Which company has the better product?

Ford appears to be winning in preorders, with 200,000 orders for the F-150 Lightning. Rivian has more than 90,000 preorders for the R1T truck and R1S SUV combined and 100,000 van preorders from Amazon. This preorder difference can probably be summed up in one word: Cost. The Ford truck starts at less than $40,000 versus Rivian’s starting price tag of $67,500.

That’s a hefty jump from vehicle to vehicle, and many people can’t justify paying that much for a vehicle, especially one from an unproven manufacturer.

Two Rivian R1Ts driving down the trail.

Rivian R1T. Image source: Rivian.

Rivian products also target a special group: outdoor enthusiasts. Instead, Ford is focusing on a wider demographic with this truck, as it has done successfully over the last two centuries.

Another electric truck is approaching production.

There are also other manufacturers entering the truck EV pool. General MotorcycleThe Silverado 1500 is slated for delivery in 2023 and Stellantis‘ The Ram 1500 will hit the market in 2024. In addition, Tesla’s Cybertruck will be launched in the next two years, but this product has been delayed several times.

Competition is coming for Ford and Rivian. While Ford was well prepared for the new entrants (having faced competition for more than a century), the Rivian lacked competition experience, as its trucks catered to its own niche. All three major truck manufacturers have exterior and performance trims on their ICE trucks that will be in direct competition with Rivian once those trims are launched in EV form. Rivian races to build his brand before industry backers can crush them. While I think the Rivian can hold its own, I’m not sure if it will be able to keep old truck buyers away from the brand they’ve been buying for years.

With Ford trading at a 2.2% dividend yield (with payouts still below pre-pandemic levels) and down 46% from their highs, I think this is the better buy of the two stocks. If the chip supply chain can be straightened out, Ford will see a massive increase in its ICE and EV production capacity and deliver fantastic quarterly results. Rivian has too much to prove as a company, although I believe it could be a huge success.

If we chose a truck, I would go with the Rivian R1T. As for stocks, I would pick up a Ford any day of the week.

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