Rivian’s IPO rotates Ford’s market value

The electric car entrepreneur who drives Elon Musk’s coattail has much to be grateful for. Tesla’s stock market value has just soared past $1tn and is on the way, lifting its stock by more than half in the past month alone—and providing another boost to “Tesla wannabes”.

There is hardly a better setting for an initial public offering of US electric truck maker Rivian, which expects a market cap of $53 billion when it launches on the stock market next week, ahead of many of the world’s most famous automakers.

But if Rivian’s strong market debut owes much to Tesla, it’s the contrast between the two that’s more interesting and speaks volumes about how quickly the electric car market has changed.

One of the differences is the amount of capital that is now pursuing the dream of an electric car. One of Musk’s great talents was pulling money off Wall Street as Tesla struggled through the nightmare years of start-up production. Including last year — when Musk took advantage of the group’s soaring share price to leverage Wall Street for more than $12 billion — the company has amassed an estimated $26 billion in equity and debt in its lifetime.

Rivian wasn’t far behind. It has raised nearly $15bn in equity and debt as a private company and hopes to tap stock market investors for another $8.4bn when it goes public next week. That would make its IPO bigger than Uber and the sixth-largest ever by a US company.

This huge amount of cash came with almost no vehicles sold. Rivian just started producing its first vehicle two months ago and predicts delivery of as many as 1,025 vehicles this year. Whether you view this as a sign of excess or a rational response to an electric vehicle opportunity, it demonstrates Wall Street’s belief that risk has left the eclectic car market. Amazon, a major customer, has taken a 22 percent stake in Rivian, adding further assurances.

Another big change since Tesla’s inception is the speed at which new electric vehicle companies are hoping to enter the mainstream. When Musk started, Tesla produced a small number of high-end Roadsters, hoping to ride a long, downhill cost curve away from EV technology towards lower-priced, higher-volume models.

Robert Scaringe, founder and chief executive of Rivian, also started selling sports cars. But in 2012 he changed course and targeted the mass market for light trucks. It took almost a decade to get there, but Rivian can already look forward to a healthy level of demand.

It was the first order of its kind for 100,000 vehicles from car rental company Hertz that pushed Tesla’s value above $1 trillion last week (despite Musk I’ll tweet later that no contract was signed). Rivian, by contrast, ordered 100,000 electric delivery vans from Amazon before it even started its production line.

But even if most of the market risk has disappeared from electric vehicles, operational risks have not. And increasing manufacturing is only part of the challenge: Rivian is also launching in a very difficult supply chain environment.

A third important difference compared to Tesla’s early days is the state of competition for electric vehicles. Rivian’s electric pickup truck contributes a lot of the joy it generates among consumers. But there will be tough competition next year, in the form of electric versions of the Ford F-150 pick-up and Tesla Cybertruck corner.

Rivian has at least had a healthy start, with 55,400 consumers giving up a $1,000, fully refundable deposit to queue up for one of its pick-ups or SUVs.

In contrast, Ford and Tesla’s refundable deposit is only $100. But Ford says 160,000 potential customers have already made reservations for one of its electric trucks, while the number of people queuing for the Cybertruck has reached more than 1 million. These large numbers of “reservations” most likely came from speculators seeking quick profits, but they provide one indication of the much greater level of demand expected for Ford and Tesla trucks.

When traditional automakers have joined forces, it has left serious questions about the chasm that has opened between the ratings of electric start-ups and older rivals. Rivian is aiming for a stock market capitalization of just 30 percent behind Ford, which sold more than 4 million vehicles last year. So how should Ford be rewarded when, if all goes to plan, the electric F-150 starts rolling off the production line next spring?

richard.waters@ft.com

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