Why Did Ford And Rivian Quit Their Electric Vehicle Alliance?

Breakups are difficult—even friendly ones. But reassessment usually reveals problems that inform the future. So, it is questionable about the relationship between the century-old Ford Motor Company and the recently launched electric vehicle (EV) company, Rivian Automotive Inc.

It’s meant to work—on paper. The big traditional manufacturers are joining forces with new startups offering all the right technology and specifications, to create an electric version of America’s favorite—the SUV. They seem like the perfect couple. But this month, the company scrapped plans to co-develop an EV.

Embarrassing. Investors love it. For Ford, it’s a bold gamble on the future at a time when he didn’t know any better and the unease surrounding the rise of EV maker Tesla Inc is keeping the traditional automaker out. They are taking big bets on futuristic technologies or forging partnerships that align them with the next generation of vehicles and the technology that will power them. For Rivian, a hot startup with all the la fad ideas around sustainability and greener vehicles, a partnership with the manufacturing giant will ensure that production issues don’t get in the way of its revival.

Rivian went public on November 10 in one of the biggest offerings ever. Ford’s stock value stands at around $12 billion. Just 10 days later, they canceled manufacturing electric vehicles together, they said. Ford still holds 12%. The two companies seem to be doing well, in theory. The Detroit giant’s subsidiary has supply agreements with the EV maker.

But the automaker part is the basic premise of that relationship. So what about the lofty goals set at the time of the initial investment that caused it to fall apart? In April 2019, following the announcement, when Ford CEO James Hackett was asked by an analyst how much his company thought it could save from its partnership versus the “$1 billion to $2 billion needed to bring a new vehicle to market,” he said: “We saw a significant opportunity” in terms of cost and speed to market, noting that the latter was important.

He went on to say that the skateboard platform, the Rivian chassis that brings together systems, motors, batteries and other controls, has a lot of capabilities that Ford can take advantage of. Rivian founder RJ Scaringe notes that as important as his 100,000 electric van-Amazon.com relationship is bringing in partners “who have the manufacturing expertise, supply chain expertise, and the ability to actually use our skateboards.” They didn’t go into details, but investors liked the idea.

More than two years later, the reality is not far from that optimistic statement. Ford is out in its own vehicle, as is Rivian, meanwhile looking for a factory in Georgia.

Maybe they can’t see technology and manufacturing firsthand, and never will—their foundations are different. Within a year of bonding, in early April 2020, luxury brand Ford Lincoln Motors scrapped plans to build a new EV on the Rivian platform. However, he maintained the partnership was still going strong and noted that they were working on “alternative vehicles.”

In the rush to pair up and give investors hope in a series of events, Ford and Rivian’s decision, in retrospect, seems only aesthetically pleasing. By the time Ford put in half a million dollars, Rivian had raised more than $1.5 billion and was worth close to $7 billion.

In a way, it’s a sign of how both companies are underestimating themselves. Maybe we still love all kinds of great electric trucks and SUVs? Current Ford CEO Jim Farley said this month his company plans to double its EV production capacity. But the truth is, we have to start seeing more of them first. Also, there should be more discussion and disclosure about what didn’t work for both sides—because it sounds like it should be straightforward. That will go a long way toward a lively EV conversation.

Many EV manufacturers contract production and often struggle to keep them running (including Tesla in the early days). What problems do they face? Is it a technology issue—hardware or software—or just philosophical?

What may seem like a good partnership or synergistic bond may need a deeper look. For investors, that’s a warning, especially given the rush to go electric and new technologies proliferating throughout the EV value chain.

A former Ford executive once told Rivian’s Scaringe, “Just because you’re engaged to someone doesn’t mean you have to marry them.” That’s right. You don’t have to. And that’s the point to keep in mind.

Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia

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