September has been a momentous month for Rivian Automotive. After more than a decade of development, the automotive startup announced that the first production models of its electric pickup truck, the R1T, were rolling off the production line at its factory in Normal, Illinois.
An all-electric pickup truck, the R1T is the first of its kind to reach the market, beating out established automakers and rival EV startups alike. While undoubtedly a victory for the company, Rivian will have to work hard to turn its first mover advantage into a sustainable market position.
First mover advantage
The 2022 Rivian R1T is certainly an impressive vehicle. Running on a separate electric motor in each wheel and boasting an EPA-rated range of 314 miles, the truck has power and flexibility for both road driving and off-roading. With an initial starting price tag pegged at $67,500, the R1T should enjoy solid buyer interest.
Despite being in business since 2009, this will be Rivian’s first attempt at translating a development vehicle into a commercially viable product. Thus, the R1T will be Rivian’s first opportunity to make a real impression on the public. Rivian clearly understands that it has just one chance to make a good first impression.
RJ Scaringe, Rivian’s founder and CEO, has acknowledged the importance of the R1T to the company’s future. In an interview with MotorTrend published Sept. 27, Scaringe explained how Rivian thinks about the R1T and R1S, a forthcoming electric SUV that is built on the same platform, saying “These products are really our handshake with the world as a brand.”
Rivals coming in hot
The R1T will not be alone for long. Ford Motor Co. (F, Financial) is currently hot on Rivian’s heels. Ford’s F-150 Lightning, a new EV spin on the venerable automaker’s enduringly popular pickup truck, is set to hit the market next year. Starting at $40,000, the F-150 Lightning is competitively priced, a fact that has likely contributed to Ford’s current tally of more than 150,000 preorders for its first all-electric truck.
Other automakers are also on Rivian’s EV trucking trail. General Motors Co. (GM, Financial) has a bevy of all-electric truck models in the works. The new GMC Hummer, scheduled to enter production late this year, will blaze the trail, while the all-electric Chevrolet SIlverado will fall some time later. The electric Hummer will start out selling a deluxe launch trim boasting an eye-watering $112,000 price tag, though more affordable versions should follow. GM has also announced an all-electric Chevrolet Silverado, which is expected to be priced for competition with both the R1T and F-150 Lightning. However, GM has yet to announce a definitive timetable for the Silverado.
As the first mover of the EV trucking market, Rivian has undoubtedly secured its place in history. But, as the long history of failed automotive businesses attests, being first is no guarantee of long-term market leadership.
The right time for an IPO
News broke early this month that Rivian had filed confidentially for an initial public offering. The upstart automaker has set an ambitious fundraising target, as Reuters reported on Sept. 15:
“Proceeds from the IPO will allow Rivian to expand production beyond its assembly plant in Normal, Illinois. The startup has said it is in talks with multiple locations to build a second U.S. factory, which documents viewed by Reuters show would include an investment of at least $5 billion.”
With a target valuation of $80 billion, Rivian can hardly be faulted for lack of ambition. Based on its fundraising track record, Rivian may have good reason to be confident. Since 2019, the company has brought in a whopping $10.5 billion from investors.
Building out the necessary capacity and market reach to compete on a level playing field with the established automakers knocking at Rivian’s door will not be a cheap proposition. Indeed, even the $8 billion the company hopes to raise may not be sufficient to cover the cost of its ambitious plans, with a second factory alone expected to cost upwards of $5 billion.
My take
With a host of other automakers coming in hot with electric pickup trucks of their own, Rivian will have to work fast to secure a sustainable strategic foothold in the automotive market. To do that, Rivian will need a lot of capital. Thus, the success of Rivian’s IPO will be of absolutely critical importance to its future, in my assessment.
Rivian has come a long way since 2009, but it still has an even longer way to go. The next chapter of its journey definitely bears watching, in my opinion.
Trade carefully!