Just two days after its high-profile debut on Nasdaq on Nov. 10, the market capitalization of Rivian, an American electric car startup, quickly surpassed that of established automakers such as Ford and GM. Although the stock price has recovered in recent days, Rivian's market capitalization is still above $100 billion, and Rivian's current revenue is still very limited, but it has created a market capitalization myth that can be recorded in history.
Rivian, the world's fourth-largest carmaker, only began delivering its first batch of 10 vehicles in September; by the end of October, it had delivered a total of 156vehicles. Yes, you read it right, that's all, but the market capitalization of this company has reached hundreds of billions of dollars.
Many people must be confused about what is so unique about this company that it can win the popularity of a large number of investors.
The market is looking for the next Tesla.
Rivian was valued at just $27.6 billion when it raised money in January and has risen since then, peaking at $80 billion.
On the eve of the IPO, Rivian adjusted its IPO guidance price several times, initially between $52 and $62 a share, and then raised it to $72 to $74 a share. By the time of the official IPO, Rivian priced the offering at $78 per share, issued 135 million shares, raised nearly $12 billion, and valued the company at $77 billion.
Although lower than the previous estimate of $80 billion, Rivian still created the world's largest IPO, this year and the sixth-largest IPO in the history of the SEC.
Rivian's shares rose 117 per cent in the first five trading days after the IPO, with the market capitalization of companies in the S & P 500, including traditional giants such as Goldman Sachs, Boeing and Starbucks, once exceeding nearly 90 per cent. Rivian closed Tuesday at $119.85, with a market capitalization of $102.2 billion.
Rivian is a big hit in the industry, the market capitalization of Volkswagen once squeezed out Germany's Volkswagen, ranking the third largest car company in the world, second only to Tesla and Toyota. At this time, Rivian has not yet achieved large-scale mass production. By contrast, Tesla delivered about 500000 electric cars in 2020, while Toyota sold nearly 10m in fiscal year 2020.
As a newly listed electric car start-up, it is a miracle that Rivian's market capitalization is comparable to that of the leader in the industry.
Some analysts pointed out that in recent weeks, retail interest in electric vehicle stocks has increased significantly, there are a large number of investors eager to enter the electric vehicle sector, and Tesla's recent stock price fluctuations have become a boon for Rivian. The prevailing view on Wall Street is that the growth potential of Rivian is much greater than that of Tesla.
Wedbush automotive and technology analysts said there was great interest in the stories of the electric car companies, after Tesla changed the valuation model of the electric car sector with a market capitalization of more than $1,000bn.
The macro background is also good for the electric car industry, with US President Joe Biden signing a $1.2 trillion infrastructure approach last week, including $7.5 billion for 400000 charging stations.
Industry insiders believe that the Biden government's investment will have a significant impact on the development of electric vehicle charging stations in the United States, but it is not exaggerated in terms of scale, because this scale of investment is still unable to adapt to the rapid growth of electric vehicles, which means additional support from municipal, public utilities and private investment is needed to fill the gap.
IHS Markit, a data research company, predicts that the number of electric cars in the United States will soar to 9.3 million by 2026, up from 1.5 million at the end of 2020.
Rivian chose the right direction?
Despite its fame only this year, Rivian didn't start much later than Tesla.
In 2009, R.J. Scaringe, founder and CEO of Rivian, founded Mainstream Motors, after earning a doctorate in mechanical engineering from the Massachusetts Institute of Technology and renamed it Rivian two years later. Musk officially became Tesla CEO in 2008.
Rivian gets its name from the Indian River in Florida. (Indian River), Scaringe grew up near there.
From the point of view of the timing of starting a business, this is not a good choice, and the financial crisis has unsettled the capital markets. The bankruptcy of General Motors and Chrysler didn't bode well for auto startups at the time.
Scaringe's family and friends provided the initial venture capital, and both he and his father applied to the bank for loans to raise money.
Like most startups, Rivian didn't get off to a good start. Scaringe and a small team spent two and a half years designing a fuel-efficient sports car, but decided to abandon it in 2011. Scaringe commented: "deep down, I realized that I had failed to answer a fundamental question, which is why the world needs Rivian's success."
It was a painful moment when, according to Roman Mistiuk, a senior designer at Rivian, the team worked for four nights in a row, but when the prototype car was finally built, Scaringe announced to employees, "We have to change cars."
Scaringe then moved the company to Detroit, the world-famous "motor city", where Scaringe lived with his employees in a house on the outskirts of Detroit because of limited funds.
The tough environment didn't stop Scaringe and his team from starting a business. Except for Rest, they talked about cars day and night.
Scaringe admits that although he has always been confident in starting a business, that doesn't mean he always knows what to do.
Early investors from Saudi Arabia and Japan provided the way for Rivian to develop electric cars, and Scaringe eventually chose to focus its products on pickups and SUV. Scaringe likes outdoor sports and mountain biking, so he wants his car to be off-road, and R1T electric pickup trucks and R1s electric SUV came into being.
Some auto market experts commented that targeting the premium pickup and SUV market in the United States is a wise choice, which is the car that Americans really want to buy, not compact cars or medium-sized cars, and higher profit margins, especially luxury models.
Pickups and SUV have always been the favorites of American consumers, with SUV accounting for half of the US market and pickups 20 per cent, according to GCBC, a car sales tracking website.
Of course, there are analysts who are not optimistic about Rivian's electric pickups because they are not real work cars, they are powerful, but they are only for entertainment purposes.
A powerful ally
In addition to the right track, part of the value of Rivian comes from strong supporters. E-commerce giant Amazon has invested more than $1 billion in the electric car start-up and ordered 100000 electric delivery trucks at once.
Amazon is building its own distribution network and needs a large transport fleet, and Rivian can help its business reduce its carbon footprint.
Traditional carmaker Haoqiang Ford provided $800m in funding for Rivian. For Ford, investing in Rivian is an out-of-the-loop move, hoping to get new ideas from start-ups. Ford and other traditional carmakers are racing to prepare for the future of electrification.
In addition to direct investment, Ford initially planned to work with Rivian to develop electric vehicles, but the two companies have now decided to end the partnership and continue with their respective car-building plans, but Ford's investment has not been withdrawn.
With such strong allies, it makes sense for investors to be enthusiastic about Rivian. Although Rivian has been questioned for its lack of income, it is not without a precedent of success in other areas.
When social media Instagram was sold to Facebook for $1 billion, Instagram had no revenue, and now Instagram has become an American social media giant.
According to media reports, GM has tried to participate in the investment before, but its demand for control and exclusivity is beyond the reach of the company's founder, Scaringe, and has no choice but to give up. Scaringe has made it clear that he wants to hold on to control of Rivian.
Just as Musk has absolute control over Tesla, Scaringe is a control freak who personally checks everything from the color of the bathroom tiles to the color matching of the assembly factory. Rivian employees also have almost fanatical admiration for Scaringe, designers praise his exquisite design sense, brand experts are impressed by his marketing skills.
The solid foundation of Rivian
Although the electric vehicle industry has developed, the electric pickup is still in its infancy. Scaringe dismisses the idea that it is often difficult to associate electric cars with pickups that symbolize cowboy culture. "the general public has a lot of misunderstandings-electric cars can't be off-road or dragged, and truck buyers don't want environmentally friendly cars. These ideas are fundamentally wrong. Electrification and technology can create a truck that is very interesting to drive. "
In fact, under the increasingly stringent pressure to reduce emissions, more and more automakers are turning their attention to electric pickups.
In addition to Tesla and electric car upstarts such as Rivian,Lordstown and Nikola, they are also targeting this area. In addition, traditional car companies such as Ford and GM have also launched their own electric pickups.
In the face of a situation surrounded by powerful enemies, it is not easy for Rivian to break out of the siege, but it also has its own advantages.
Rivian has an operating plant and the first mass-produced electric trucks on the market, a landmark achievement that surpasses competitors such as Tesla and Ford.
Compared with Tesla Cybertruck's more than 1.2 million orders, Rivian's current external orders of less than 60, 000 are a drop in the bucket, but provide a solid foundation for future growth and stability.
On the other hand, the mass production time of Cybertruck has been delayed again and again. Musk had previously said that the Cybertruck would start production at the end of 2022 and was expected to reach mass production by 2023.
By contrast, Rivian delivered a batch of electric cars at least a few months ago, although mainly for its own employees. It is reported that by the end of this year, Rivian's Normal plant in Illinois will accumulate production of about 1200 electric vehicles, and by the end of 2023, it is expected to achieve annual production of 150000 vehicles.
According to media reports, Rivian is in talks to build a second plant in the United States, possibly in Georgia.
Conclusion
The soaring market capitalization of Rivian has also attracted a lot of criticism, with some analysts warning that this is another sign that Bubble is quietly returning to the market.
In the eyes of opponents, there is a problem with the market's valuation of Rivian. Their reason is that Tesla has made a lot of money for many investors, so now everyone wants to participate in the next star company in the field of electric cars, but unfortunately, companies like Tesla don't appear very often.
However, outside criticism may not affect Scaringe.
Scaringe, who is at the helm of Rivian, said he was inspired by American rock climber Alex Hornold (Alex Honnold). On the wall of Scaringe's office is a poster of the documentary "unarmed climbing" (Free Solo), which documents Hornold's unassisted conquest of the 3000-foot-high (El Capitan) of Emirates Rock in Yosemite National Park.
"when you can't see the way forward, all you can do is climb the infinitely steep mountain in front of you," Scaringe said.
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