EVs & Credits xxxx

General Motors (GM) announcedMonday that its full lineup of electric vehicles will qualify for the $7,500 tax tax credit.

Ford said its Mustang Mach E lost half of the credit on April 5.

Probably not a problem for Tesla as their cost of production is lower than competitors.

Death knell for Rivian?

Georgia was essentially acting as an early-stage investor in an unproven company, using taxpayer money in an attempt to attract jobs and economic growth that were far from guaranteed. In the years since, Rivian has failed to hit vehicle production targets, scaled back expectations, and lost billions of dollars, with no clear end in sight to the losses.

Rivian is also burning through cash at an unsustainable rate. In its most recent quarter prior to the 2021 announcement, the company lost $1.2 billion; its 2021 losses would total $4.7 billion and it lost another $6.8 billion in 2022. Amazon, one of Rivian’s earliest investors, paid $1.3 billion for a 20 percent stake, plus an exclusive contract for 100,000 all-electric delivery vans by 2025. The deal was later quietly amended to 100,000 vans by 2030.

Tesla also burned through money until they turned the corner. Will Rivian?

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I see two problems with Rivian right now, one in each of their two business segments:

  1. Their consumer vehicles are quite expensive, I think their lowest end model starts at over $70k. That, by definition, will limit their total market opportunity. Which, in turn, will limit profits.
  2. Their fleet cars are still quite expensive to produce. But fleet purchasers are known to squeeze their supplier as much as they can to get as low a price as possible. And that will limit profits (it’s pretty well-known in the auto industry that fleet sales are meant to gin up volume, but don’t produce much profit).

So both of their business segments have limits to profits. They’ve burned through over $6B in cash last year, and have about $12B in cash remaining. If they need another $5B to $10B for survival, will the investors, or new investors, give it to them? I’m not sure. Seems like Amazon is much less enthusiastic about it than they were 4 years ago.

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Not all carmakers need to be mass marketers, Rivian could go after the truck market, sports and commercial. Currently I’m less certain about Rivian since the price cutting started.

The Captain

Of course not. Look at all the niche car companies that have survived for decades and decades. BUT, their costs need to be “medium” while their prices are “high” in order to survive (Ferrari, etc). But even if they survive, most of the time they eventually end up being acquired by a larger automaker.

Also, with their (Rivian’s) focus on fleets, they seem to want to be more than just niche.