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Rivian IPO puts a spin on Ford’s market value

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The electric car entrepreneurs riding on Elon Musk’s coattails have a lot to be thankful for. Tesla’s stock market value just surged past $1tn and kept going, lifting its shares by more than half in the past month alone — and giving another boost to the “Tesla wannabes”.

There could hardly be a better set-up for the initial public offering of US electric truckmaker Rivian, which is hoping for a market cap of $53bn when it launches on the stock market next week, above many of the world’s best-known carmakers.

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

One difference is the huge amount of capital that is now chasing the electric car dream. One of Musk’s great talents was to charm money out of Wall Street as Tesla struggled through its years of start-up production nightmares. Including last year — when Musk took advantage of the group’s soaring share price to tap Wall Street for more than $12bn — the company has raised about $26bn of equity and debt in its lifetime.

Rivian is not 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 has come with barely a vehicle sold. Rivian only started producing its first vehicles two months ago and predicts vehicle deliveries of 1,025 this year. Whether you see this as a sign of excess or a rational response to the electric vehicle opportunity, it shows Wall Street’s belief that the risk has gone out of the eclectic car market. Amazon, an anchor customer, has taken a 22 per cent stake in Rivian, adding further assurance.

Another big change since the early days of Tesla is the speed with which new electric vehicle companies can now hope to enter the mainstream. When Musk started out, Tesla produced a small number of high-end Roadsters, hoping to ride the long, downward-sloping cost curve of EV technology towards lower-priced models and higher volumes.

Robert Scaringe, Rivian’s founder and chief executive, also started out to sell sports cars. But in 2012 he changed course and aimed instead at the mass market for light trucks. It has taken nearly a decade to get there, but Rivian can already look forward to a healthy level of demand.

It was the first-of-its-kind order for 100,000 vehicles from rental car company Hertz that pushed Tesla’s value over the $1tn bar last week (though Musk later tweeted that no contract had been signed). Rivian, by contrast, had an order for 100,000 electric delivery vans from Amazon before it even started up its production lines.

But even if much of the market risk has gone out of electric vehicles, the operational risk has not. And ramping up manufacturing is only part of the challenge: Rivian is also launching in a very difficult supply chain environment.

A third important difference compared with Tesla’s early days is the state of competition for electric vehicles. Rivian’s electric pick-up trucks account for much of the excitement it has generated among consumers. But there will be formidable competition next year, in the shape of an electric version of Ford’s F-150 pick-up and Tesla’s angular Cybertruck.

Rivian at least has a healthy start, with 55,400 consumers putting down a $1,000, fully refundable deposit to get in line for one of its pick-ups or SUVs.

By contrast, the Ford and Tesla refundable deposits are only $100. But Ford says 160,000 potential costumes have made a reservation for one of its electric trucks, while the number of people lining up for a Cybertruck has been put at more than 1m. A large number of these “reservations” are likely to have come from speculators out to make a quick profit, but they provide one indication of the much greater level of demand expected for the Ford and Tesla trucks.

As traditional carmakers join the fray, this has left a serious question over the gulf that has opened up between the valuations of electric start-ups and older rivals. Rivian is shooting for a stock market capitalisation only 30 per cent behind Ford, which sold more than 4m vehicles last year. So how should Ford be valued when, if all goes to plan, the electric F-150s start rolling off the production line next spring?

richard.waters@ft.com

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