Rivian Automotive is the rare stock-market story that makes Tesla look staid. Having only delivered 156 vehicles, the Amazon.com-backed electric-vehicle startup tore past expectations in its public trading debut on Wednesday. With a valuation that kicked off at $93 billion, up 37% from its initial public offering price the day before, Rivian is larger than General Motors or Ford Motor. The electric-car business is a good one to be in, but optimism is over the limit.
The company opted for a traditional offering instead of merging with a special-purpose acquisition company, making its route to the market more like Tesla’s than other young electric-vehicle makers like Lucid. Raising some $12 billion makes this the largest initial public offering of the year. It also makes Tesla’s IPO back in 2010, valuing Elon Musk’s company at a mere $1.5 billion, look quaint. Rivian is at an even earlier stage: Tesla had already delivered 1,650 Roadsters when it went public.
While boss RJ Scaringe sees production ramping rapidly, Rivian has come into the limelight at a difficult time for the industry. Its IPO filings acknowledge supply shortages that have hamstrung automakers like GM, mentioning semiconductors 27 times. Those pressures look unlikely to ease any time soon, and Rivian is barely getting started.
The promise of achieving the stratospheric valuation enjoyed by the $1 trillion Tesla – larger than traditional car companies like Toyota Motor, Volkswagen, Daimler, GM and Ford combined – is nonetheless drawing investors in. Lucid, for instance, recently saw its valuation nearly double when it made its first deliveries.
Tesla’s recent results show margins expanding and it has largely avoided supply crunches. The electric-vehicle business, already a far more mainstream proposition than when Tesla went public, could prove to be meaningfully and sustainably more profitable than the legacy combustion-engine industry. And Rivian, specifically, already has a major customer: Amazon, which has said it will purchase 100,000 electric delivery vehicles and has sunk cash into the company.
But competition from the growing number of EV hopefuls may grind on margins. Supply disruptions could continue. And Amazon does not actually have to purchase all those vans. Even the IPO price looked optimistic. Rivian’s public-market investors are pricing in a perfect journey.