Ford & Rivian – EV independence

Ford can make it alone.  

• The ending of the partnership is a sign that expectations for Rivian are now so high that it thinks that it will be able to challenge Ford for its crown as the vendor of the workhorse of the USA.
• Ford is ending its relationship with Rivian and all plans to use its technology and/or platforms in its electric vehicles have been cancelled.
• What began as an insurance policy has now become a rivalry as it is clear that Rivian (and its investors) think that it can challenge Ford’s dominance in the pick-up truck segment.
• I think that this has come about as a combination of two factors.
  • First, Ford’s EVs: are faring much better than expected.
  • Ford now has the F-150 Lightning, Mustang Mach-E and the E-Transit and is seeing much greater than expected demand for all of them.
  • Part of the reason for this is that Ford has realised that EVs are the future and has put a lot of thought into how it can make its EVs better than their petrol predecessors.
  • This combined with steady progress on its digital user experience means that Ford is a real contender in the race to EVs.
  • It also has the advantage of its products tending to be much cheaper than competing products from its newer rivals.
  • This has given Ford confidence in its own EV platforms and products meaning that it no longer needs Rivian as an insurance policy.
  • Second, Rivian’s aspirations: With a market capitalisation of over $100bn despite not having sold a single vehicle, expectations for this company are sky-high.
  • This means that it has to go after F-150’s established position as the best-selling vehicle in North America and the workhorse of the USA.
  • This is where I think it comes unstuck because although it is a great lifestyle product, the real truck reviewers have not labeled this product as a workhorse.
  • Hence, those that buy a truck for utility rather than lifestyle, are likely to stick with the F-150 in petrol or electric form.
  • The fact that it is meaningfully cheaper than Rivian is also a big reason to stick with the F-150.
• This move by Ford has been on the cards for a while as Ford relinquished its place on Rivian’s board in September.
• I suspect that the next move may be to sell down its 12% stake in Rivian once the post-IPO lock-up expires.
• I continue to be fairly optimistic about Ford’s migration to electric where I see it as ahead of many of its traditional competitors.
• Its shares trade at a tiny fraction of Rivian’s and I would own it over Rivian without hesitation.