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Rivian Building All-Electric Pickup Trucks

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Whitney Tilson’s email to investors discussing Galileo Russell is really, really excited, Tesla Inc (NASDAQ:TSLA) may report a profit this quarter; a friend’s comments on Rivian.

1) Galileo Russell is “really, really excited; the report is far better than my and Wall Street’s expectations; I think they’re going to report a profit this quarter; short squeeze time; up 7%”:

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Q1 hedge fund letters, conference, scoops etc

2) A friend’s comments on Rivian:


For a company that has been getting universally fawning media coverage, Rivian is hardly building the “Tesla of trucks” quietly.  Every reader is bordering on being lectured by each journalist granted an interview with the company’s Founder and CEO, that they must think of Rivian as not just the most successful new auto company ever -- perhaps with the exception of Tesla -- but also that it may even be morally superior to every other entity, for some reason.  Rarely have I seen such implied virtue-signaling as in the fawning media coverage about Rivian.

Reality check:  No independent journalist has ever gotten to drive one of the company’s two concept cars.  Perhaps someone at Ford or Amazon got to do proper due diligence, but there is no independent confirmation in the real journalistic world.

The company doesn’t have an assembly line yet.  It has a building. Lord knows when manufacturing will commence, if ever.  Where are the 400 or so pre-production validation vehicles that will be torture-tested in the harshest climates for over a year, before production commences?  It seems to me that this product is at least two years away in a best-case scenario.

Everyone who has been granted an “exclusive” interview with the Founder/CEO professes to be totally in love with the product.  It is sooo cool.

The price?  Perhaps around $100,000, perhaps quite a bit more.  If it ever makes it to market.

I get it: There will be *some* buyers for a $100,000 electric pickup truck.  It will not be zero. But how many, really?

Let’s consider that General Motors (Chevrolet and GMC) and Rivian’s own investor -- Ford -- will also have all-electric pickup trucks some time between 2 and 3 years from now.  Tesla has been suggesting that it will have one even before those. Just wait another year or two, and we may hear about all-electric pickup trucks from Nissan, Toyota and FCA (RAM and Jeep) as well.  Hey, why not Honda and Volkswagen as well?

Divide a total market of, perhaps, 40,000 units per year between these companies:

  • Rivian
  • Tesla
  • General Motors (GMC and Chevrolet)
  • Ford
  • FCA (Jeep and RAM)
  • Nissan
  • Toyota
  • Honda

That’s at least 8 companies and perhaps 12 brands.  How many of them will sell more than 6,000 units of all-electric pickup trucks per year?

At least Rivian isn’t pretending that it can sell such a pickup truck for $49,000, profitably.  And it’s not promising to sell more than 20,000 per year. And it has two of the most credible and important investors if you were ever to pursue this product -- Ford and Amazon.

Still, at the end of the day: The probability that Rivian will earn its cost of capital on any sustainable basis, is closer to one in a million.

Let’s say that against all odds the company manages to sell 20,000 vehicles per year at $100,000 each.  That’s $2 billion. There likely won’t be any gross margin on that, but all this will have to pay for billions of dollars in development and factory assembly line costs.  It just doesn’t come remotely close to penciling out.

Who will have an electric pickup truck business that doesn’t bury the company behind it?  Most likely the incumbent truck makers who can write off the losses over their profitable trucks, as well as have an existing service network.  Those would be: Ford, GM (Chevy/GMC), FCA (RAM/Jeep), Nissan, Toyota, Honda and Volkswagen. Perhaps Mercedes too. They can afford to lose their shirts on a vanity project like this.

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