Bearish: Partnerships Look Overhyped
$Rivian Automotive (RIVN.US)$ Many investors may get excited about Rivian’s partnerships with well-known companies like Amazon and Ford. However, when we dig into the details of these partnerships, they’re filled with hype and not much else.
$Amazon (AMZN.US)$ : In 2019 Rivian announced a partnership with Amazon Logistics Inc., (referred to in the S-1 as “Logistics”) a subsidiary of Amazon which is responsible for last-mile delivery of Amazon’s retail operations. While it's reported that Amazon has ordered 100,000 electric delivery vehicles (EDVs) from Rivian, under the terms of the agreement Amazon is under no obligation to actually purchase any vehicles. From the S-1:
“While the EDV Agreement provides that we will be reimbursed for certain development costs, it does not include any minimum purchase requirements or otherwise restrict Logistics from developing vehicles or collaborating with, or purchasing similar vehicles from, third parties.”
Additionally, Amazon Logistics has exclusive rights to purchase EDVs from Rivian for four years after the date of first vehicle delivery and a right of first refusal for an additional two years.
In other words, Rivian cannot sell EDVs to any other company for four years after delivering its first vehicle to Amazon, whether or not Amazon decides to purchase any EDVs at all. The exclusivity clause of this agreement may significantly hamper Rivian’s ability to capture market share and allow more competitors to enter the EDV market uncontested.
$Ford Motor (F.US)$ : Rivian also made headlines due to the investments from Ford, which now total nearly $800 million in Class B and D preferred stock. In 2019, Rivian entered into a purchase agreement with a Ford subsidiary, Troy Design and Manufacturing Co (referred to as TDM), for the supply of prototype and pre-production vehicles. Now that Rivian’s factory is up and running, it expects to discontinue purchases for this service from TDM.
However, Rivian is still required to purchase certain key components for its R1 vehicle program exclusively from TDM for the life of the R1 vehicle program. Details on the rest of the partnership are unclear. Ford already cancelled plans to build a Lincoln EV based on Rivian’s platform in 2020, stating that “it would be better to focus our development efforts on Lincoln’s own fully electric vehicle.” More recently, Ford executives left Rivian’s board of directors and Ford noted in a statement that “Rivian is a strategic investment and we're still exploring ways for potential collaboration with them. We don't have anything to announce today.”
While these partnerships were touted as legitimizing Rivian’s business, in reality, they look more like arms-length equity investments by Amazon and Ford. In its latest 10-Q, Amazon reported a 20% ownership interest in Rivian. In many respects, these partnerships hinder Rivian’s growth and cost model more than they help the company.
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Teddy Willson : Your analysis assumes people invest using fundemantals. People invest now becuase of a cool tweet, bright colors, and rainbows. Just wait until the crash of 1987 or 2022 repeats itself before people return to normal investing strategies.
James Browny : I know it is a crazy world, but by any means this is way overpriced, will hold and buy later with 60% discount to IPO price, time will tell…
Stitch-fu James Browny : I am picturing you still waiting for Tesla to go back under $50/share since a few years ago. Add the money planned for buying RIVN at a 60% discount to that “I will never use this cash” glass jar.