Barriers to sustained high valuation
$Rivian Automotive(RIVN.US$ Incumbent automakers have found a path to profitability and earn billions of dollars in free cash flow, thanks to their scale and expertise. What critics see as their Achilles heel, that is, their investments in traditional auto manufacturing, are in fact an advantage for these incumbents. The transition to EVs will be easier for traditional automakers compared to the path to scale and profitability for pure play EV makers.
We are all familiar with Tesla’s operational struggles: The many setbacks, as well as delays, which have eased as the company has matured but are still present. Money and an idea, no matter how great the idea, are not enough to compensate for the decades of manufacturing experience and the immense scale of traditional automakers. This is the competitive advantage that traditional automakers have, which companies like Rivian and Tesla have not found a way around. Rivian has followed the same path of Tesla, delaying delivery of its flagship cars. These are not problems that get fixed in a quarter or a year. They take years to fix and in that time incumbents are expanding their EV presence. You cannot assume that Rivian will be allowed to grow and learn and in response incumbents will be twiddling their thumbs.
Rivian does not yet have the kind of brand loyalty that Tesla has. It faces a risk that further delays would turn off its ~54,000 customers. In the time that Rivian announced its delay, Ford announced that it had more than 160,000 pre-orders for its F-150 Lightning.
$Ford Motor(F.US$ , $General Motors(GM.US$ , and $VOLKSWAGEN AG(VLKAF.US$ , as well as $Tesla(TSLA.US$ , have built the infrastructure to deliver EVs at scale. All these incumbents are well funded and are deploying billions of dollars into the EV market. This means that Rivian’s path to minimum viable scale is getting narrower even before the company delivers a single EV.
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jake Nho : Do you think the trend after RIVN will remain crazy
Austin ONeill : So is Tesla’s but look where we are. The markets have become a giant Ponzi scheme of epic proportions. When this ends who knows. It will wipe out this “new economy” though and the government won’t have any monopoly money left the bail it out.
Wyatt lincoln : Looking at daily volume, it does not seem that there are any long term investors here.... may be a new addition to the meme family.
Sacai Luis : How does volume translate to long term holders in this IPO versus other IPOs?
Rann New Sacai Luis: have no data on this. Just looked at trading volume in relation to the float..
sPhCqxPcWZ : Would you consider TSLA a meme stock?