CA's Rivian Unseats Ford, GM In Market Value, 2nd Only To Tesla

LOS ANGELES, CA — Move over Detroit. There's a new Motor City, and it’s in California, the epicenter of the electric vehicle revolution.

Irvine-based automaker Rivian, which most Americans had not heard of, overtook Ford Motor Co. and General Motors Co. this week to become the automaker with the second-highest market value in the nation in its initial public offering.

Only Palo Alto-based Tesla has a higher valuation, which is about $1 trillion.

That’s right, Rivian, an automaker with fewer than 200 vehicles on the road is now America’s second-biggest automaker as measured by market capitalization.

It’s a real head-scratcher.

How did this happen? Here are the facts to help you understand the California-based paradigm shift reshaping the automotive industry.

What Is Rivian?

Formed in Irvine in 2009, Rivian’s claim to fame is that it won the race in September to launch the first fully electric truck.

So far, most of its 153 trucks have gone to the company’s employees. But it has already booked preorders for more than 55,000 vehicles and has plans to launch a fully electric SUV and van later this year.

Rivian vehicles are marketed to outdoors enthusiasts. The trucks are designed for steep off-road terrain and can go from 0 to 60 mph in just three seconds on the highway, the company said. Its R1T model truck starts at $67,500.

Why Is Its Stock So Highly Valued?

Timing, timing, timing. Rivian, a company that has yet to turn a profit, went public Wednesday in one of the largest IPOs in the nation’s history. Just days after going public, its market value hit about $107 billion.

Not only did Rivian win the race to be the first electric truck manufacturer, it also went public in the middle of the 2021 United Nations Climate Change Conference, also known as COP26, where dozens of nations and companies agreed to sell only zero-emission vehicles within 20 years.

Investors once saw Tesla as a model for building wealth through shrewd investments in electric vehicle startups. Now that we're even farther down the road, investors see a future in which electric vehicles nudge gas guzzlers off the road.

The company targets fleets and has booked one major contract already, according to NPR. Amazon committed to buying 100,000 delivery vehicles from Rivian.

With more companies entering the EV market, there is still plenty of room for newcomers, said Craig Irwin, an analyst who covers electric vehicle and EV-charging companies for Roth Capital.

“EVs are inevitable, and it’s a good thing for the markets to have another credible EV competitor come public,” Roth said. “Rivian’s IPO marks a point of incremental maturation for the industry and shows that billions in capital is available for credible players.”

Is It All Hype?

That depends on whom you ask. Heavy hitters are among the early investors in Rivian.

Ford is one of Rivian's high-profile backers, having invested half a billion dollars into the company in 2019. The other is Amazon, which held a 20 percent stake in Rivian ahead of the IPO. With that kind of backing from the titans of industry, Rivian went public with major street cred.

But Rivian will have to scale up production at a stunning rate to be able to compete with giants such as Tesla and Ford. Some notable critics don’t think Rivian can do it.

Investor Michael Burry, made famous in the film “The Big Short,” predicted the mid-2000s housing bubble and bet heavily on its collapse. He expressed his doubts about Rivian, Markets Insider reported.

"More speculation than the 1920s," Burry tweeted, highlighting an article about Rivian, according to Markets Insider. "More overvaluation than the 1990s."

For his part, Tesla’s Elon Musk saw Rivian coming for Tesla's market share and has made a point of publicly downplaying the threat. Highlighting other electric vehicle startups that launched with fanfare only to flop, Musk told Bloomberg, “prototypes are trivial compared to scaling production and supply chain.”

“I hope they’re able to achieve high production & breakeven cash flow," Musk tweeted Thursday. "That is the true test. There have been hundreds of automotive startups, both electric & combustion, but Tesla is only American carmaker to reach high volume production & positive cash flow in past 100 years.”

The Associated Press contributed to this report.