Big If True: Why Would GM, Amazon Invest In Rivian? | WGLT

Big If True: Why Would GM, Amazon Invest In Rivian?

Feb 14, 2019

This week’s Reuters report that GM and Amazon are considering investments in the electric startup Rivian raises all sorts of questions.

Why? How much? And what does this mean for Bloomington-Normal?

For all the speculation, several auto industry and technology analysts tell GLT the one definite takeaway is that it’s a vote of confidence in Rivian.

“There are a large number of electric vehicle startups out there,” said Mike Ramsey, senior research director for automotive and smart mobility at Gartner. “The fact that you’re getting two marquee investors on the tech side and on the manufacturing side, in Amazon and GM, it lends credibility to Rivian, honestly.”

Until now, Rivian’s only publicly known financiers were Saudi conglomerate Abdul Lateef Jameel, its largest shareholder; Sumitomo, the Japanese company with a U.S. operation based in New York; and Standard Chartered Bank, an international group based in London.

No one knows exactly why GM and Amazon might be seeking minority stakes in Rivian, which has its manufacturing plant in Normal. All three companies won’t comment on the Reuters report.

Rivian founder and CEO RJ Scaringe with the company's R1S electric SUV at the LA Auto Show in November 2018.
Credit Ryan Denham / WGLT

But in the past Rivian founder and CEO RJ Scaringe has strongly hinted at partnerships like these. Last week Forbes reported Rivian was in “negotiations with a well-known brand that’s not a traditional automaker … and the company expects to get further investments of capital within the first quarter of 2019.”

Rivian's own trucks and SUVs will be built on top of the company’s so-called “skateboard,” a high-tech platform that will house its battery technology. Speaking last fall at the LA Auto Show, Scaringe told GLT they want to sell that technology to other companies.

“This is something we’re not talking about publicly yet. But there’s a lot of activity. We’re taking that core technology and we’re utilizing it in some very different applications, where we put a different ‘upper’ on the skateboard,” Scaringe said. “It’s non-Rivian branded products. It could be anything. And that’s the beauty of our architecture is the flexibility the skateboard allows to let us put different things on top of it.”

This GM-Amazon development is being closely watched in Bloomington-Normal. Rivian won millions in local and state tax breaks to buy the former Mitsubishi Motors manufacturing plant. Rivian plans to begin making its first electric pickup trucks and SUVs next year, eventually ramping up to 50,000 vehicles. Rivian has promised to hire 1,000 full-time workers in Normal by 2024.

Partnerships with GM and Amazon could be a good thing for the plant, said Sam Abuelsamid, senior analyst at Navigant Research in Detroit.

“(Rivian) would be just as happy to sell the platforms, because that’s where most of the value is anyway. They can sell the skateboard platform, or have somebody else utilize it, as opposed to selling the complete vehicle. That would help them utilize that plant and get more production out of it,” Abuelsamid said. “Because they’re on their own, they’d probably struggle to gain much of a foothold (selling vehicles). Truck buyers are notoriously loyal in staying with a brand for many, many years.”

Could the plant actually be busier because of these investments?

“Rivian might be able to sell 20,000, 30,000, or 50,000 a year within a few years (of its own vehicles), but if they had GM and potentially Amazon using their platform, they could ramp that up to full capacity (at the plant) within a couple years,” Abuelsamid said.

Amazon’s Logistics Future

If the Reuters report is true, analysts tell GLT that Amazon’s investment aligns with the online retailer’s other recent moves. Instead of relying just on UPS or FedEx, Amazon is now building up its in-house logistics operation, recently growing its own delivery fleet to 50 aircraft. You might've seen Amazon Prime trucks popping up in Bloomington-Normal in the last few months.

“I can certainly see where it would make sense for them, if they had access to a platform like this, to have their own electric vehicle. Which would potentially save them a lot in operating expenses,” Abuelsamid said.

There’s a parallel between Amazon-Rivian and DHL’s acquisition in 2014 of an electric delivery van maker called StreetScooter, said Colin McKerracher, the London-based head of advanced transport for the BloombergNEF research service. 

A Boeing 767 with an "Prime Air" livery flies over Lake Washington in 2016.
Credit Ted S. Warren / AP

“When DHL decided to electrify more of its fleet, they went to the market and looked at what the big original equipment manufacturers (OEMs) were offering,” McKerracher said. “They concluded that none of the big OEMs had something that would really work for what they wanted to do. So they looked at the next tier, further down, and came across StreetScooter. I think that provides some interesting context for what a big logistics company might be interested in.”

McKerracher said the reasons for a possible GM investment are less clear.

“Teasing out GM’s motivations is difficult,” he said.

In a statement, GM did not respond directly to the Reuters report—or deny it.

“We admire Rivian’s contribution to a future of zero emissions and an all-electric future,” GM said.

GM said it wants to introduce 20 electric vehicles by 2023. And while many electric SUVs are on the horizon, the big automakers have been slow to get an electric pickup to market. Rivian aims to be the first.

Mike Ramsey, the Gartner analyst, said there's precedent for GM to invest in small tech companies that do, say, GPS mapping or the LIDAR technology at the core of self-driving cars.

“This is essentially investing in a competing—theoretically—automaker, in the early stages. So it’s a bit of a difference for them,” Ramsey said.

Betting On Rivian

This type of investment is not unheard of. Toyota and Daimler were both investors in Tesla, which to date is the only electric startup to move into the mainstream.

For GM, an investment in Rivian could be a relatively low-cost way to have some exposure to the future of electrification, McKerracher said.

“Going in and making a really big platform investment in all of their pickup trucks is something GM has hinted it wants to do with their long-term vision of an electrified future. But maybe in the short term, they just want to place some money on something that’s a short-term hedge in case this goes somewhere,” he said. “And they looked around and thought, hey, Rivian is doing interesting things and has generated some good buzz and looks like it has good tech and good design.”

Something more strategic and product-driven could also be happening, Ramsey added.

“It’s not just a stock gain. Because that would really far down the line. But (it’s) the ability to share technology and be essentially a supplier to Rivian, and the other way around, that Rivian could be a supplier to General Motors for its lineup,” Ramsey said.

What about for Rivian? Why does maybe pairing up with GM and Amazon make sense for a company trying to make a name for itself?

Global automakers still have a huge advantage in successfully mass producing vehicles, said McKerracher. Even companies like Tesla have burned through cash and missed production targets.

“If Rivian does end up with an investment from GM, I’d imagine that would be a part of their reasoning—access to that manufacturing expertise and knowledge. It looks like they’ve got a great team built up and a promising future ahead,” McKerracher said.

Rivian has been quiet since the Reuters report. 

“We don't comment on media speculation,” said spokesperson Michael McHale.

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