'Challenger' Rivian, To Defeat US Electric Vehicle King Tesla [Im Juhyung's Tech Talk]

Rivian's Stock Soars Post-IPO
Tesla Joins Global Top 3 After Toyota
"Real Test Is Mass Production," Some Pessimistic
Average Production 1.5 Units/Day Over 5 Weeks Since Last September
Contrasted with Tesla's Mass Production and Cash Flow Management

Pickup truck of Rivian, an American electric vehicle startup. / Photo by Rivian website capture

[Asia Economy Reporter Lim Juhyung] The American electric vehicle startup 'Rivian' is making waves in the stock market. Since its initial public offering (IPO), its stock price has surged significantly, surpassing established automobile manufacturers. Some predict that Rivian could even threaten Tesla, the world's largest electric vehicle manufacturer.

However, there is also considerable skepticism. Despite electric vehicles being fundamentally different from traditional internal combustion engine vehicles, they still belong to the 'manufacturing' sector, making it difficult to surpass the expertise of existing companies.

◆Rising to the Global Top 3 Automakers Just 6 Days After Listing

Rivian, which was listed on the U.S. stock exchange on the 10th (local time), has seen its stock price soar repeatedly over the past few days. On the 16th, when its market capitalization peaked, it exceeded $170 billion (approximately 201 trillion KRW), overtaking Germany's Volkswagen ($139 billion) to enter the global automaker 'Top 3'. This remarkable achievement came less than a week after its stock market debut.

There are optimistic forecasts that Rivian, which enjoys strong support from investors, could eventually surpass Tesla to become the world's number one electric vehicle company.

The new electric vehicle startup Rivian was listed on the Nasdaq, the US stock market, on the 10th (local time). / Photo by Rivian Official Website Capture

Tesla's market capitalization, as of the close on the 18th, has surpassed $1 trillion (approximately 1,180 trillion KRW), solidifying its position as the most valuable automaker globally. It is more than three times that of Toyota ($300 billion), the world's second-largest automaker.

◆Rivian Adopts a Strategy Completely Opposite to Tesla

From the start, Rivian emphasized that its growth strategy was the 'antithesis' of Tesla's. Robert Scaringe, CEO of Rivian, stated in a letter to investors before the IPO, "It has become increasingly clear that the strategy of making sports cars is not the right one." Instead, he stressed focusing production on pickup trucks, delivery vans, and sport utility vehicles (SUVs).

This strategy is the exact opposite approach taken by Tesla CEO Elon Musk. Tesla gained popularity with high-performance sports cars and luxury vehicles before expanding its lineup to SUVs and the 'Cybertruck'.

A delivery van for parcel delivery by Amazon, a major American e-commerce company, to be produced by Rivian. / Photo by Amazon

Luxury cars aimed at general consumers are a fiercely competitive field dominated by established automakers. Therefore, this can be somewhat disadvantageous for startups. However, vehicles used in delivery and logistics industries, such as delivery trucks, are less electrified, allowing startups like Rivian to enter relatively easily.

Rivian already enjoys strong support from Amazon, the largest e-commerce company in the U.S. Amazon plans to purchase 100,000 electric delivery vans from Rivian by 2025.

◆"The Real Test Starts with Mass Production"... Musk's Advice

However, Rivian's future is not without challenges. To evolve beyond a mere 'new technology startup' into a proper global manufacturer, Rivian must prove its capability for mass production.

CEO Musk also advised Rivian, saying, "The real test starts now." On the 11th, he tweeted, "I hope Rivian can achieve mass production and reach positive cash flow at the break-even point. That will be the real test." He added, "There are hundreds of automotive startups for both electric and internal combustion vehicles, but in the past 100 years, Tesla is the only company in the U.S. to have achieved both mass production and positive cash flow."

Tesla CEO Elon Musk advised Rivian, saying, "Mass production and achieving cash flow at the break-even point must be possible." / Photo by Yonhap News

As Musk mentioned, Tesla's production capacity and financial status are both solid. Looking at Tesla's performance in the third quarter (July to September), net profit surged about fivefold year-on-year to $1.62 billion (approximately 1.9 trillion KRW). Consequently, the company's cash flow reached about $1.3 billion (approximately 1.5 trillion KRW), more than doubling from the previous quarter.

Meanwhile, production capacity is rapidly increasing. Tesla can already produce over 500,000 vehicles annually and delivered 241,300 vehicles in the third quarter alone. By expanding factory production capacity, Tesla has successfully achieved the 'two rabbits' of increasing margins and output.

◆To Become a Global Company, Rivian Must Catch Up with Established Firms' Expertise

On the other hand, Rivian has spent billions of dollars annually from 2019 through the first half of this year but has yet to achieve smooth mass production. According to the IPO prospectus submitted by Rivian, since starting vehicle production in September, the company has produced an average of only 1.5 trucks per day over five weeks. Additionally, the disclosed financial information shows a cumulative deficit of $2.7 billion (approximately 3 trillion KRW).

The first electric pickup truck 'F-150 Lightning' unveiled by Ford Motor Company in the United States / Photo by Yonhap News

Meanwhile, established manufacturers are releasing competitive electric vehicles based on their vast production infrastructure built over the years. Ford unveiled the 'F-150 Lightning' pickup truck, and GM is producing models like the 'GMC Hummer EV'.

Although the shift from internal combustion vehicles to electric vehicles demands IT technologies such as infotainment, semiconductors, and autonomous driving, the essence of manufacturing remains unchanged.

Startups can only truly become 'global giants' by first catching up with the 'know-how' of established companies?optimizing supply chains, expanding factory facilities, securing funding, and ensuring cash flow does not dry up.