Unveiling Rivian: A Comprehensive Analysis ????

INTRODUCTION

The business world can be seen as a complicated chess game, each company is a piece of the game, and the market is the board, which is constantly metamorphosing. The business world, such as the classical chess game, is all about strategies, which resources to use or not to use? Which goals to pursue? To be better than your rival or competitor. The difference between chess and the business world is that chess has a finite option for the player, while anything can happen in the business chess game.

???????????This case analysis will be analyzing the strategies used by a new automobile company focused on electric vehicles that recently went public (Rivian) and its relationship with the other two giants of the market (GM & Ford). This analysis will be primarily focus on Rivian. However, GM & Ford will be constantly mentioned since they are big pieces in this "business chess game."

? CURRENT STATUS OF THE ORGANIZATION

Recent strategies or issues

???????????Rivian Automotive was founded back in 2009 by its current CEO, R.J. Scaringe. The company was initially called Mainstream Motors, and its focus was producing sporting cars. However, soon after, Rivian pivoted his strategy of the sporting cars industry and went on adventures itself in electric pickup trucks and SUVs. This change of market niche inside the automobile industry was crucial to Rivian becoming what it is today. But who was behind this change of pace?

???????????If "the eyes are the windows to our soul," the company's CEO is the window to its company culture. R.J. Scaringe,38, is often seen dressed more casually than its competitor's CEOs. He likes to wear Patagonia clothes, a renowned eco-friendly outdoor brand from California. Its former CEO and activist, Rose Marcario, always speak about environmental issues and reusing clothes. unlike most clothing brands that try to sell more every year, Patagonia even released an ad with one of their coats?with the saying "Don't buy this coat." In small letters, they explained that they meant it, don't buy this coat if it is unnecessary, an action against consumerism to its brand.

???????????Using cloths from Patagonia shows that R.J. Scaringe agrees with this eco-friendly approach by Patagonia. As seen in class, the company's culture will follow the influence of its leader, as it happened to Southwest Airlines with Herb Kelleher and Ford Motors with Henry Ford. R.J. Scaringe's beliefs and values will mold Rivian behaviors in external and internal choices. To give a better perspective on R.J. Scaringe's way of thinking, when introducing Amazon's first electric delivery truck made by Rivian in October of 2020, R.J. Scaringe stated on his Twitter, "Climate change is one of the biggest challenges facing our planet. It's amazing what's possible when companies and industries come together and commit to finding meaningful solutions for the world our kids and our kids' kids will inherit. Can't wait to see these on the road!"(Scaringe, 2020)

???????????When pivoting from sports cars to electric vehicles, Rivian showed its culture and beliefs and chose one different strategy for the market they were about to enter, an offensive strategy, introducing new generation tech, for early adopters. This change happened in 2011, one year after Tesla, one of the pioneers with electric vehicles, went public, and their IPO raised US$226 Million.

???????????Rivian is following the same steps as Tesla, and it has been drawing some big names attention. In an article by Forbes, after Rivian went public was said, "On Wednesday, the electric vehicle maker went public at a $90 billion valuation in the biggest U.S. IPO since Facebook, with its stock price surging nearly 30% to around $100 on the first day of trading." (Forbes,Nov 12, 2021) This kind of attention from the media also made Tesla's CEO speak his mind. "There have been hundreds of automotive startups, both electric and combustion, but Tesla is [the] only American carmaker to reach high volume production and positive cash flow in past 100 years."(Elon Musk, 2021) Some say that Musk minimized Rivian so investors wouldn't be so excited about Musk's direct competitor. However, "Tesla raised just over $200 million in its IPO, while Rivian raised nearly $12 billion earlier this week".(Forbes, Nov 2021) Apparently, Musk's attempt to throw cold water in Rivian's investors didn't work. But who are Rivian's big investors?

???????????In 2019, Rivian was being scouted by two giants of the automotive business, Ford and G.M., Both companies were founded at the beginning of the 19th century and are perhaps the most significant automotive companies to ever exist. The reason why these two giants were interested in Rivian was the one and only Tesla. The rise of Tesla made both Ford and G.M. nervous. As the saying goes, "The enemy of my enemy is my friend." The newest direct competitor of Tesla, Rivian, was a perfect partnership for these giants to quickly reach the electric vehicles market and shake the Tesla market as a bonus. In a turbulent series of negotiations, Rivian ended up with Ford's investment. An original investment of US$500 Million with later funding rounds that summed to US$1.2 Billion. As seen in class, partnerships are helpful for market entry and technology sharing; Rivian got good money for future investments while Ford got access to new technology and a market entry. However, "not everything is flowers," as is said back in Brazil. Even that the "Ford-Rivian partnership remains intact, some aspects are scaled back. Ford has canceled plans for a Lincoln SUV using Rivian's platform and even gave up its seat on the startup's board"(The Wall Street Journal, 2021). While G.M. is in advanced works to release its own electric pickup truck, the GMG Hummer, that will be a direct competitor with Rivian's truck. Now that Rivian history and environment have been discussed, what can spectate from the company what are its strengths, weaknesses internally, and how those can implicate in externally opportunities and threats.

? INTERNAL ANALYSIS

Strengths

???????????Right of the top, Rivian have an offensive strategy, as mentioned before, bringing everything they got with their new generation tech. Their electric pickups truck (R1T) and SUV(R1S) were first shown in the L.A. Auto Show back in 2018. Back at that time, competitors were already curious and investors, even more, to see "Some of the unique features of Rivian's vehicles are design, real off-road capabilities, 400+ miles range, and 0-60 mph acceleration in just 3 seconds." (Business Insider, 2020)

???????????Rivian made this new technology and patented it, increasing the value of their batteries, the vehicle charging technology. On top of all that, they are proprietary of their skateboard platform technology, a unique frame for their vehicles. On their website, they promote the foundation of their electric vehicles. "The foundation of the R1T and R1S is Rivian's skateboard platform, which efficiently packages the battery pack, drive units, suspension, braking, and thermal system all below the height of the wheel, leaving the space above for occupants and their gear." (Rivian, 2021) Of course, this information is as important as the cars' colors for the general public. However, investors and car lovers see the revolution of vehicles, a brief glimpse of the future today. The director of engineering and programs Mark Vinnels said, "The beauty and elegance of our quad-motor setup isn't just about brute power; this architecture provides instantaneous torque with extremely precise control at each wheel, which is completely game-changing from a dynamics perspective, both on- and off-road" (Vinnels, 2021).

???????????It is incredible for one company to have all those strengths. Notwithstanding, Rivian does not stop there; besides the new unique technology that helps save the environment and substitutes the high gas price, topics covered in opportunities,?Rivian impressed so much that attracted giant investors. Ford, as mentioned before, invested US$500 million, chipping in later funds that reached US$1.2billion; Ford owes 12% of Rivian's stake. If this investment wasn't impressive enough, Rivian also found another partner, a company called Amazon, needless to introduce.

???????????On September 30 of 2021, Amazon revealed "held equity investments "including preferred stock of Rivian Automotive, Inc. representing an approximately 20% ownership interest" that had a carrying value of $3.8 billion, up from $2.7 billion on December 31, the company disclosed in an SEC filing. Amazon has invested more than $1.3 billion in Rivian to date."(CNBC, 2021) If it was great to have one giant company backing up Rivian, imagine two. These huge investments from Ford and Amazon give Rivian a lot of cash to produce, invest, create, etc. Amazon has even ordered a hundred thousand vehicles until 2030. Rivian is expected to make the new delivery vans for amazon. However, not only strengths make a company.

Weakness

???????????One of the weaknesses that Rivian faces are the size of its target market. Yes, the space for electric vehicles has been growing over the past decade. However, it is because of Rivian competitor Tesla that this has been happening. Rivian strategy is the reach niche of electric vehicles customers and, inside this already limited niche, to find those interested in SUVs and pickup trucks. Rivian also has a small number of choices to offer its potential clients. If any potential customer goes on Rivian website today,11/24/2021, they will find only two models to choose from it. They have the R1T, the electric pickup truck, and the R1S, the electrical SUV. The latter on being described as "The R1S was designed to take families, friends, dogs and all your gear on long trips to places you love."(R.J. Scaringe, 2021), this is a pretty generic approach for an SUV that is supposed to change the market on its website.

???????????Besides only the existing two cars being produced by Rivian, the other dark side is the price. If the quantity of potential consumers is not the biggest, it will get smaller. For anyone to be a pride owner, or reserve, of a Rivian R1T today, it will need to shell out a minimum of $67.500, or if the customer desires to "take families, friends, dogs and all your gear on long trips to places you love."(R.J. Scaringe,2021) To buy or reserve the R1S, it will need to spend at least $70.000.

???????????But why are the prices so high? As mentioned before, Rivian is introducing a new generation of technology, which can be very excited for the market but heavy for the consumer pockets. It was already expected that the first consumers of Rivian electric vehicles would be primarily early adopters of this technology, like the Apple fans that make huge lines outside the stores to get the new phone that costs a fortune every year. Rivian is only drawing consumers' attention interested in technology and environmentalist causes because it is too expensive for the everyday American joe to buy one of its cars. The switching cost from gas cars to electric cars is still very high for the most significant part of the world.

???????????These prices show Rivian profitable business model being a product pyramid profit model, like the other automobiles companies. Rivian has a high-end, low volume, high-profit process. However, their cars are not focused on the high luxury market like Ferrari, Porche, Lexus, etc. Rivian is targeting the everyday American family, the environmentalist enthusiasts. Rivian prices today are not meeting the budget of their target market. To do so, Rivian needs a low-end, high-volume, low-profit pyramid profit model. It will be hard to achieve this in the present situation because the new technology they bring to the market is costly and unique.

? EXTERNAL ANALYSIS

Opportunities

When it comes to opportunities, the biggest elephant in the room for Rivian is the electric vehicle, which is considered the future by many. "Sustainability is now at the top of the global political agenda. The recent United Nations World Economic and Social survey identifies the need for a new technological revolution that will: '…reverse the undesirable impacts of the past technological revolutions while preserving and enhancing their positive achievements, this means:?Reversing the dependence on fossil fuels." (Woodcook, M, 2012).

????????????Electric cars are included in the "new technological revolution" mentioned above. Accordingly, with the non-profitable organization, "Our world in data." "Carbon dioxide emissions are the primary driver of global climate change. It's widely recognized that to avoid the worst impacts of climate change, the world needs to urgently reduce emissions." (ourwourldindata.com, 2021) Their research shows that in 2019 the world emission of carbon dioxide, CO2, reached a peak of 36.70 billion Ton, the highest ever recorded. China emissions that year peaked impressively at 10.49 billion Ton, and The USA wasn't too far behind with 5.26 billion Ton of emission.

???????????To give a better perspective and contrast of how vehicles have significant guilt in this high carbon dioxide emission, the numbers from 2019 need to be compared to the numbers of 2020. In 2020 most countries around the world were under lockdown because of the Covid-19 pandemic. People would not leave their houses only if necessary, fewer people outside, fewer cars on the streets. The carbon dioxide emission for 2020 worldwide was 34.81 billion tons, 2 billion less than the previous year. The USA emission was 4.71 billion Ton in 2020, reducing 0.5 billion Ton. However, China increased its emission from 10.49 billion Ton in 2019 to 10.67 billion Ton in 2021. Possible because of its high product demand. China was the first country to suffer from the Covid pandemic and the first to lift the lockdown state. While the world was in lockdown, factories in China were producing more than before due to the high demand for products since other countries were under lockdown.

???????????The year 2020 showed that if the world population changes its fuel vehicles to electric vehicles, the CO2 emission that is the leading cause of global warming can be significantly reduced. And who is in the race to provide these electric vehicles? Rivian.

???????????Rivian has a lot of money due to its investors. However, the company does not have unlimited money resources and need to select the right place in the world to invest. Sure, electric vehicles are the future of the world in personal locomotion, but where in the world are electric vehicles the?"present"? So Rivian can invest there. "According to WEF analytics, Norway's highest share of plug-in E.V.s is because of policies like--tax exemptions, toll exemptions, and other incentives. Norway has more electric vehicles per capita than any other country. The Nordic country imposes hefty vehicle import duties and car registration taxes, making cars significantly more expensive than the U.S."(Mint, 2020)

???????????Norway had a 74.8% share of plug-in electric vehicles in new passenger car sales in 2020. Norway is followed by Iceland (45%), Sweden (32.2%), Netherlands (24.9%), Finland (18.1%), and in sixth Denmark (16.4%). All the six first countries in the list are impressively located in northern Europe. Until the 15th (Ireland), there are only European countries on the list. On 16th, it appears China with merely 6.2% of its population. However, China has a population of 1.4 Billion people, and 6.2% of that is 86.924 million electric vehicles on the streets. The number of Electrical vehicles sold in China in 2020 is three times higher than the entire population of the Nordic Countries. ( 27.36 million) The Nordic countries are the ones listed from first to sixth, without the Netherlands. Rivian has money and market to enter these regions or countries. It is a massive opportunity for the company to invest in it.

Threats

???????????BBC has stated five major challenges for electric companies. The first is that change takes time and will take years until countries no longer have fuel vehicles. Secondly, there is a limited choice of brands, which is terrible for the consumer but good for Rivian. However, the small but intense competition shows that producing the product is too expensive, and the final product is even more costly. The third challenge would be backing the right technology; Rivian is investing in an unexplored world, and spending money on the wrong type of battery or wrong software can be bad for the company in the long run. The fourth threat is who will pay for charging places on the streets, the government will provide, or the companies will invest in this infrastructure worldwide. The fifth and last threat is the zero-carbon fantasy. Indeed, the electrical vehicle emissions are way less, almost zero, in contrast with the fuel cars. However, they need to be charged, and that electricity is coming from somewhere; in places like Norway, we know that their energy is cheap and clean because it comes from hydropower. However, other countries in the world may not have the same geological luck.

???????????But what all of that has to do with Rivian? Rivian can't control those problems or risks, but they need to pay attention if they change strategic directions. One strong example is the chip shortage. It is happening right now; chips are needed to build any car today, and with the shortage, it's been more costly to produce and buy the cars.

???????????Rivian also has intense competition; Tesla is the most valuable car company today. They can produce a high volume of cars, something Rivian is still unable to, and Elon Musk is aware. "Tesla is [the] only American carmaker to reach high volume production and positive cash flow in past 100 years." (Elon Musk, 2021)

? PRIMARY STRATEGIC ISSUES

???????????As for today, the primary problem for Rivian is the number of cars produced and their price. Rivian's strongest competitor, Tesla, is aware of this weakness. If Tesla decides to make an electric vehicle to compete with Rivian directly, Rivian will have problems.

???????????The Ford-Rivian partnership brought a lot of money for Rivian, which is great. However, some of the initial plans changed. After two years of the deal, the partnership is still intact; sadly, "Ford has canceled plans for a Lincon SUV using Rivian's platform and recently gave up its seat on the startup's board."(The Wall Street Journal, 2021) Rivian must be very careful with this partnership with Ford. Back when the deal was made, it was a win-win situation for both companies. Rivian got a lot of cash to invest, and Ford got access to new technology. However, in the present, this partnership does not seem to be working as it did. Otherwise, Ford would not cancel plans for the Lincoln SUV using Rivian's platform.

? STRATEGIC PLANNING

Primary Concern

???????????The primary concern, as mentioned before, is Rivian being unable to have a high-volume manufacturer. It is understandable that it is an expensive product and is a new generation of technology. Notwithstanding, Tesla was able to do it, so somehow, it is possible to manufacture the high-end electrical vehicle in a higher volume than Rivian is doing today. If Rivian finds a way to produce more cars besides opening more factories, it would be an excellent opportunity to sell more cars thru The USA and even abroad. A cheaper alternative is waiting until the big companies, Ford and G.M., find out how to do this process for them; Ford would share the technology. However, that can take a long time.

Secondary concern

???????????The secondary concern would be the expectation that Ford will help them to grow beside the investment made. Rivian should keep one eye on Ford and don't expect too much from them. They already back it on the Lincoln SUV, and giving up a seat in the Rivian's board means they are not interested in what Rivian is up to. Rivian should get all the cash Ford invested in them and open more manufacturers while not having a high-volume production. After the deal with Amazon, Rivian will have even more money to build the factory, and it appears they are already doing that. "While it's early in an evolving process, Rivian is exploring locations for a second U.S. manufacturing facility," spokesperson Amy Mast said in an emailed statement(TechCrunch.com, 2021)???

???????????Besides another factor in The USA, Rivian should start thinking about opening a plant in Europe to reach a big market with demand for electric vehicles. A physical plant in Europe would help the company dribble high imports taxes and even a high-rate exchange risk on the final prices.

? CONCLUSION AND RECOMMENDATION

???????????????To conclude this paper is essential to remember that Rivian is swimming in dangerous water, with giant sharks around. Rivian is more than capable of becoming one shark itself. Rivian have the timing right, electric vehicles are becoming more popular every year, and countries are starting to be more worried about the environment and global warming. Rivian also has the support of Amazon that wants to change all of its delivery’s vans to electric vans. Rivian today has demand, money, and support from two giant companies. Rivian has the knife and the cheese in its hand, as it's said back in Brazil. My recommendation would be to produce one smaller car to be popular in the urban areas of Europe, and besides opening more factories, match the same volume produced as Tesla. When it to Ford, keep the partnership, even if Ford is not interested much in what Rivian is doing it, is better to have Ford as an ally than Ford, GM, and Tesla as full-time competitors.

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References

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