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Should you get on board electric vehicle maker Rivian’s IPO?

Electric car manufacturer Rivien plans to launch one of the biggest IPOs of the decade, which could raise more than $ 8 billion. But despite the company’s sleek trucks and SUVs, investors need to be prepared for a ride that leaves their stomachs aching.

Founded in 2009, Rivian launched its first vehicle – the R1T – in September. This five-passenger pickup tows up to 11,000 pounds, travels from 0 to 60 mph in three seconds and offers a range of 314 miles. Rivian is selling the R1 at a starting price of $ 67,500. Its optional accessories include a camp kitchen, with induction hobs and a water tank for washing dishes, which slides out of the side of the truck.

Rivian also plans to deploy its R1S, a seven-passenger SUV built on the R1T’s battery and propulsion system, in December for $ 70,000. You can fold down the seats of the R1S for up to 105 cubic feet of cargo space.

Image source: Rivian.

Both vehicles are fitted with the Rivian Driver + safety system, which offers hands-free driving assistance and is updated periodically by radio link. The platform includes 11 cameras, 12 ultrasonic sensors, five radars and a high-precision GPS antenna. This system generates substantial amounts of data, which improves artificial intelligence.

Rivian’s S-1 filing reveals 48,390 pre-orders for the R1T and R1S in the US and Canada – but those are $ 1,000 deposits that are voidable and refundable.

Why is Rivian sexy?

Like Tesla, Rivian does virtually everything in-house: designing and building vehicles, financing and selling them through its own dealerships, partnering with major insurers to offer its own auto insurance, maintaining hardware and software. vehicles and even provide fleet management software. for large corporate clients. Keeping all of these operations under his own umbrella, Rivian estimates that each vehicle he sells will bring the company an additional $ 10,000 to $ 15,500 for software, $ 8,700 for insurance and financing, and 3,500 $ for revenue from vehicle services over its lifetime – all of which will likely have higher margins and generate more profit than building and selling the vehicle in the first place.

But the most interesting part of the company is its commercial trucks, which are part of a collaboration with Amazon (NASDAQ: AMZN). The e-commerce giant has invested $ 1.3 billion in Rivian and has accepted a first order for 100,000 vehicles, with the first delivery starting in December. Of these, Rivian plans to deliver up to 10,000 vehicles by 2022 and the rest by 2025. The contract prevents Amazon from buying someone else’s delivery vans for four years, and Rivian will need Amazon’s consent to sell vehicles to other customers. If Amazon fails to order a total of 10,000 vehicles over the two-year agreement, it will reimburse Rivian’s development costs.

What’s next for Rivian?

For the first half of this year, Rivian spent $ 851 million in operating cash flow. But with $ 3.7 billion in cash and the expected inflow of capital from the IPO, the company is expected to have enough financial resources to maintain itself over the next few years without going into further debt or diluting investors. .

Rivian faces other issues, however. Ford (NYSE: F), who is an investor in the company, plans to launch its own F-150 Lightning EV in the spring at a much cheaper starting price of $ 39,974. Pre-orders for the F-150 Lightning hit 150,000 last month and Ford is ramping up production.

Rivian eschews traditional advertising, relying on won and shared media. You’re here proved it was a winning strategy, but Rivian lacks a similar charismatic leader to keep him in the spotlight. Founder and CEO RJ Scaringe only attracted 46,600 followers on Twitter, compared to 60.9 million for Tesla CEO Elon Musk. Musk’s antics, bravado, and stunts may seem trivial, but he turned Tesla into a fast-growing automaker that turned the industry upside down. In contrast, Scaringe’s relative obscurity does not bode well for its marketing strategy.

Although the contract with Amazon will be the main growth catalyst for Rivian, the relationship carries risks. Like Tesla and Nio, have discovered that manufacturing complex vehicles can be extremely difficult and subject to costly delays. In the past year, Rivian has delayed R1T twice due to the COVID-19 pandemic. Now, the company must overcome other hurdles such as semiconductor shortages and supply chain disruptions plaguing the global auto industry.

For an IPO of its size, the Rivian deal is unusual. The business has yet to generate revenue and relies heavily on a single customer, Amazon, who is also a major investor. Until investors can see that Rivian has mastery in building cars, they may want to stop buying his shares.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.