Ford Motor Company’s stake in Rivian, the electric vehicle maker, has been dropping steadily since May 2022. Ford’s stake in Rivian is now at 1.15% or 10.5 million shares, which is a far cry from the 51% stake that Ford had when it first invested in the company.
Rivian is a Silicon Valley startup that was founded in February of 2022. The company’s main product is an electric vehicle that it claims is quieter and more efficient than traditional cars. Recently, however, the stock prices for Rivian have plummeted as the company has reported two large write-downs on its investment in a self-driving entertainment company called Ford. Ford invested $1 billion in Rivian back in February 2022 and thus far the investment has amounted to a $7.3 billion write-down
Given Ford’s track record with Rivian, it is likely that the automaker will do the same thing again with its other investment: sell a small stake to recuperate some of the losses, then move on. This strategy has worked for Ford in the past and it seems likely to work again with Rivian.
It seems as if Ford’s investment in Rivian was more of a desperate attempt to catch up with Tesla than anything else. The legacy automaker canceled its plans to build a vehicle on Rivian’s “skateboard” platform in November 2021, citing a shift in direction away from electric vehicles. Four months later, Ford increased its in-house electrification investment to $50 billion through 2026, up from the previous $30 billion by 2025. This move suggests that Ford has faith in Rivian’s technology and believes that EVs will be the future of automotive transportation.
The continuous losses made by Rivian are costing Amazon and other companies that have invested in the electric vehicle startup a great deal of money. It will be interesting to see how Rivian manages these issues in the future, as it seems as if they are facing a difficult road ahead.
Investors and executives at companies such as Tesla and Rivian share a common belief: that electric vehicles will represent the future of automotive transportation. But there are several reasons why these companies are paying the price for investing in this promising, if not troubled, EV company. First, it is still unclear how widespread electric vehicle adoption will be. Second, many of the technological advances needed for mass-market adoption of EVs (such as recharging infrastructure) have yet to be developed. Finally and most importantly, many questions remain about the geopolitical climate – both in terms of oil demand and carbon emissions – which could dramatically impact electric vehicle adoption prospects.
Ford’s sale of Rivian is likely to have a negative impact on the stock price, as it indicates that Rivian is not yet meeting Ford’s expectations. The sale could also be indicative of a slowdown in Rivian’s growth, which could put Pressure on the stock prices in the near future.
