What is Rivian and why did it drag down Amazon and Ford earnings?
Both Amazon and Ford reported quarterly earnings losses this week, citing their investments in Rivian Automotive.
Amazon on Thursday reported a rare quarterly loss of $3.84 billion, owing entirely to a $7.6 billion loss in value of its stock investment in Rivian Automotive. Same with Ford, which said it lost $5.5 billion on its Rivian holdings in the quarter, causing it to report an overall loss of $3.1 billion.
Why did a publicly obscure startup cause headaches for such U.S. business giants?
What is Rivian?
Rivian Automotive is an electric truck manufacturer that owns a former Mitsubishi plant in Normal, Illinois.
It was founded by RJ Scaringe, who earned his Ph.D. from the Massachusetts Institute of Technology in 2009. In 2011, Scaringe scrapped plans to build a coupe, noting the auto industry’s shift to pickups.
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Why did Ford and Amazon invest?
Rivian's promise, and Scaringe's vision and connections, have always attracted big investors. Scaringe’s MIT connections linked him with the Jameel family of Saudi Arabia, which, along with other investors, helped the company raise $450 million.
After a splashy truck unveiling that even attracted singer Rihanna in conjunction with the L.A. Auto Show in November 2018, Amazon announced in February 2019 that it would lead a $700 million investment in the company. That April, Ford said it was investing $500 million.
Ford was interested in battery development and at one point planned to jointly develop a pickup, but the latter plan was scratched. Amazon has ordered 100,000 electric delivery vans.
Once thought to be a potential competitor to Tesla, Rivian's other investors include big names such as Vanguard, T. Rowe Price and BlackRock.
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What caused the loss?
Rivian remained an automotive and tech darling as it did an initial public offering in November 2021. The share price hit a peak of $172.01 on Nov. 16. At the end of the year, that was down to $103.69.
But by March of this year, Rivian said supply chain issues had dramatically cut its production, and it would be able to make only 25,000 vehicles this year. It said it had made only 1,410 to that point in 2022, against 83,000 orders, not counting Amazon.
The stock tumbled, closing the first quarter at $50.24. Amazon and Ford thus lost roughly half the value of their investment in a quarter.
What's the outlook?
Shareholders – and, indirectly, investors in Ford and Amazon – can't expect a quick turnaround. Amid all the economic headwinds, Rivian stock continues to fall, closing Thursday at $32.18.
Randy Essex is an editor on the USA TODAY Money team: firstname.lastname@example.org; @randyessex on Twitter. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.