Veteran car companies and new car manufacturers, who has more hope?

Over the past two years, as Ford has struggled to build a spectacular electric car business, investors believe Ford has become the king of the past. Some upstarts in electric car manufacturing have soared, including Rivian, a company that doesn't have much of a car-making track record, but that doesn't stop it from becoming a hot topic.

Now, the roles have been reversed: Ford has become a darling, and the pretentious Rivian has become the object of scorn.

On March 2, Ford's chief executive, Jim Farley, officially announced the company's restructuring, which excited investors. Ford will create two separate self-financing business lines. By spinning the new "Ford Model E" out of the traditional "Ford Blue" division, management hopes to continue to benefit from economies of scale while eliminating unnecessary duplication.

Farley told reporters on March 2: "The reality is that our traditional structure has been dragging us back. We have to make a difference. He also denied the idea that the move was a prelude to the overall divestiture of the electric vehicle business and seeking to go public.

Ford split the company in two, and we know it has no choice. In this case, the traditional business part will take all the profits, while the electric car part will bear all the losses. Ford will raise money for the electric vehicle business. But where should Ford's stake in Rivian go?

—@GerberKawasaki, March 2, 2022

Since the COVID-19 pandemic sparked a boom in electric vehicle stocks among retail investors, the major existing car companies have experienced a decline in market value, and analysts have speculated that the broader market no longer expects these companies to survive the transition to zero-emission vehicles.

However, Ford's shares surged 8 percent on March 2 as investors held high hopes for Farley's sweeping promise of restructuring in early February, when he said he had the mentality of "putting it into action" that he needed to succeed.

Affected by the split, Ford now expects its electric vehicle production to be 2 million units in 2026 and 600,000 units next year, while cutting costs by $3 billion. These cost cuts will essentially come from streamlining the company's internal combustion engine vehicle business, which will focus on star models such as the Mustang coupe, Bronco SUV and F-150 pickup.

Meanwhile, in Southern California, far from Ford's suburban headquarters in Detroit, Rivian told customers who had already ordered and awaited vehicle delivery that the company would significantly raise the selling price of those vehicles due to the recent high inflation rate. This remark triggered a storm of public opinion.

A large number of potential car owners are willing to take the risk of buying a model they have never seen before, and want to test drive it for themselves. In Rivian's record IPO of 2021, these people are an important selling point for investors. Often, unlike future new owners, bookers also want to avoid possible price increases by ordering in advance, especially when Rivian has barely started producing all the promised models. Documents rivian filed with the U.S. Securities and Exchange Commission (SEC) show that in 2021, the company delivered only 920 vehicles.

When pre-order customers learned later on March 1 that the price of the Rivian-winning R1T electric truck would be raised by 17 percent and the R1S crossover by 20 percent, many expressed their anger through social media.

Another defeat for @Rivian. Their truck is now asking for $100,000, and I only saved up $85,000 a few months ago to buy the car (and don't fulfill the lock-in price like Tesla). To be honest, I want to cancel my order. The price increased by $15,000, crazy.

—@SnazzyQ, March 1, 2022

Jess Kraft-Miller wrote: "I'm seeing more 'I cancelled my booking' posts than ever before. The customer placed an order a few years ago and paid a $1,000 deposit. With a price increase of up to 20%, it's time to reflect. ”

After news broke that angered many fans, the company's stock plunged nearly 14 percent on March 2 to close at $53.56, well below its $78 IPO price.

In November 2021, Rivian's stock peaked just under $180, and although the company only delivered a few dozen vehicles, its market capitalization was about 50% higher than Ford's. Since then, however, its stock price has plummeted nearly 70 percent.

In response to a question from Fortune magazine, Rivian explained that the company had to address the rising cost of raw materials due to unprecedented shortages in the supply chain, including the supply of semiconductor chips.

In a statement, Gittenberg, Rivian's chief growth officer, said: "The increased cost and complexity of these challenging situations has forced the company to raise the price of R1T and R1S models to current levels, which were previously set in 2018. ”

To offer customers more approachable models, Rivian said it will produce slightly less powerful all-wheel drive models and will reduce the number of motors from four to two, while reducing the battery pack capacity of pickup and SUVs.

The Rivian still has a $67,000 model.

It's just that the model can only run 260 miles today, not 400 miles, has only two motors instead of four, and will start production in 2024, not 2021.

In other words, the product has just been baptized by reality.

——Whole Mars Catalog(@WholeMarsBlog), March 2, 2022

Given that Ford spent $500 million in 2019 to buy a stake in Rivian, this role shift for investors is ironic. With Ford no longer focusing on the internal combustion engine business, over time, the investment has become less important for the long-established automaker.

In fact, Ford's Farley revealed in the industry publication Automotive News that he dismissed the idea of developing electric cars jointly with Rivian. After that, Rivian shares, which hit a record high in mid-November 2021, began its epic downward journey. Now, with Ford fully committed to electric vehicles, the reasons for the cancellation of the partnership have become extremely clear.

Farley re-emphasizes: "Today, our corporate structure is dragging the company's feet and making it impossible for us to focus. Ford Blue will focus on getting cash and profits out of its internal combustion engine business, while the Ford Model e will focus on driving innovation and recruiting the best tech talent: "We can't get one team to do both at the same time. He said.

The March 2 share price rally shows that Ford is more favored by investors than Rivian because of its electric vehicle strategy. The company, which Farley runs, is currently the sixth-largest automaker at $73 billion, while Rivian, with a market capitalization of $48 billion, has failed to keep even the top ten, let alone the previous top five. (Fortune Chinese Network)

By Christiaan Hetzner

Translator: Feng Feng

Reviewer: Charlene

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