- Electric truckmaker Rivian has raised an additional $2.5 billion in recent months.
- Rivian’s cash-rich position makes it the electric carmaker to watch in the coming years.
- Rivian enjoys the advantage of learning from Elon Musk’s fumbles and stumbles.
Electric truck maker Rivian raised $2.5 billion in a recent fundraising round. It is now one of the best capitalized electric vehicle companies in the world–so much so that it should be in no hurry to go public.
Besides the cash, Rivian has other things going for it. This includes ready customers such as Amazon (NASDAQ:AMZN), which has already ordered 100,000 delivery vans.
For Rivian to be considered a serious threat to Tesla (NASDAQ:TSLA), the world’s most valuable automaker, it must not repeat Elon Musk’s mistakes. Those mistakes are summarized below.
1. A long history of poor execution
Motor vehicle manufacturing is an extremely complex process. Tesla has been making cars since 2009 but is still facing production challenges.
Sometimes, this has led to production delays. Most recently, the production and delivery of the Tesla Semi truck were pushed to 2021. It was initially scheduled for release in 2019.
From day one, Tesla tried to set itself up differently from the legacy carmakers. It could have benefitted from them by observing their high-volume production processes. Tesla may now be the world’s biggest carmaker by market cap, but it produces just a fraction of Toyota or Volkswagen’s annual output.
Tesla’s annual production volumes relative to other carmakers are making it harder not to associate its stock with a bubble. | Source: @StultusVox/Twitter
Rivian is expected to initiate production on a 2.6 million-square-foot plant. If it is to take on Tesla in any meaningful way, it must have better, more efficient, and more reliable production capabilities.
2. Elon Musk’s C-suite is a revolving door
Elon Musk is known for being a demanding boss who sometimes places impossible demands on his team. For an overachiever with lofty ambitions, this is expected. Two years ago, reports painted Musk as a horrible boss who fires employees on a whim.
Elon Musk has been equated to the late Steve Jobs. His employees would agree. | Source: @boconnor47/Twitter
This comes at a cost, though. Last year, it emerged that Tesla has a higher executive turnover than its peers. According to Bernstein analysts, Tesla’s annualized executive turnover level is 27%, while the average in the tech industry is 15%.
High turnover leads to the loss of highly skilled and much sought-after talent.
3. Elon Musk’s gift for stirring controversy
Elon Musk speaks and tweets his mind. This has landed him in trouble with institutions and individuals, including the Securities and Exchange Commission and NASA.
The controversies generate negative press, which has sometimes harmed shareholder wealth. Two years ago, Tesla’s stock fell nearly 10% after Musk was recorded smoking weed on a podcast.
Tesla CEO has a knack for attracting controversy. | Source: @HakunsanLad/Twitter
While these controversies have yet to hurt Tesla’s brand, that might change when there is a wider variety of electric cars on the market. Rivian’s leadership must avoid the Elon Musk model if it is serious about giving Tesla a run for its money.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.
Last modified: July 12, 2020 6:12 PM UTC