Amazon’s Rivian Deal Bolsters Tesla Rival; Expect Commercial EVs

February 21, 2019 by Jerry Hirsch, @Jerryhirsch

Amazon’s large investment in fledgling electric truck and SUV developer Rivian will position it as a strong Tesla rival and likely push the automaker into the commercial vehicle business.

That’s the conclusion of two reports issued this week by analysts at the research arm of the Morgan Stanley & Co. investment bank following a $700 million round of funding in startup Rivian earlier this month led by Amazon.

The Plymouth, Mich., company is raising funds to complete development and launch production of the all-electric R1T pickup truck and R1S SUV it unveiled at the Los Angeles Auto Show in November. Both are billed as adventure vehicles that can easily navigate rugged terrain. But the Morgan Stanley analysts argue that the real benefit of the deal will be leveraging Rivian’s technology as a platform for building commercial vehicles.

“Amazon’s plans to have 50 percent of its trips carbon-neutral by 2030 implies a major push in electric vans/delivery vehicles. We think investors should prepare for more moves by megafleets to solve for sustainability,” the analysts told investment clients.

Bigger commercial than consumer use

Morgan Stanley believes that electric vehicles will see quicker adoption for commercial uses by megafleet managers and the logistics industry than by the consumer auto market.

“The ‘front line’ of sustainable propulsion systems will be fought in dense urban and suburban transport networks where large, well-resourced and technologically savvy companies managing fleets of potentially many millions of vehicles may be held to strict standards of tailpipe emissions by local/metropolitan governments,” the analysts wrote.

They believe vehicle fleets associated with large tech firms such as Amazon may be held to a higher standard of sustainability, including tailpipe emissions and greenhouse gases, by an increasing number of large metropolitan areas and states.

“We expect customer awareness over sustainability and the environmental impact of companies’ logistics/transport footprint will only grow over time, pressuring firms to take action,” they said.

Rivian R1S SUV

Rivian unveiled its R1S SUV in November at the 2018 L.A. Auto Show. (Photo: Rivian)

EV costs falling

At the same time, electric vehicle development and manufacturing costs are falling, placing development at a tipping point, the analysts said.

“As battery costs continue to approach $100/KwH cost at pack level, it seems to have encouraged a wider array of companies and products offering all-electric architectures. GM recently decided to eliminate its hybrid program and go for ‘all electric’ and we expect other (automakers, including Ford) to capitulate on hybrids over the next couple of years,” they wrote.

The deal is transformational for Rivian, starting with “significantly” improving the chances that the startup will meet its goal of having an all-electric pickup on sale in 2020, the analysts said.

Tesla, beware

Tesla should beware as its dominance is finally challenged.

“Just when it seemed like Tesla’s lead over the competition in EVs couldn’t be any wider, we have Amazon making a bold move right into U.S.-made EVs. We view Amazon and Tesla as competitors rather than partners/collaborators in advancing the future of transport,” the analysts said.

Read next: 2018 L.A. Auto Show: Rivian Launches ‘Adventure’ Electric Pickup, SUV

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