The startup also plans to release an SUV.
Amazon’s move into the electric vehicle market is the first big challenge to Tesla’s dominance in that space and possibly “the most significant milestone in EVs” since Tesla’s 2010 initial public offering, said a top Wall Street analyst.
Amazon’s investment of $700 million in U.S. electric pickup maker Rivian, in fact, may prove to be “most important auto moment” this year, wrote Adam Jonas, research analyst with Morgan Stanley in a Feb. 19 investor note.
“It may prove to be the most significant milestone for U.S. autos for all of 2019,” wrote Jonas. “We think auto investors should take a moment to contemplate the significance of last week’s Amazon-Rivian investment.”
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GM also has been in discussion with Rivian about possibly investing in the Plymouth Township startup since earlier this month. But sources familiar with the matter say no announcement is expected soon.
If GM were to join Amazon by investing in Rivian, it would be “another sign of GM’s prescient strategic vision,” Jonas wrote in a Feb. 14 investor note.
While GM remains coy about talks with Rivian, it has stopped short of a denial: “We admire Rivian’s contribution to a future of zero emissions and an all-electric future,” GM has said in a media statement.
What’s the big deal?
Rivian plans to make an all-electric pickup and an electric SUV, each of which is supposed to have range of roughly 250 to 400 miles.
So just why is Amazon’s investment such a big deal? First, the capital it provides to Rivian “significantly derisks Rivian’s goal of having an all-electric pickup on sale in 2020.”
There is the business model it helps shape. “Amazon has a vested interest in managing the marginal cost of its transport and logistics expenses. Dense networks, predictable routes, and start-stop duty cycles are ideal for all-electric vehicle architectures,” said Jonas, who added. “It’s Amazon. Do we really need to elaborate here?”
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The EV market
Also, EVs are at a tipping point as battery costs continue to decline, encouraging a “wider array of companies and products offering all-electric architectures,” said Jonas.
Global EV sales are forecast to be 18 million by 2030, with China accounting for 7.5 million, said Tyson Jominy, managing director of the data and analytics consulting group at JD Power.
“It’s a rapidly expanding number with China leading, followed by Europe, and both are driven by regulations in those countries,” Jominy said.
In the United States, Jominy said EV sales will increase by about 100,000 each year through 2025, putting it at 700,000 by then. Still, EVs will make up only about 5 percent of the retail car market at that point.
But Jonas said over the next couple of years, he expects other automakers, including Ford, to follow GM’s decision to eliminate its hybrid program and go for an all-electric one.
Amazon versus Tesla
Megafleets also will face environmental challenges, Jonas said.
“Vehicle fleets associated with large tech firms may be held to a higher standard of sustainability, including tailpipe emissions and greenhouse gasses by an increasing number of large metropolitan areas and states,” said Jonas. “We expect customer awareness over sustainability and the environmental impact of company’s logistics/transport footprint will only grow over time … pressuring firms to take action.”
Jonas also said many investors see autonomous vehicles and electric cars along with ride-sharing as a positive development in mobility that can support auto companies’ share prices. But with Amazon’s increased and more direct involvement in “revolutionizing a century-old propulsion and business model ecosystem,” that’s a possible threat to traditional carmakers’ stock prices if they lag in the space.
Finally, he said, “Tesla’s EV dominance” is now being 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,” said Jonas. “We view Amazon and Tesla as competitors rather than partners/collaborators in advancing the future of transport.”
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