Could the Rivian share price rival Tesla’s in the future?

The Rivian share price has soared 58% over its IPO price of $78 per share. Is this an overhyped electric vehicle IPO, or could Rivian pose a serious future challenge to Elon Musk’s trillion-dollar company?

At $123, the Rivian (NASDAQ: RIVN) share price has already soared 58% from its IPO price of $78 per share yesterday. Having raised over $11 billion in the stock sale, it now has a market cap of over $100 billion. It was the largest IPO since Facebook back in 2012, even though the electric vehicle company has lost over $2 billion since the start of last year. And unlike its competitor, it has delivered just 53 vehicles so far, and most of them to employees. However, Rivian plans to increase this to 1,000 by the end of the year.

And it counts Amazon, Ford, and Saudi investment firm Abdul Latif Jameel as major backers. Moreover, its soaring share price is proof that there is no shortage of investors wanting a piece of this pie. But does it really have the potential to challenge Tesla for market share?

Where do you think the Rivian share price will go next?

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Rivian share price: a competitor for Tesla?

During COP26, multiple car companies committed to moving away from fossil fuels by 2040 or earlier. So investor focus on electric alternatives is heightened right now. And CEO RJ Scaringe believes that ‘Rivian exists to create products and services that help our planet transition to carbon neutral energy and transportation.’

But it’ll have to compete with the behemoth that is Tesla. Elon Musk’s trillion-dollar company had a share price hovering around $40 in 2019. Two years later, it’s worth $1,063 per share, even after he sold $5 billion of stock after a twitter poll.

As I wrote last month, Tesla recently posted record Q3 results, with revenue growth of 57% year-over year. It’s delivered more than 600,000 vehicles in 2021 and is negotiating a deal with Hertz for 100,000 of its electric cars.

Meanwhile, Rivian is only just starting to roll out its first vehicle, the R1T pick-up truck. And its assembly plant in Normal, Illinois can currently build only 150,000 cars a year.

Last night, Musk tweeted that ‘I hope they’re able to achieve high production & breakeven cash flow. That is the true test. There have been hundreds of automotive start-ups, both electric & combustion, but Tesla is only American carmaker to reach high volume production & positive cash flow in past 100 years.’

Musk vs Bezos, again?

But Rivian is backed by Amazon’s Chairman, and the world’s second richest man, Jeff Bezos. His company owns 20% of the start-up. And Amazon has agreed to buy 100,000 Rivian electric vehicles by 2025. It’s tempting to compare this pledge with the Tesla-Hertz deal, given that the order numbers are the same.

This backing could have the potential to be the start of a new contest with Musk, after SpaceX beat Blue Origin to become the first private company to send an all-civilian team into space. Their rivalry was in the spotlight recently as the US Court of Federal Claims dismissed Blue Origin’s complaint that NASA had unfairly awarded SpaceX a $2.89 billion next-gen lunar landing system contract.

Rivian is now the USA’s second most valuable car company, ahead of stalwarts Ford and General Motors. But its market cap is a tenth of Tesla’s. And the excitement of investing in a new EV company could well taper off in the coming days. But Nicholas Colas of DataTrek Research believes that ‘Rivian’s valuation makes it a legitimate option for institutional investors who have previously only had Tesla to play the electric-vehicle space.’

It’s worth noting that the Rivian share price will also face competition from heritage car manufactures, who are all rapidly investing in their own electric vehicles. However, Ford’s stake in Rivian is ‘strategic,’ so it may be that the newcomer has a long-term market advantage over Tesla’s go-it-alone strategy.

Rivian has powerful backers and positive investor sentiment. But it’s ability to rival Tesla will depend on how quickly it grows. And as Musk knows, it’s unlikely to be all plane sailing.

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