Rivian - The Epitome Of The EV Bubble - YouTube

INTRO: Can you guess  

what the third largest automaker in the world is?  

Volkswagen? GM? Daimler? While those are all  great guesses and would usually be correct, we’re  

not living in normal times. Last week, the third  most valued automaker in the world was actually  

Rivian. Rivian peaked at a valuation of $150  billion which is more than Volkswagen. Volkswagen  

generally delivers a cool 10 million cars per  year. Considering this, how many cars do you think  

Rivian delivers? 8 million? 5 million? Well, the  answer is actually a whopping 156 pickup trucks.  

Now, I don’t wanna bag on Rivian because they’ve  worked super hard on their pickup truck over  

the past decade and they’ve had to cross so many  hurdles to get to market. Moreover, they actually  

have a great working product unlike some other  notable competitors. So, there’s nothing wrong  

with the company Rivian, but there’s no doubt  that there’s something seriously screwed up with  

the stock Rivian. So, here’s the story of Rivian  and how they became the epitome of the EV bubble.

QUIET BEGINNINGS: 

Taking a look back, when Rivian was founded in  2009, most people didn’t really care about EVs.  

EVs were completely impractical due to their low  range and high cost. Hybrids were starting to pick  

up steam but this was only in what most would  consider the nerd community. So, Rivian didn’t  

particularly have a bright outlook out the gate,  but that didn’t stop a man named Robert Scaringe  

or RJ from taking the risk anyway. At the time, RJ  was only 26 years old and he had spent his whole  

adult life in academia. RJ had a bachelors in  mechanical engineering from Rensselaer Polytechnic  

Institute and a PHD in mechanical engineering from  MIT. But instead of continuing on in the regular  

path and getting a job, after graduation, RJ  returned to his home state of Florida and founded  

Mainstream Motors. Some sources say that RJ came  up with the capital himself, but at 26 with most  

of his life spent in academia, it’s not likely  that he would’ve been able to come up with  

car company levels of startup capital.  I’m sure RJ put in every penny he had,  

but most of the money for initial development came  from the Florida government. You see, RJ’s father  

Robert Scaringe Sr. was a business owner himself  who ran a company called Mainstream Engineering.  

I think you can see where RJ got the name  Mainstream Motors from. But anyway, his father  

had managed to raise $61 million over 25 years all  from the US government. So, his father was well  

aware of how to raise money, and given that the  US government was looking to support EV endeavors,  

RJ was able to secure a small grant of 2 million  dollars. Given that he was building a car from  

scratch though, this really didn’t last that  long. RJ ended up spending $900,000 on payroll,  

$170,000 on contractors, and the rest was  presumably on materials and manufacturing.  

By 2011, RJ had burned through all the money,  but at least he had something to show for it.  

Mainstream Motors had created an electric  sports car called the R1, but there was a  

massive problem: the Tesla roadster. RJ’s sports  car wasn’t bad by any means, but the Roadster was  

already on the road and it didn’t make sense to  compete against Tesla in an already niche market.  

I’m not sure why RJ didn’t realize this  when he started the project as Tesla was  

delivering roadsters since 2008. But, he did  eventually make this realization and he would  

decide to scrap the entire idea. Now, I’m  sure people are going to comment down below  

that Rivian is considering bringing back this  car today, so it wasn’t a waste. But in 2011,  

the revival of this car was by no means a  guarantee. So, RJ was back to ground zero.

CHANGING COURSE: 

Determined to change the direction of the  company, RJ looked at what EV competitors  

weren’t targeting, and the obvious  answer was SUVs and pick up trucks.  

RJ also decided to change the name of the company  to Rivian which was derived from Indian River.  

He combined the first part of River and the  last part of Indian. RJ had spent a lot of his  

childhood in a rowboat on the Indian River in  Florida, hence the name. Anyway, RJ had a new  

target and new name, but he was still lacking the  biggest part which was new funding. For RJ though,  

this wasn’t that hard to secure. The source of  Rivian’s 2012 funding effort isn’t clear, but it  

was likely the government again or some venture  capitalists who like to keep a low profile.  

Over the next couple of years, Rivian hired a  bunch of talent from legacy automakers like Ford,  

GM, and Chrysler, and by the end of 2016,  they had grown to 100 employees. This is still  

relatively small, but given that basically all  of these guys were engineers earning 6 figures,  

it wasn’t cheap to run Rivian. Even if we  just assume $100,000 per year per person,  

we’re looking at $10 million annually  on just payroll. And keep in mind,  

Rivian still had no revenue coming in. Rivian was  also investing heavily into manufacturing plants.  

For example, in January of 2017, Rivian acquired  a manufacturing plant from Mitsubishi for $16  

million. Soon enough, Rivian revealed their pickup  truck and their SUV originally called the A1T  

and the A1C at the LA Auto Show in November  of 2018. Unlike the Cybertruck reveal which  

left the audience divided, the A1T and A1C were  exactly what the audience wanted. From a distance,  

they looked just like traditional vehicles, but  up close, they had that futuristic electric touch,  

and that’s what made all the difference. Step  by step, Rivian was slowly getting ready to  

launch their first vehicle, but the last step  of bringing the product to market would take  

way longer and cost way more than anybody  expected. Fortunately for Rivian though,  

investors with massive pockets would  enter the scene after this reveal.

SMART MONEY: 

Up until this point, Rivian had primarily  raised money in the tens of millions,  

but it didn’t take long for them to cross into  the hundreds of millions. In May of 2018, Rivian  

took on $200 million worth of debt from Standard  Chartered bank which increased their total raised  

funds to a whopping $450 million. Despite raising  nearly half a billion dollars, the general public  

still wasn’t that interested in EVs as the price  was still way out of reach for most people. But  

all of this would change with the launch of the  Tesla model 3 in 2017. While the Tesla model 3 was  

a promising idea from the start, many big players  weren’t convinced that Tesla would actually  

be able to execute on the idea. And this was an  absolutely fair assessment given that Tesla would  

go through production hell in 2018 trying to ramp  up the model 3. Tesla played with the bankruptcy  

line several times this year, and there were  plenty of customer complaints regarding subpar  

manufacturing. Despite all the uncertainty though,  Tesla survived 2018, and that was the signal  

that the time for EVs had finally come. Many big  players didn’t want to take the gamble with Tesla,  

but now that Tesla had gotten to the otherside,  they were willing to take the risk with other EV  

startups. And this led them straight to Rivian.  In February of 2019, Amazon led a $700 million  

investment round for Rivian. Overnight Rivian  went from lifetime fundraising of $450 million  

to raising $700 million in a single round and this  was just the beginning. Just two months later,  

Ford invested $500 million which they would  later raise to $1.2 billion. Later that year,  

Cox Automotive poured in another $350 million.  And Amazon would put the nail in the coffin by  

ordering 100,000 electric delivery vehicles from  Rivian. By the end of 2019, Rivian had raised  

a total of $2.85 billion, and now that smart  money was in, it was time to open up the gates.

EV BUBBLE: 

As we all know, starting at the end of 2019, Tesla  stock soured. First it crossed a $100 billion,  

then it overtook Volkswagen and Toyota, and now  it’s literally a trillion dollar company. That’s  

more than the rest of the top 10 auto companies  combined. I’m not trying to get into whether  

that’s justified or not, but something that’s  crystal clear is the fact that Tesla took the rest  

of the EV industry with them and that of course  includes Rivian. In the meantime, Rivian was  

struggling to start production and get deliveries  going. Promised delivery dates and came and went,  

and Rivian kept delaying the release time after  time. But one thing we can be sure of was that  

money was no longer the issue. They had already  raised billions, and billions more were flowing  

in due to Tesla hype. But Rivian was running out  of time. Ford had revealed their F150 lightning  

and Tesla was rapidly building their Austin  gigafactory and making the cybertruck a reality.  

It would’ve been a shame if Rivian had targeted  the EV pick up truck and SUV market a decade ago  

just to beat by Tesla and Ford. Fortunately  for Rivian though, they were able to deliver  

at the last second. At the end of August, Rivian  filed for an $80 billion IPO and this confirmed  

that Rivian was finally ready to start making  deliveries. Ironically, despite targeting the  

market years before Ford and Tesla, it looks like  they only beat them to market by months. Anyway,  

by the time Rivian IPOd, they had raised  a total of $10.5 billion since 2019 alone.  

To put that in perspective, that’s half the  valuation of Nissan, twice the valuation of Mazda,  

and four times the valuation of Aston Martin.  And all of that was just to get their first  

product to market. But looking back, that  was just a drop in the bucket given that they  

would reach a valuation of $150 billion which  just leaves the question, what happens next?

FUTURE OF RIVIAN: 

The truth is Rivian’s entire existence has been a  bubble. First it was millions from the government,  

then it was tens of millions from early investors,  then it was hundreds of millions from smart money,  

and now it's billions from the public markets.  It seems like this must come to an end soon, but  

the truth is, that’s not necessarily the case. All  it takes is one announcement from Elon that Tesla  

is going to do a stock split on December 9, and  Tesla and EV industry will go to Mars. If Tesla  

makes another run, I wouldn’t be surprised if  Rivian ends up overtaking Toyota which is stupid  

but reality nonetheless. When the bubble does  eventually pop though, whether that's tomorrow or  

after Rivian reaches a trillion dollar valuation,  retail investors will likely lose substantial  

amounts of money. Instead of trashing on Rivian  and shorting the stock though, I think it's a much  

better idea to see it in a positive light. The EV  bubble has given companies that would otherwise  

have little chance against the legacy automakers  an opportunity. And at the end of the day,  

the bubble is centered on a great cause which  is reducing pollution and transitioning to  

sustainable energy. The more companies that  enter the scene and fight for market share,  

the faster we’ll see a transition to EVs. So,  maybe the bubble isn’t actually all that bad.  

The crash, however, will be deadly for Rivian  if they don’t make a mark before it’s too late.  

So, I wish the best to Rivian despite their  stupid valuation, but only time will tell if  

they’re able to make it to the other side. Do  you guys think Rivian will survive the eventual  

crash and rival Tesla? Comment that down below.  Also, drop a like if you also have a love hate  

relationship with the EV bubble. And of course,  consider joining our discord community to suggest  

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