In Rivian, Amazon May Have 'Bespoke Automobile' At Its Service

• Amazon's investment in electric truck maker Rivian helps secure e-giant's future as a carbon neutral logistics platform.

• The investment gives Rivian edge over electric vehicle competitors

Rivian's recent $2.5 billion fundraise accelerates Amazon.com Inc AMZN path to zero-emissions logistics domination, analysts said, while simultaneously opening up a new front in the battle to bring electric vehicles to market.

"For Amazon, this creates a potential to do even greater vertical integration and create a new kind of system, where they have a bespoke automobile for their purposes," Michael Ramsey, a VP, an analyst with Gartner's Automotive and Smart Mobility division told FreightWaves. "It's very interesting from that perspective."

To date, Amazon has led or participated in at least three Rivian financing rounds, including a $700 million chunk of cash the e-commerce and cloud services giant sank into the electric truck and SUV startup in February 2019. Amazon also participated in Rivian's latest $2.5 billion funding round, announced last week.

And that's not all. In addition to capitalizing on the Michigan-based startup, Amazon has ordered 100,000 electric delivery vans from Rivian. That combination — a massive financial investment plus an outsize product order —  has catapulted Rivian to the front of the pack among electric vehicle startups, according to some analysts, even giving it an edge over leading contender Tesla.

"When Tesla was young, they struggled with getting big suppliers to commit," said Ramsey, "so it was difficult to get off the ground because there wasn't any certainty they would have the volume that suppliers need."

With Amazon's investment, Rivian "is almost certain to be able to produce a product, and then that product has a set of buyers."

Tesla was founded in 2003 and is still not profitable, Ramsey observed, while the other high-profile electric startup, Nikola, publicly-traded and now worth a lot of money, doesn't have a manufacturing plant, a backer from major entities or a product.

Rivian's Zero-Emissions A Lure For Amazon

The Rivian stake gives Amazon the opportunity to do more than consolidating operations. Facing mounting criticism over the environmental impact of its e-commerce and data services operations, Amazon in June announced a $2 billion investment fund focused on "sustainable and decarbonizing technologies." Logistics and transportation technologies were identified as one of the top priorities.

Simultaneously, Amazon announced it would speed up by five years — to 2025 — a previously announced effort to power its operations with renewable energy sources. The company reaffirmed another earlier commitment to be carbon neutral by 2040.

One month later, Amazon upped its investment in Rivian.

"Amazon has a vested interest in securing its future as a sustainable (ultimately carbon neutral) logistics platform," wrote Morgan Stanley in a research note commenting on last Friday's Rivian raise.

"In our opinion, Amazon is in a position to take significant steps to push the adoption of zero-emission and sustainable technologies in its ecosystem, and this has driven the company's investment [in Rivian.]"

Shifting Markets, Consumer Vs. Commercial Vehicles

Brittain Ladd, a former Amazon executive who now runs his own consultancy, speculates that Amazon, facing tremendous logistics pressure tied to skyrocketing e-commerce demand, will "seriously consider" acquiring Rivian. 

The giant's decision to purchase self-driving vehicle startup Zoox last month has shown that Amazon is not averse to acquiring companies outright to give it the logistics capabilities it needs. 

But Ladd's theory hinges on the market for electric SUVs and pickups  — "the most popular vehicles in the U.S." He believes Tesla will accelerate its ability to bring those consumer products to market, possibly acquiring Jeep from Fiat Chrysler or Ford's F-150 brand, or by signing a strategic partnership making Tesla the exclusive manufacturer of electric power trains for Ford pickups.

"Amazon definitely sees the value in Rivian as a manufacturer of vans for Amazon in addition to Rivian's consumer business," he said. But a Tesla partnership with an original equipment manufacturer would reduce Rivian's value, he added, and lead Amazon to hit the pause button on a possible Rivian acquisition.

Rivian: A more refined Tesla

Ramsey said Rivian will likely prioritize production of the Amazon delivery van, "the money maker."

"From a market perspective, the SUV they've produced is going to get people's attention, and the commercial product for Amazon is the one that is going to pay the bills."

Characterizing Rivian as a "more refined Tesla," in part because it acts like more of a traditional automaker, (and, perhaps, because it doesn't have notoriously outspoken Elon Musk as a CEO), Ramsey reiterated his position on Rivian's future.

Amazon's investment may not guarantee Rivian's success, he said. "But it guarantees longevity."

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Click here for more FreightWaves articles by Linda Baker.