The Reuters article seems well sourced, and the GM comment did not only not deny any talks, but kind of caused the reader to believe that there are talks to this effect. Therefore, I have to assume that’s the case. This article will not argue that talks aren’t happening. What this article will argue is that this kind of deal does not make sense for General Motors.
But first, a tiny bit of background about what Rivian is. It’s a decade-old startup, which showed two very attractive battery-electric vehicles (BEVs) at the Los Angeles Auto Show last November 2018. One was a pickup truck and the other was a SUV version thereof, sort of like a Chevrolet Suburban.
These were production-intent concept vehicles. They would now have to undergo at least a couple of years worth of testing and production readiness in order to have a shot at making it to market as a quality product. Depending on when such testing started - or will start - it’s hard to see that Rivian’s products are going to be in mass production of a quality product before the end of 2020. It could just as well be 2021 or 2022.
Production equipment will need to be ordered, installed, and optimized, a supply chain will have to be developed, and so on. This takes years. Pickup truck buyers need QRD - an industry term that means “Quality, Reliability and Durability.” The testing of vehicles that can tow very heavy trailers is a time-consuming science itself. Watch “The Fast Lane Truck” for videos about testing pickup trucks that tow up the longest and steepest mountains in Colorado: here.
That brings us to General Motors. GM is essentially tied with Ford (F) for being the largest pickup truck maker for the U.S. market. GM’s pickup truck business is its crown jewel in terms of market position and profitability.
When it comes to electric vehicles, GM also has considerable experience, really more than any other automaker in any meaningful sense today. Starting with the Lunar Rover from 1969 and then the EV-1 in the mid 1990s, the first real commercial product became the Chevrolet Volt, which entered mass production in November 2010 as a 2011 model. The Chevrolet Volt has proven to be a most beloved electrified vehicle in no small part because of its legendary reliability and practical powertrain solution.
It’s a long story and indeed a subject for a wholly separate story, but the main reason the Chevrolet Volt was not successful in the marketplace was that it was a low-slung hatchback with very limited rear seat space. If the Chevrolet Volt has been a taller SUV, perhaps with all-wheel drive (AWD), it would most certainly not have met its current fate of being taken out of production in 2019.
In 2016, GM became the first automaker to deliver a spacious 238-mile range BEV for $37,495. No other automaker came close to hitting those specs until the Hyundai Kona EV in the second half of 2018 - a car that just went on sale in the U.S. in the last couple of weeks. The Chevrolet Bolt EV is sold under multiple names on three continents.
Combine GM’s market-leading (together with Ford) pickup truck position with GM’s superior experience in delivering quality electric cars (Volt, Bolt and many others such as Spark, ELR and CT-6), and you have to ask yourself: Which other automaker (truckmaker) on earth is better positioned to deliver an all-electric (BEV) pickup truck?
The answer is of course: None!
Basically, GM does absolutely not need Rivian. I don’t know what someone at GM is smoking, but the idea of GM investing in Rivian seems to be total lunacy, from a basic strategic standpoint.
We already know Ford is developing multiple versions of electrified F-150 pickup trucks: here. Yes, there will be both hybrid and all-electric (BEV) ones. We see one development unit being plugged in right here: here.
There's of course nobody who knows to what extent there will be demand for an all-electric (BEV) pickup truck. It sure sounds like a neat idea to some. It’s a bit like “would you like a brand new 4,500 square foot house that looks very cool?” Most people would answer yes to that question.
But we don’t know what price it would take to offer a, say, 300 -mile range pickup truck. Would such a truck cost nearly $100,000 just to build? How heavy would it have to be? What would be its remaining payload and towing capacity?
I think that if you are in the business of making pickup trucks you may just have to provide all powertrain options and see what the consumer is truly willing to pay for - not just state some vague conceptual interest. This includes GM, Ford and RAM (FCAU) - and probably also Nissan (OTCPK:NSANY), Toyota (NYSE:TM) and Honda (NYSE:HMC), as they also make and sell pickup trucks in the U.S. market.
Tesla (TSLA) hired Nissan’s chief pickup truck designer Randy Rodriguez in the middle of 2016, and Tesla will show its pickup truck some time later this year. I have no doubt that it will look spectacular, and that Tesla will as usual promise amazing specifications and some dramatically over-optimistic manufacturing date. So that’s the next shoe to drop here, unless Ford can beat Tesla to the punch.
But here's the main point: GM has all the ingredients to make an electric pickup truck. It’s already tied for leadership in pickup trucks, and it’s got more electric vehicle experience than any other automaker. It also has lots of factory capacity. It needs Rivian for positively nothing. All an investment in Rivian would accomplish is to a feed a would-be competitor. Why?
If the Reuters article turns out to be true, and GM makes an investment in Rivian, either of three things must be true:
A majority of The GM board of directors needs to take a cold shower.
GM’s management should be fired for lack of critical strategic thinking.
There is something about this conceptual deal that we don’t know, or haven’t properly understood.
My advice to General Motors: If you think that an all-electric pickup truck is a good idea - and it seems to me that it’s a good idea to bring one out just to find out - then simply build it yourself. GM has all the ingredients and is starting from a stronger position to do so than any other pickup truck maker on Earth.
Perhaps GM will invest in Rivian while simultaneously develop its own lineup of electric pickup trucks? That would be an interesting move. If that’s what GM is doing, it’s probably wise not to tell us that - right now, anyway.
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