While many electric vehicle (EV) makers have aspirations for an electric truck (*cough* Tesla *cough*), only two have electric trucks in production: Rivian (RIVN -1.11%) and, as of April 26, Ford (F -0.17%). In the U.S., trucks are the most popular vehicles, with the Ford F150, Ram 1500, and Chevy Silverado 1500 consistently topping the list of best-selling vehicles year in and year out.
With the move toward EVs picking up pace, intelligent investors should look into electric truck manufacturers to see which one will lead the market. With these three vehicles selling 1.8 million units combined last year, there's a vast market available. Of the two companies with trucks in production, which is the better buy?
F-150 Lightning. Image source: Ford.
Two different companies and investment styles
Ford and Rivian couldn't be more different. Ford revolutionized the car industry with its $5 workday, 40-hour workweek, and the assembly line in the early 1900s. Since 1903, Ford has been churning out internal combustion engine (ICE) vehicles, but it will end global production of ICE vehicles by 2040.
On the flip side, Rivian was founded in 2009 by current CEO RJ Scaringe and has only designed and produced EVs. Its first truck (and first electric truck anywhere) rolled off the line in September 2021, 118 years after Ford's first vehicle.
These two companies are radically different, and the investment styles are too. Ford represents a value style of investing, where you pay a low price for the stock now in expectation for it to reach fair value in the future. An investment in Rivian is a bet on growth, as you are paying a high price now and expecting the company to grow past its current valuation in the future.
How is Rivian causing both companies to become unprofitable?
Comparing the companies' financials is nearly impossible, as they are in two different life stages. Ford is well developed and produced 966,000 wholesale units in the first quarter of 2022, whereas Rivian produced a mere 2,553. Diving into Ford's electric portfolio shows that the company sold about 36,000 electric vehicles in Q1. Even though none of these were electric pickups, Ford's EV capabilities are greater than Rivian's.
Despite Ford being a resourceful and much larger company, it lost money during Q1, just like Rivian. Ironically, this loss was driven by Ford's investment in Rivian, as it invested $1.2 billion into the company during the start-up phase. Now that Rivian's stock has tumbled, Ford was forced to update its balance sheet to reflect the $5.4 billion paper loss sustained by Rivian's fall (its stake was worth $10.6 billion at the end of 2021).
Ford has begun selling its stake in Rivian, unloading about 8% of its total holdings in the company earlier in May. Without this loss, Ford would have been profitable for the quarter.
Rivian's unprofitability was real. It is spending heavily to bring its factory to full speed to meet its 2022 production goal of 25,000 vehicles. It lost $1.6 billion on revenue of $95 million during Q1, but this loss should narrow once Rivian reaches full capacity. Because Rivian is highly unprofitable, it's wise to look at how long it can sustain its operations without needing outside funding.
As of March 31, Rivian held nearly $17 billion in cash and equivalents. With a net change in cash for Q1 of $1.5 billion, Rivian has enough to fund its operations through the end of 2024. This projection doesn't factor in increased revenue from production, so in reality, Rivian can last much longer.
R1T being assembled. Image source: Rivian.
Which company has the better product?
Ford appears to be winning in preorders, with 200,000 reservations for the F-150 Lightning. Rivian has more than 90,000 preorders for its R1T truck and R1S SUV combined and 100,000 van preorders from Amazon. This preorder difference can likely be summed up in one word: Cost. Ford's truck starts at less than $40,000 versus Rivian's starting price tag of $67,500.
That's a hefty jump from one vehicle to another, and many people cannot justify paying that much for a vehicle, especially one from an unproven manufacturer.
Rivian R1T. Image source: Rivian.
Rivian's product also targets a niche group: Outdoor enthusiasts. Instead, Ford is focused on a broader demographic with this truck, just as it has done successfully over the last two centuries.
Other electric trucks are nearing production.
There are also other manufacturers entering the truck EV pool. General Motor's Silverado 1500 is slated for a 2023 delivery and Stellantis' Ram 1500 will hit the markets in 2024. Additionally, Tesla's Cybertruck should be launching within the next two years, but this product has been delayed multiple times.
Competition is coming for Ford and Rivian. While Ford is well prepared for the newcomers (as it has dealt with competition for well over a century), Rivian has no experience in dealing with competition, as its truck fulfills its own niche. All three of the major truck manufacturers have outdoor and performance trims on their ICE trucks that will compete directly with Rivian once those trims are launched in EV form. Rivian is racing to establish its brand before the industry stalwarts can crush them. While I think Rivian can survive, I'm not sure if it will be able to sway legacy truck buyers away from the brands they've purchased from for years.
With Ford trading at a 2.2% dividend yield (with the payout still below its pre-pandemic levels) and down 46% from its high, I think it's the better buy of the two stocks. If the chip supply chain can ever get straightened out, Ford should see a massive boost to its ICE and EV production capacity and deliver fantastic quarterly results. Rivian has too much to prove as a company, even though I believe it could be a great success.
If we're picking trucks, I'm taking the Rivian R1T. As for stocks, I'll take Ford every day of the week.
