The dazzling success of Tesla has inspired a slew of tech companies with little experience in the automotive industry to invest in or launch their own electric vehicle projects. Apple has garnered intense media attention for its mysterious “Apple Car” project. Amazon has a $10 billion stake in Rivian, a startup making electric trucks. Even Sony, known for making gaming consoles and TVs, has debuted several EV prototypes and is looking for a way to mass produce them.
But building a car is different than setting up a shopping website or making a home appliance. As Tesla CEO Elon Musk famously said, “those who have not been involved in manufacturing just have no idea how painful and difficult it is. It’s like you’ve got to eat a lot of glass.”
Ouch. No wonder none of the companies above has delivered a meaningful rival of Tesla yet. Meanwhile, for some of them, the financial risks of this challenging industry are coming back to bite them.
On April 28, Amazon reported a shocking $3.8 billion loss, or $7.56 per share, for the quarter ended March 31, missing Wall Street analysts’ earnings expectation by $16 per share. It was Amazon’s first quarterly loss in eight years and was primarily driven by one item: a $7.6 billion investment write-off of the company’s investment in Rivian, whose stock lost half its value in the first quarter.
Amazon has an agreement to purchase 100,000 electric delivery vans from Rivian between now and 2024. But Rivian is currently focusing on manufacturing its electric pickup truck, the R1T.
Progress is proving bumpier than it hoped. It the first quarter, Rivian built about 2,500 R1Ts and delivered 1,200 of them. The company said supply chain issues forced it to slash full-year production target to 25,000 vehicles. It completed only 10 percent of that in the first three months of the year. The company had about 70,000 pre-orders of R1T at the end of 2021.
A bumpy road for Amazon’s Rivian investment
Ironically, just three months earlier, Rivian added a $12 billion profit to Amazon’s fourth-quarter bottom line, thanks to its then soaring stock. Amazon’s core retail and cloud businesses generated only $2 billion in net income during that period.
Amazon owns about 18 percent of Rivian. The wild fluctuation in the value of this investment has become difficult for Amazon to balance out with its main business, as the company faces growing costs running its e-commerce unit, which accounts for 70 percent of its total revenue.
Rivian isn’t the only EV stock struggling in 2022. Almost every publicly traded electric carmaker, with the exception of Tesla, have seen their share prices tumble amid sluggish market conditions. Shares of e-truck startup Nikola is down 30 percent this year so far; its Ohio rival Lordstown Motors is down 40 percent; and Los Angeles-based EV startup Fisker is down 38 percent. Chinese EV makers Nio and Li Auto, both traded in the U.S., are also down 50 percent and 30 percent, respectively.
Other Big Tech-backed EV projects are also moving slowly.
Apple has relaunched its Apple Car project several times in recent years without making much progress. Sony debuted its first EV prototype more than two years ago at the Consumer Electronics Show in 2020. It introduced two more models after that, including an electric SUV. None of them have entered production yet.
Alphabet-owned Waymo, which initially wanted to make an electric, self-driving car, gave up its manufacturing plan in 2017 to focus on developing autonomous driving software because manufacturing automobiles is too hard and could be a distraction to a company that doesn’t rise from a manufacturing background, a Waymo executive said in 2019.