Big Tech’s dream of electric vehicles turns out to be harder than planned

Rivian electric trucks are seen parked near the Nasdaq MarketSite building in Times Square on November 10, 2021 in New York City. Michael M. Santiago / Getty Images

Tesla’s dazzling success has inspired a number of technology companies with little experience in the automotive industry to invest in or launch their own electric car projects. Apple has received intense media attention for its mysterious “Apple Car” project. Amazon has a $ 10 billion stake in Rivian, a startup that makes electric trucks. Even Sony, known for making game consoles and TVs, has debuted several EV prototypes and is looking for a way to mass-produce them.

But building a car is different from setting up a shopping site or making a home appliance. As Tesla CEO Elon Musk famously said, “those who have not been involved in production just have no idea how painful and difficult it is. It’s like you have to eat a lot of glasses.”

Ouch. No wonder none of the above companies have delivered a meaningful rival to Tesla yet. Meanwhile, the financial risks of this challenging industry for some of them are returning to bite into them.

On April 28, Amazon reported a shocking loss of $ 3.8 billion, or $ 7.56 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 of its value in the first quarter.

Amazon has an agreement to buy 100,000 electric vans from Rivian between now and 2024. But Rivian is currently focusing on manufacturing its electric pickup, the R1T.

Progress is proving to be more erratic than hoped. In the first quarter, Rivian built about 2,500 R1Ts and delivered 1,200 of them. The company said supply chain problems forced it to cut the year-round production target down to 25,000 vehicles. It completed only 10 percent of it in the first three months of the year. The company had around 70,000 pre-orders of R1T by 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 bottom line in the fourth quarter, thanks to its then-rising stock. Amazon’s core retail and cloud companies generated only $ 2 billion in net revenue 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 with its core business, as the company faces rising costs to operate its e-commerce unit, which accounts for 70 percent of its total revenue.

Rivian is not the only electric car stock struggling in 2022. Almost all listed electric car manufacturers, with the exception of Tesla, have seen their stock prices fall under sluggish market conditions. Shares in e-truck startup Nikola have fallen 30 percent so far this year; its Ohio rival Lordstown Motors has dropped 40 percent; and Los Angeles-based EV startup Fisher has dropped 38 percent. Chinese electric car manufacturers Nio and Li Auto, both traded in the United States, have also fallen by 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. After that, it introduced two more models, including an electric SUV. None of them have come into production yet.

Alphabet-owned Waymo, which originally wanted to make an electric, self-driving car, gave up its manufacturing plan in 2017 to focus on developing software for self-driving because car manufacturing is too hard and could be a distraction for a company that does not do it. come from a production background, a Waymo director said in 2019.

Big Tech's dream of electric vehicles turns out to be harder than planned

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