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The ‘Big Two' U.S. Automakers are Now Tesla & Rivian, With a Combined Market Cap of $1.1 Trillion

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【Summary】The combined market cap of Tesla and newly listed startup Rivian are now roughly $1.1 trillion, which should be a huge wakeup call for Ford and General Motors, who now find themselves far behind in the electric vehicle race after spending most of the time on the sidelines as Tesla rose to prominence in the auto industry.

Eric Walz    Nov 11, 2021 11:00 AM PT
The ‘Big Two' U.S. Automakers are Now Tesla & Rivian, With a Combined Market Cap of $1.1 Trillion
The Rivian R1T fully-electric pickup.

For years, General Motors, Ford Motor Co and Chrysler were referred to as the "big three" U.S. automakers. The three companies faced little competition from overseas car companies until the 1970's, when Toyota and Honda and others began exporting more fuel efficient cars to the U.S.

Over the past 40 years or so, Detroit's big three saw their market share being eroded away as consumers purchased millions of more fuel efficient vehicles from Japanese automakers, including the popular Toyota Camry, which was once the best selling sedan in the U.S. Other popular imports include the Honda Accord and Toyota Corolla. 

Then Tesla came along with the goal to transition the world to sustainable energy, starting with fully-electric zero emissions cars. Just a decade ago, Tesla was largely dismissed by legacy automakers as a niche California EV builder. As a result, over the past ten years, General Motors and Ford continued to churn out millions of highly profitable, yet gas-guzzling trucks and SUVs while Tesla slowly established itself as a formidable electric car company with the Model S. 

Since the launch of the Model S in 2012, Tesla has launched the Model X SUV, mass-market Model 3 sedan and Model Y crossovers, with the Cybertruck and Tesla Semi still in development. 

At the same time, Tesla has disrupted the auto industry with its electric software based vehicles with features such as automated highway driving. Now Tesla has risen to become the world's most valuable car company, with a market cap topping $1 trillion.

Tesla itself faced little competition from the world's automakers up until recently. Now just about every automaker is planning to build more EVs, including New startups like Rivian. Rivian's high-profile IPO this week, in which it raised nearly $12 billion from investors, quickly pushed its market cap to over $100 billion.

The combined market cap of Tesla and Rivian are now roughly $1.1 trillion, which should be a huge wakeup call for Ford and General Motors, who now find themselves far behind in the electric vehicle race after spending most of the time on the sidelines as Tesla rose to prominence in the auto industry. 

GM's market cap is currently $88.6 billion, while Ford is valued just over $78 billion respectively. But both companies have been building cars for over 100 years. That's a big head start. 

It appears that Ford and GM were caught off guard by Tesla's meteoric rise with no fully-electric models to compete with Tesla up until recently, at least on the surface. But internally the two automakers likely knew the threat they were under from Tesla and other global automakers following in Tesla lead and introducing new electric models. But its tough for companies to risk easy profits and invest tens of billions of dollars in electric vehicles.

For years, GM and Ford relied on building large trucks and SUVs for most of their profits, making the switch to electric vehicles much more difficult than building an electric car company from scratch like Tesla and Rivian succeeded in doing. Both GM and Ford are now forced to catch up to Tesla and Rivian and are investing billions to do so.

In January, GM announced plans to become a carbon neutral company by 2040. To reach that aggressive goal, the automaker plans to phase out internal combustion engine passenger models, including light-duty trucks and SUVs by 2035. It will be a historic move for the company that has been building gas-powered vehicles since 1908.

In June, GM announced it was boosting its investments in electrification and autonomous driving technologies to $35 billion through 2025 as it plans for an all-electric future with dozens of new battery-powered models in the works, many with autonomous driving capability.

In Nov 2020, GM announced it would deliver 30 new EVs by 2025 globally, with two-thirds of them available to customers in North America. The automaker said it will add additional U.S. assembly capacity for electric SUVs, which is one of the most popular body styles in the U.S.

GM will also electrify some of its popular vehicles, including the popular Chevy Silverado pickup. The announcement of an electric Silverado in April sent GM's stock to $61.94, its highest level since GM emerged from bankruptcy after the recession of 2008-2009.  

Ford's electrification plans are equally as aggressive. In May, Ford announced it was boosting investments in electrification as it looks to take on Tesla and Rivian.

The increase in investment in EVs is part of a plan called "Ford+" in which it would become more like a technology company rather than an automaker in the eyes of investors. It's the same way that rival Tesla bills itself.

Ford expects to spend more than $30 billion by 2030 on electrifying its model lineup, including EV battery development. The company's previous commitment was $22 billion. Ford aims to have 40% of its global volume all electric by 2030. The announcement was made at Ford's Capital Markets Day meeting in May.

Rivian's massive IPO this week is especially alarming for Ford though, as the automaker's F-150 pickup is the best selling pickup truck in the U.S. for over 40 years. Now Rivian has come along and beat Ford to market with its R1T pickup. 

Ford also counts on the sales of the F-150 for a big chunk of its annual profits, so the company cannot afford to let Rivian lure away customers with its more powerful, yet zero emissions pickup.

Ford announced the fully electric F-150 Lightning earlier this year, and the first models will be delivered to customers in spring 2022. Ford says its has over 160,000 reservations for its F-150 Lightning. Combined with the automaker's ability to manufacture vehicles at scale, the Lightning could be a big hit and help the company better compete with Tesla and Rivian.

GM will soon launch an electric Silverado pickup, Cadillac Lyriq SUV and Hummer EV and many other new EVs, all of which have the potential to become a hit with EV buyers.

But simply building battery-powered versions of aging vehicle nameplates might not be enough to compete in a changing auto industry that's quickly moving towards electrification and technological innovation. 

EV buyers today are looking for innovative and game changing zero emissions electric vehicles packed with advanced technology that offer more power versus conventional SUVs and trucks. It's what Tesla and newly-listed Rivian can both deliver. The combined $1 trillion+ market value of the two companies could become much larger, which is why GM and Ford need to prioritize their electric vehicle plans to remain competitive.


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