Author Topic: How Amazon gets 100,000 eTrucks for free  (Read 1794 times)

PonoBill

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How Amazon gets 100,000 eTrucks for free
« on: October 10, 2019, 08:34:06 AM »
It occurred to me last night when I was trying to fall asleep that Amazon probably will get it's 100,000 delivery trucks from Rivian for free. In fact, they will make money on the order.  They led a $700 million dollar funding round for Rivian, investing about 440 million as I recall to get 20 percent of the company. Then they order 100,000 trucks. So Rivian gets the funding to scale up and has an order worth 10 billion give or take a billion. As soon as they start delivering trucks in volume the value of the company skyrockets to reflect that 100,000 order, as well as any trucks they might turn loose to us peons.

Tesla's current market value is 48 Billion and growing. Assume a similar value for Rivian when it produces those 100,000 trucks and Amazon's share is now worth 9.6 Billion. Gee.

Could they have done this with any other company? Not really. These folks ain't dumb.

Of course, this assumes that there are enough batteries available to power 100,000 eTrucks. Tesla has a huge advantage with the gigafactories. The Chinese gigafactory that was a mudhole last February is already in production of both batteries and vehicles. Rivian sources their 21700 cells from LG, who are certainly no slouches in Lithium battery production.
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Admin

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Re: How Amazon gets 100,000 eTrucks for free
« Reply #1 on: October 10, 2019, 08:45:20 AM »
Also interesting that Cox (KBB, etc) recently invested 300 Million.  After that Rivian announce no dealerships and what may be an all subscription model. 

https://www.digitaltrends.com/cars/rivian-electric-vehicle-subscription-service-report/

These services typically allow drivers to pay a flat monthly fee that bundles the cost of the car, as well as insurance and maintenance, without the long-term commitment of buying or leasing. Some services even let customers regularly switch cars. You could have a practical sedan during the week and a sports car on the weekend, for example.

Bean

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Re: How Amazon gets 100,000 eTrucks for free
« Reply #2 on: October 10, 2019, 09:17:32 AM »
Great observations. 

Ordinarily we might expect valuation issues related to the perception of related party sales, a high customer concentration and potentially non-recurring sales.  But in this case, I would not bet against Amazon.  It will be interesting to watch for sure...

Wetstuff

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Re: How Amazon gets 100,000 eTrucks for free
« Reply #3 on: October 10, 2019, 09:20:53 AM »
Nine flow, Bill...

The retail auto market is slowly changing. 

https://www.fool.com/investing/2018/06/08/why-rising-car-leases-should-worry-automakers.aspx

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TallDude

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Re: How Amazon gets 100,000 eTrucks for free
« Reply #4 on: October 10, 2019, 03:35:13 PM »


Of course, this assumes that there are enough batteries available to power 100,000 eTrucks. Tesla has a huge advantage with the gigafactories. The Chinese gigafactory that was a mudhole last February is already in production of both batteries and vehicles. Rivian sources their 21700 cells from LG, who are certainly no slouches in Lithium battery production.
I believe Panasonic makes the batteries for Tesla. The Panasonic battery factory is inside the Gigafactories, but run as a separate in operation.   

PonoBill

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Re: How Amazon gets 100,000 eTrucks for free
« Reply #5 on: October 10, 2019, 03:39:48 PM »
In the long term I think Tesla has its eye on transportation as a service, not as a durable good. The earning potential of autonomous vehicles could easily be a multiple of their price. If that proves to be true, why would Tesla sell them? And why would anyone buy one except for earning potential? Given that a competitive internet-based market for personal and bulk transportation with low fuel cost and no drivers would be efficiently priced and the depreciation of the vehicle would be an expense against profit, not just a loss to individual owners, the cost to consumers would probably be to low to justify other options.
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PonoBill

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Re: How Amazon gets 100,000 eTrucks for free
« Reply #6 on: October 10, 2019, 03:49:56 PM »


Of course, this assumes that there are enough batteries available to power 100,000 eTrucks. Tesla has a huge advantage with the gigafactories. The Chinese gigafactory that was a mudhole last February is already in production of both batteries and vehicles. Rivian sources their 21700 cells from LG, who are certainly no slouches in Lithium battery production.
I believe Panasonic makes the batteries for Tesla. The Panasonic battery factory is inside the Gigafactories, but run as a separate in operation.

Yes, more or less. Tesla is also working on battery production outside of the Panasonic agreement. Its recent acquisitions of Maxell who have important battery and supercapacitor technologies and Perbix who manufacture equipment for making lithium batteries is part of the longer-term strategy. I suspect they will always have a deep relationship with Panasonic since they are willing to pour a lot of money and resources into ramping production quickly, but no large-scale manufacturer can afford to be single-sourced for a critical component.
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surfcowboy

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Re: How Amazon gets 100,000 eTrucks for free
« Reply #7 on: October 11, 2019, 02:28:38 AM »
Bill, thx for that last, “why would Tesla sell them” quote. We’ve just wrapped v1 of an enterprise app that somewhat works the same way. Long term, it’s probably best as a service. We’ll sell it til we have the funds to flip it to Saas or find the right investors. Then, like you said, “why would we sell it anymore?”

There are so many lessons to be gained from watching how Amazon buys and invests. It’s truly crazy how much once you hit a certain size all the rules change.

When I talk to friends who are blue collar workers yet vote against their own best interests I often say that the old joke about “the first million is the hardest” is not really the way it is. It’s actually that “the second million is so much easier” (almost guaranteed, in fact.) That’s the way our system is set up to work if you just don’t screw up too much.

Once you start to bump above a certain ceiling some things flip in a way that is hard to understand for a lot of folks. Like getting 100,000 trucks for free.

This is the billionaire version of flying on credit card points accrued on business expenses. Thanks for this analysis.