Electric and Autonomous Vehicle arms race heats up following funding announcements from GM and Rivian
2021 is shaping up to be a pivotal year for autonomous and electric vehicle manufacturers as the automotive industry charges ahead towards an emissions-free future.
Microsoft and General Motors announced the commencement of a long-term strategic partnership together with Cruise, GM’s self-driving subsidiary. The partnership will see the introduction of cloud computing via Azure for self-driving vehicles while Microsoft will collaborate with GM to improve AI and machine learning.
The new partnership will see an injection of funding as Microsoft joins Honda, GM and other investors to raise more than $2 billion in equity investment, increasing the value of Cruise to $30 billion.
The news broke around the same time that Amazon and Ford backed EV startup Rivian, which announced it had raised $2.65 billion through its Climate Pledge Fund – a dedicated investment program to aid the transition to a low-carbon economy. The injection of funding has raised Rivian’s value to $27.6 billion, according to The New York Times and Bloomberg.
With the automotive industry in one of its most transformative periods in recent history, we are seeing technology companies increasingly partnering directly with automakers to provide tailored solutions. “Microsoft, as the gold standard in the trustworthy democratization of technology, will be a force multiplier for us as we commercialize our fleet of self-driving, all-electric, shared vehicles," Cruise CEO Dan Ammann said in a statement.
During an interview with CNBC, Rivian CEO R.J. Scaringe announced that Rivian had no plans to go public and was seeking alternative financing solutions to support what he described as “aggressive growth plans.” At the same time, Rivian remains “very selective” about their funding partners as they aim to become Tesla’s top rival.
Prior to the latest round of funding, Cruise was valued at approximately $18 billion, but Wall Street analysts and investors have always stated that GM’s Cruise division should be much higher, naming the San Francisco company as one of the fasting-soaring valuations of the automotive industry.
The announcement sent GM shares soaring to an all-time high, where it remained fairly stable based on the company announcing its plans to go all-in on electrifying its vehicles, services and component infrastructure. The company has committed to bringing 30 new electric vehicles to market by 2025.
Rivian, however, remains a private company, but has hinted that an Initial Public Offering (IPO) may be in the cards once it reaches a valuation of $50 billion. The amount would be one of the most significant IPOs since Tesla’s $1.7 billion market cap in 2010.
Unlike Tesla, Rivian has received mostly positive press coverage and has chosen to shun the spotlight, preferring to take a more measured approach to fundraising and promotion. The company frequently makes its testing videos public, an approach that has seen it generate massive interest for its 2021 RT1 electric pickup.
“We want to launch, demonstrate our capability and let our performance speak for itself before we can look into becoming public,” Scaringe said.
The unanswered question that remains to be seen is how successfully the newer players in the EV space — such as Rivian, and even established automakers as GM and Ford — can effectively compete with Tesla. The Silicon Valley company experienced record sales in 2020 and turned its first annual profit.
Tesla CEO Elon Musk expects a production increase of 50 percent in 2021 and the company has established itself as the brand to beat, but new partnerships between technology companies and established automakers could be enough to take a significant bite out of Tesla's EV market dominance.
