Car brands like Ford, Chevrolet and Mercedes are well-known names with a long history. Even brands like Buick and Lincoln have maintained a presence, thanks in part to endorsements from celebrities like Tiger Woods and Matthew McConaughey. However, the automobile market is also filled with now-defunct brands such as Studebaker, Oldsmobile, Pontiac and Saab.
When people buy cars, they often plan to keep them for many years. They depend on the manufacturer for support, spare parts, and critical recalls. Knowing that a car company will be around for the long term is a key consideration for buyers.
This is particularly important in the emerging electric vehicle (EV) market, which features new names such as Tesla, Polestar, Rivian and Lucid. These companies face significant challenges due to their startup status, new technology, and the capital-intensive nature of the business.
This week, Volkswagen invested $5 billion in a joint venture with Rivian, providing the struggling electric vehicle maker with a crucial cash boost. Rivian shares rose 67% before stabilizing with a 30% increase over Monday’s price.
“Volkswagen’s investment in Rivian will be crucial to helping it achieve the scale necessary to achieve positive free cash flow,” BofA analyst John Murphy said in a research note. “Rivian is one of the most viable emerging EV automakers with a compelling product, a strong long-term strategy and sufficient financing through 2025 and beyond.”
Viability is the key concern for these companies. As Murphy’s team points out, the ability to raise funds and maintain positive profits and free cash flow are essential.
Our chart highlights these issues: Rivian shares have fallen 89% since its 2021 IPO, while Tesla and Ford have risen 1,253% and 22%, respectively, over the past five years. Despite the recent declines, Tesla’s longevity concerns have mostly subsided for now.
Ford’s conservative approach, which stays true to its history as an automaker, contrasts with Tesla’s more ambitious vision of an “AI robotaxi company” and may reassure traditional car buyers.
Questions about the future of Rivian and its competitors will persist until more vehicles are on the roads and the companies demonstrate their financial stability and ability to thrive.
Also read: Rivian Shares Rise After Major Volkswagen Deal