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Ford suffered a billion dollar loss because of its investment in an electric car startup

CNN reported that a few days after its November IPO, electric vehicle maker Rivian was at one point one of the world’s most valuable automakers, despite not having made any revenue yet. However, the company’s shares began to decline continuously since then. And the one who suffered the most was Ford. But why?

This is completely true. Ford has been making cars and trucks for more than a century, and they’ve even sold more electric cars than the Rivian. However, the company just reported a loss due to a drop in Rivian shares.

Accordingly, Ford and Amazon are the two units pouring money into Rivian from the very beginning. The electric vehicle company was founded in 2009 and went public last year. Ford invested $500 million in the startup in April 2019 when the two companies announced plans to develop electric trucks together. These plans never came to fruition and Ford kept the investment intact.

Despite the stock’s decline over the past five months, however, Ford has had a good time with the investment.

Rivian’s IPO in November made a huge splash, raising $12 billion for the company – making it the biggest IPO since Facebook’s IPO in 2012. Anyone wants to dive into the stock. – what is expected to be the next Tesla, and they all believe Rivian is the company that can do so. Shares of the company doubled in its first week of trading, making it more valuable than any other automaker on the planet, behind only Tesla and Toyota.

After that, things didn’t go well.

Exactly two weeks later, Ford and Rivian announced that they weren’t going to build an electric truck together, sending Rivian stock in a 17 percent free fall in one day. In December, it announced plans to build a second factory but also reported that initial sales of electric vehicles would fall more than expected. The company’s stock continued to fall further, adding 10% in 1 day.

Through the end of 2021, Rivian has seen the stock trade 40% below its IPO peak. However, the company’s value remains at $92 billion, $10 billion more than Ford’s value. This means Ford’s $500 million investment in Rivian is worth $10.6 billion. And then, Ford also reported a profit of $9.1 billion that year.

Rivian shares continued to fall as supply-chain issues raised concerns among investors that automakers not as big as Tesla would find it difficult to build vehicles.

This year, Rivian stock is down 70 percent through Wednesday’s close. As a result, Ford posted a net loss of $3.1 billion. They could have reported a $1.6 billion profit if it weren’t for the special costs associated with the investment in Rivian.

The $1.6 billion profit was better than investors expected, although it was down 44% from Ford’s own prediction. Car sales reached $32.1 billion.

Like the industry as a whole, supply chain problems such as a lack of computer chips have affected Ford’s production and sales of vehicles. In fact, their 53,000 vehicles by the end of the quarter were almost complete but were still waiting to install some missing parts due to supply chain issues.

Source: CNN

https://cafebiz.vn/ford-chiu-thua-lo-ty-do-vi-dau-tu-vao-startup-xe-dien-20220428161726928.chn


Phuong Linh

Following Economic Life

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