DETROIT — After going public this month, electric-vehicle startup Rivian Automotive is worth almost 50 percent more than one of its early big investors: Ford Motor Co.
But Ford believes it can soon add more value for shareholders than at any point in the past century with a plan to become the nation’s second-biggest producer of EVs in two years. And Ford no longer thinks it needs Rivian’s help to get there.
The two companies have scrapped plans to jointly develop an EV, Ford CEO Jim Farley told Automotive News. Ford already had canceled a planned Lincoln collaboration at the start of the coronavirus pandemic but still intended to work with Rivian on a different vehicle until recently.
“Right now, we have growing confidence in our ability to win in the electric space,” Farley said in an interview Thursday. “When you compare today with when we originally made that investment, so much has changed: about our ability, about the brand’s direction in both cases, and now it’s more certain to us what we have to do. We want to invest in Rivian — we love their future as a company — but at this point we’re going to develop our own vehicles.”
Ford is so confident in its abilities that it’s doubling its planned EV production capacity to 600,000 globally by the end of 2023, Farley said. The company aims to become the largest U.S. EV maker after Tesla in the same time frame, Farley said, and to challenge Tesla’s leadership after planned EV campuses in Tennessee and Kentucky come online several years later.
The electric push is part of a broader remake of the 118-year-old automaker that involves modernizing how it sells vehicles, reconfiguring pieces of its supply chain and expanding into software services that will generate recurring revenue.
“As a leader of Ford I get really excited, because there hasn’t been a chance to transform Ford and create this much value since we scaled the Model T,” Farley said. “The chance to emerge out of this transition to a digital product with a much higher valuation is now much clearer.”
Farley admitted he has had “mixed emotions” watching Tesla, Rivian and Lucid surpass Ford’s valuation, though he said Rivian is unique because Ford has a rooting interest in its success. Ford invested $500 million as part of the companies’ 2019 agreement — later increasing the amount to $1.2 billion — and until recently had a seat on Rivian’s board.
Through Rivian’s Nov. 10 public stock offering, the value of Ford’s stake has grown tenfold.
“Rivian’s a special case for us; it’s kind of like a brother or a sister, since we’re an investor,” Farley said. “We know [CEO RJ Scaringe] and the company really well.”
Rivian shares rose 4.2 percent to close at $128.60 on Friday. Ford shares fell 0.9 percent to close at $19.39.
Farley said the companies’ relationship has not soured, calling it “some of the best cooperation we’ve had with another company.”
Rivian, in a statement, said the companies “mutually decided to focus on our own projects and deliveries” as demand for each of their EVs has grown. “Our relationship with Ford is an important part of our journey,” Rivian said, “and Ford remains an investor and ally on our shared path to an electrified future.”
One factor Farley cited in the decision is the complexity that would be required to marry another company’s electric architecture with embedded software developed in-house by Ford.
“We have slightly different business models,” he said. “We like what they’re doing, but we’re going to go our separate ways.”
Ford’s EV ambitions hinge around battery capacity, another area in which it recently changed course — pivoting from sourcing batteries from suppliers to making them in-house.
The automaker in September announced plans for three new battery plants that would raise its U.S. production capacity to roughly 129 gigawatt hours annually. Farley said that’s still not enough and Ford will need additional plants.
“Already we need more than we planned,” he said. “I’m not going to give you a number, but it’s very clear we’ll have to move soon, and it will be more.”
Farley said Ford can squelch Wall Street skepticism of traditional automakers’ ability to compete in the EV space with newer entrants such as Tesla or Rivian by reaching its ambitious production goals in the next 24 months.
“We’re different from these other companies in that we have three hits on our hands,” Farley said, referring to the Mustang Mach-E crossover, E-Transit van and upcoming F-150 Lightning pickup. “We need to be No. 2 in the U.S. in electric sales, and we need to make money on those products. If we do those two things, Ford will be in a different situation, and I believe the narrative will be different.”
As Ford builds more electric and connected vehicles, Farley said it will need to rethink its supply chain. It’s getting practice at that as a result of the semiconductor shortage.
Ford this week announced a nonbinding agreement with GlobalFoundries to take a more direct role in the purchase of U.S.-made microchips. It hopes to gain more of a say in their design as its needs grow with products that rely more heavily on software.
Although Ford estimates the chip shortage will last into 2023, Farley said the crisis is easing.
“It feels like with the semiconductors we’re through the worst part, and we’re starting to proactively change our supply chain management,” he said. “But will there be a memory chip shortage, or camera and sensor shortages we’ll all suffer through? I bet. If you learn anything from companies like Apple, when there’s a technology change, supply chains become strategic.”
Farley said the chip shortage has shown Ford the need to adjust its sourcing of batteries and critical raw materials that upcoming vehicles will increasingly depend on.
“I think this crisis will be one of the biggest gifts our industry will get, because of the shift in supply chain,” Farley said. “We’ll look back and say we kind of grew up as an industry with this new bill of material.”