The e-truck race has begun.
This week, traditional US automakers joined the battle for market share with pure EV players for electric pickup trucks, vans, and SUVs.
In a span of about three days, competition intensified as traditional truckmakers officially signalled plans to take on newcomers like Rivian and Tesla, which have been at the forefront of EV truck development. The kids are no longer in a league of their own, said Morningstar senior equity analyst Seth Goldstein.
“I think what we’re seeing is – given, especially in North America, the consumer desire for light trucks – meaning trucks and SUVs versus smaller cars – all the major US automakers are launching and developing their own EV trucks,” Goldstein said. “And they fight for that (truck) segment.
“And so when you have this fierce competition from the existing automakers that are converting factories and planning to mass-produce hundreds of thousands of trucks, that really creates a lot of pressure on new entrants.”
By new entrants Goldstein is referring to newer, pure EV truckmakers that have never produced vehicles with internal-combustion-engines. Ford’s F150 Lightning and GM’s Silverado EV are electrified versions of existing ICE powered models that have large customer bases.
Commercial customers sought
Detroit automakers are also seeking to build and sell fleets of EV pickups, SUVs, and vans for commercial customers.
Ford announced plans to nearly double production of its F15O Lightning pickup to 150,000 units and Chevrolet unveiled its EV Silverado. At the same time, Netherlands-based Stellantis reached a deal to supply an unspecified number of EV delivery vans to Amazon.
These efforts may have helped cause the stock of newcomer Rivian to tank. Rivian which started producing and selling EV pickup trucks in 2021.
Rivian’s stock price has plunged since Wednesday, briefly dropping below its November IPO price. The stock had doubled – and stayed above $100 most of the time – since going public.
“All of a sudden now you have a lot of increased competition from the traditional automakers for those business and consumer light-truck segments that Rivian is going after,” Goldstein said. “So this really puts increased pressure on Rivian to quickly ramp up their production.”
Rivian suffers ‘outsized drop’
Goldstein said an analyst downgrade, a down market, and investor concerns about pending US Federal Reserve interest-rate hikes also contributed to the outsized drop in Rivian’s stock price.
Amazon previously ordered 100,000 last-mile delivery vehicles from Rivian. But Goldstein noted that Amazon orders vehicles from a number of suppliers. (Amazon is also one of Rivian’s largest shareholders, and the online retailer shows no signs of wanting to divest).
The question now is whether pure EV truckmakers can ramp up production versus traditional automakers that have large established plants, dealerships, repair facilities, customer bases, and marketing mechanisms.
“In my opinion designing an EV is going to be the easier challenge of a new startup,” Goldstein said. “Being able to profitably mass-produce the EV, that’s going to be the most difficult part of any EV startup – going from design concept to profitable automaker.
“Time will tell. It’s still very early. It seems like Rivian has a good plan and is starting to execute on that. But, ultimately, we’ll see if they are successful in ramping up profitable mass production.”
Rivian started producing EV trucks in late-2021 but fell short of its year-end production goal of 1,200 trucks. Company executives cited challenges in ramping up two different production lines – the R1 and RS models – as well as the global chip shortage, other component shortages, and supply-chain pressures as challenges they are facing.
Tesla a late entrant
While Tesla has dominated the EV sedan market, the company can expect to face intense competition because its long-awaited Cybertruck pickup has not been produced on schedule, analysts say.
“Tesla has always been in this first-mover, market-leader position,” Goldstein said. “But due to the delay of the Cybertruck, Tesla will find itself launching a product when there will already be multiple EV trucks that all have adequate range for consumers to choose from. So Tesla will no longer enjoy that first-mover advantage… Tesla will be entering the Cybertruck market late to the game, and we’ll have to justify why it is better than any of the incumbents that can offer a strong (battery-charge driving) range and a comparable price.”
But Goldstein and Edmunds analyst Jessica Caldwell believe that Tesla can capitalise on its strong brand.
“I think the (truck) market is probably more wide open in terms of an EV segment,” said Caldwell in an interview with Capital.com. “But Tesla definitely has its fans and people who will just buy Tesla because it is a Tesla. So I think those people would be hard to shake.”
Due to Tesla’s brand equity, consumers are willing to pay higher prices for the company’s EVs, Goldstein said. So Tesla will not necessarily lose in the EV truck market. But the company will not be a clear winner in the segment, either.
“Just, they may never say overtake the Ford F series for No. 1 truck in the US,” Goldstein said.
Ford the likely winner
Ford, he added, is likely to win to win EV truck race.
“They seem to design a truck that has a lot of enthusiasm,” he said. “They already have the name-brand equity with the F series. That’s the No. 1 selling truck in the US, so offering the F150 Lightning, the EV version of the F series, makes a lot of sense and gives consumers the electric vehicle choice on the truck that already resonates with consumers.”
Caldwell said it’s “exciting” that the two biggest-selling pickup trucks in the US – the Ford F150 and Chevy Silverado, which will come in lower-price Work and high-end RST models – will be electrified within 12 to 18 months.
But, she noted, there is a significant difference in driving range between the Lightning and Silverado EV.
Ford and GM will have to provide greater detail on pricing on their various models, Caldwell said.
“I think the Lightning is going to be a strong vehicle,” she said. “It’s priced well and I think that is extremely important because EVs, especially the ones that have been introduced so far, have been quite expensive. And even if you look at the Rivian which is out right now, it’s well over $70, 000. So if Work can get a price point of somewhere in the neighbourhood of 40,000, that’s a significant win because I think that’s in the sweet spot of where most people want to transact at, versus something that’s $75,000-plus. That (higher pricing) really limits your market.”
Goldstein said higher-priced EV trucks will be like high-end sedans – luxury vehicles that sell for premium prices. Accordingly, Caldwell expects Rivian and Tesla, whose Cybertruck is also expected to carry a high price, to target buyers seeking to use trucks primarily for lifestyle purposes.
To succeed, Goldstein said, EV truckmakers will have to sell their vehicles at prices only slightly above ICE-powered trucks.
“So, when you include the cheaper electricity versus gasoline and when you include lower maintenance costs, they have to price it so that the purchase price plus fuel plus maintenance is the same for EV versus ICE,” he said. “That’s when you can get to the tipping point of selling more electric vehicles, as long as the range and the availability of chargers are there.”
Production needs to ramp up
To reach that tipping point, EV truckmakers will need to ramp up production capacity and produce vehicles on a mass scale for lower prices.
“If you can reduce your manufacturing unit costs for the truck itself, then you can reduce your battery costs,” he said. “Then you can pass along those cost savings to consumers in the form of a more affordable price point.”
Higher prices can deter overall EV adoption at a time when alternative vehicles are wanted to reduce greenhouse gases and offset climate change. But the development of EV trucks for commercial purposes will aid the transition from ICE vehicles, Goldstein and Caldwell said.
“I think it makes a lot of sense,” Goldstein said. “Currently, you look at the commercial fleet and it makes sense (to deploy) an electric truck because commercial fleets can generally be parked back at a warehouse or back at the company’s base, where there can be chargers installed, so you can charge at home or at the location overnight, meaning that range isn’t really an issue.
“You have none of these concerns of having to find a place to charge in the middle of the day or something like that. … They will save costs today and, given that they won’t really be used on (long) road trips, you really don’t have any of those functional concerns that can limit consumer (EV) adoption today.”
Goldstein believes that Ford is likely leading the EV truck race at this point due to the company’s historical ability to generate enthusiasm over design, propularity of the F150, which is the No. 1 selling truck in the US, and the opportunity for consumers to choose an EV version of a model that resonates with them.
He expects the Silverado EV and Tesla, and Rivian pickup trucks to rank among the top market leaders with Ford. While Rivian might be struggling now, he believes the company can rebound.
Analyst bullish on Rivian
Wedbush analyst Daniel Ives is extremely bullish about Rivian, contending the company is “in the catbird’s seat” in spite of lower-than-expected earnings results in December. Ives has raved about the company in recent research notes that he provided to Capital.com. The analyst believes that the company will “help pave the way for a new EV market on pickups and SUVs.”
The EV truck race field could become considerably more crowded. Pure EV maker Bollinger and traditional automaker Stellantis will begin to market pickups in coming years, and Morningstar analyst Richard Hilbert has counted 38 new pure EV startup companies, including 19 publicly traded firms, that have launched since 2020.
But Goldstein expects EV truck developers to hold their own as their vehicles start to reach cost and range parity with conventional trucks.
“As EVs take more share from internal combustion engines, I think there will be room for everyone (in the EV truck race) to grow,” Goldstein said.
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