It’s another big day in the EV (electric vehicle) and AV (autonomous vehicle) space.
Included in the deal is new funding, in which Microsoft will join GM, Honda (HMC) and other institutional investors in a combined new equity raise of more than $2 billion in Cruise, pushing its valuation to $30 billion.
Not to be outdone, electric truckmaker Rivian announced it has raised $2.65 billion from an investor group led by asset managers T. Rowe Price, Fidelity, and Amazon, through its Climate Pledge Fund. The New York Times and Bloomberg estimate Rivian’s new fundraise values the company at over $27 billion. Ford (F) is also a partner and investor in Rivian.
For the automakers, it makes more and more sense to partner with big technology companies. “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.
“As Cruise and GM's preferred cloud, we will apply the power of Azure to help them scale and make autonomous transportation mainstream,” Microsoft CEO Satya Nadella said, underscoring Ammann’s sentiments.
For companies like Rivian, that straddle the space between tech and autos, raising money and securing technology partners is a necessary precondition for success. As is competing with the big first mover in the space — Tesla (TSLA).
“The process of creating something like this is anything but simple,” Rivian CEO R.J. Scaringe said in an interview with the New York Times. “It’s a complex orchestra, several thousand parts coming from several hundred suppliers. It’s definitely far more complex than people think and far more complex than I thought it would be.”
An electric & autonomous arms race
Prior to today’s deal, Cruise was worth around $18 billion on paper based on its last fundraise. Many analysts on Wall Street and investors surmised GM’s Cruise division was worth a lot more, and today’s announcement is something of a validation. Before Tuesday’s deal, GM owned slightly more than 80% of Cruise, which is headquartered in San Francisco.
Indeed, GM shares soared to a new high last week, and another new high today, based on the company’s push to electrify its vehicles, services, and component infrastructure (batteries, drivetrains, etc.).
A big factor in a lot of these big stock movements, and even bigger valuations, is Tesla. “The massive ramp of Tesla stock and overall valuation is an undeniable factor here,” iSeeCars.com Executive Analyst Karl Brauer tells Yahoo Finance.
Rivian, which is private, has been a darling of the VC community and automotive press, as its highly anticipated electric pickup and SUV near production. The company has taken a more measured approach to fundraising and promoting its products, quietly seeking investment (and not through a public offering or uber-popular SPAC merger) and rolling out updates on its vehicles when there’s something concrete to show.
“We want to launch, demonstrate our capability and let our performance speak for itself before we can look into being public,” Scaringe said.
Though Cruise is a pure AV play and integrated into GM’s EV plans, Rivian also is working on AV tech as well (like Tesla).
The big question is whether upstarts like Rivian, and even established automakers like GM and Ford, can effectively compete with Tesla.
“I think there is a sense that if you're not Tesla, you have to make up for some lost time, and time is money,” Brauer says. “There’s a big investment coming to a lot of these Tesla competitors in order to catch up, to be a player in the space.”