Automotive giant Ford has made an $8.2bn gain from its investment into California electric truck maker and Tesla rival Rivian, following its November market debut.
Reporting its fourth quarter results in early February, the Detroit car maker has also announced it would reclassify a $900m non-cash gain from the investment as a special item. As a result of the investment, Ford’s EBIT is expected to soar from $3bn to between $10.5bn and $11.5bn.
According to Daniel Clarke, automotive analyst at GlobalData, Ford should use the funding to gain terrain over rivals such as Tesla.
“Ford has done tremendously well with their investment into Rivian. However, after the collaboration between Ford and Rivian was cancelled, this investment became virtually redundant,” he told City A.M.
“Once the post-IPO lock-up period is over and Ford can sell their shares, the company should look to use these profits to re-invest in itself. They are in a relatively strong position but are behind a cash-rich Tesla. This windfall could be used to supercharge the company’s recent $29bn investment into EVs and AVs, two key technologies which will be at the forefront of the automotive industry in the future.”
The owner of a 12 per cent stake, Ford is one of Rivian’s biggest backers alongside Amazon and it’s thought to be behind the company’s mind-blowing Wall Street debut.
With a $100bn market valuation, Rivian has had the strongest market debut since Facebook in 2012, becoming the third most valuable automotive maker after Tesla and Toyota, City A.M. reported. But after a few weeks of market frenzy, in the past few months Rivian’s shares have dropped 27 per cent, closing yesterday at $73.16.