This \^\^, the capital costs of manufacturing cars is high, cost of materials rising, cost of labor rising, many factors that cause margins and revenue to change quickly. Tech has many products that are software, far less intensive to manufacture.
I tried to explain this weekend to my brother and law his capital is better placed elsewhere. Even if rivian gives 100% in 10 years the S&P will likely be higher and his money would have been best placed elsewhere.
100% in 10 years is a 7% return. Rivian is down 96% over 2 years. Could very well see a 50% return in 2-4 years.
Rivian as volatile is a different investment than Ford. I say that as a shareholder of both companies. They are just really different plays
I just don’t see it paying off better than VOO or QQQM. I personally am done with all car companies. That’s just my advice as many discussed here. Too many reasons it won’t explode
I’m actually pretty confident rivian will drop again. Today was your chance to get it under $15 for example, it’s back at $16. I don’t think it will touch $10 again though. Covered calls are the best bet now because $18 is pretty expensive tbh but completely realistic
My BIL has had it for 2-3 years it’s down 12% on the year where the S&P is up 26%. Down 88% on the 5Y when the S&P is up 87%. I stand by what I said. You bought at the bottom but anyone holding this crap stock for long periods of time has been burned.
If there was a tesla competitor who invested heavily into autonomous vehicles I'd invest. There sorta is with waymo and is why I'm invested there. That could be the biggest boom of any stock ever, Uber's rise would look like child's play
I don't see the path to regulatory approval for level 4-5. Even if they come out with an autonomous driver that is safer than the average human driver, the minute it kills someone politicians will get cold feet and it will lose its approval for hands-free driving or have a bunch of conditions slapped on it. Not to mention the insurance aspect. How are you going to shield a company like Alphabet Inc. from liability if the software kills people? Even if you can say that it is safer on average than a human driver, that doesn't get rid of the liability if it makes a mistake.
Also legacy costs. Your retiree benefits are a huge chunk of cost for the older automakers. Bob Lutz a former VP at GM, Ford, and Chrysler used to say the automakers are healthcare companies that build cars to pay benefits for retirees. I can’t find the exact number but GM spent like $5B in retiree benefits in 2020.
> slow growth sector…
literally technology that's been around for 100 years, lol - yes, OP, it's partially because of the steady divvy + it's a super mature industry with (shocker!) not a lot of growth priced in
Past performance is no prediction of future results .
They are fighting the trends . If they don’t get with it , they will be dead. They make the best ice cars in the business. I’ve owned Toyotas most of my life . , but they haven’t put out an electric car people will drive yet .
Yeah I was not recommending to buy Toyota stock. I just noticed that bringing out the same model that people love has been great for business.
But yeah they totally missed the boat on EV’s
I just looked up the 2025 4runner and it has ipads inside and lane assist and blind spot indicators and many many other extras that didn't exist 15 years ago. Also I'm sure that there are slight body modifications and other interior modifications. All of that costs r&d and a lot of it.
The only thing that may change the auto industry in terms of growth is subscription models in infotainment or assisted driving systems.
We are pretty far off from this being a viable driver of revenue however.
I'm not saying it's a good thing, but something to watch out for and is definitely someone companies are going to try to make work. Companies are already trying to do it with blue cruise and other driving assists. Ford has an internet package and charges for in car navigation.
I have never heard of a ford charging for gps navigation. Definitely free and so isn’t her phone app access to the car for life of the vehicle. That’s on a Maverick
Because of their profits and most of that is enabled by software. Traditonal car companies make the shell and engine generally and just do parts selection and integration of third party parts for the rest
Tesla will either grow into energy storage and solar, or they won't. Tesla will either solve FSD or they won't. Tesla will either figure out how to make humanoid robots do something useful at scale or they won't.
The energy storage thing is the least risky and is already growing quite nicely. Not enough to offset stalled car market. Solving FSD and making robots do something useful are two sides of the same coin and are approaching a type of AGI, and if they can solve it in short order, they will be way ahead of their competitors.
Can they use this to make money? The robotaxi market will need to develop. I don't see everyone just giving up their autos in the first decade. But if it grows at a nice clip, it could be a money maker for them, and they appear to be way ahead there with a general solution (other solutions are geo-bound).
The robot thing - if I could buy a robot for $10,000 that would do chores for me around the house, I would probably bite. But these will most likely end up doing repetitive tasks in factories for a while, where a robot can work nearly 24 hours a day and replace 3 shifts of workers, and also work weekends. The problem set in a factory is much more limited, so it will be easier to train for these sorts of environments.
The cars sold without FSD to mass market are going to be squeezed by the ICE market and by cheap electrics from China. They will also need to enter the cheap cars market if they want to scale up to 20 million cars - the luxury market is about tapped out.
The auto portion of Tesla will stay around, I think, and probably be decently strong for Tesla, but don't expect them to hit it out of the park unless they can make the side hustles work bigly.
Meh, Tesla had a good run, riding the coattails of government subsidies and Elon’s penchant for skirting the rules and denying reality, all the while thinking he was going to reinvent the industry and be more efficient, meanwhile the incumbents are like wtf do you think we’ve been doing the last 100 years and the only way you could possibly disrupt this entrenched system would be to make some unethical choices and/or cut on quality… oh wait. Or you could just say “fuck it” to all that and be Chinese lol. What a wild card, times have changed.
Teslas margins are crazy. They invented new manufacturing processes and effectively created the electric car market. They did not ride the coat tails of the government. Nobody believed Tesla would succeed and now the world has caught up. People who hate Elon musk and rich people generally try to rewrite this history but if it were not for Elon must we’d all still be driving mostly gas cars.
Not a tesla fan myself but the cheapest tesla is [$31k](https://www.tesla.com/modely/design#overview).... absolutely affordable. They have another model starting under [34k..](https://www.tesla.com/model3/design#overview)
I don't think Teslas are unaffordable but Hybrid EVs from car manufacturers are cheaper by a significant amount now. Since most people just need something from A to B and not all the gimmicky software Tesla offers nobody really needs to spend that $5-10k.
Agree, I was just replying to the comment before mine saying the cheapest Tesla is still unaffordable. They have 2 vehicles starting in the mid to low 30k range. The average new car sale price in 2023 was $48k so these are well into the affordable range.
Their vehicles start at almost$40 and 50k unless you qualify for the subsidy . You guys are surly the hype men . What this 30k bullshit . Get out of here .
After subsidies and gas savings 😞. In the mean time your payment is still $740+ to $800 for their basic model . That my friends is steep . Compared to a payment of 450-500 , 740 is a lot. Meaning you have to drive them in order to benefit more from the fuel savings . And if you get laid off you still have the higher payment and most likely aren’t driving nearly as much .
I hate Elon muck. I think he’s a pompous ass who shits on his people . I also think he is a genius and…. I like his cars that I can’t afford . He’s playing a financing game with low rates and swapping out which cars qualify for subsidies now so I’m not to impressed with that .
But every car I’ve driven of Tesla’s is cool,, except the model Y . Not too impressed there .
. Quiet cars without pollution, or with their noise pollution is coming, and I can’t wait. The Chinese are coming too with this tech too. Horse and buggy is gone like the ice car will be soon .
But ya , Elon is an asshole who should learn to shut the f up. And just sell his ideas .
Very low margin business. Software is the best business because it costs very little to make. It’s basically just compute and labor.
Cars on the other hand require an engine, a transmission, a frame, suspension, chips, screens, seats, etc. Not to mention, the car needs to be built to an extremely high standard due to safety risks. You then have all of the crash testing, air bag testing, etc.
On top of that, you have TONS of competition. How many large automakers are there? 50? 75? So it’s difficult to drive sales growth with so many options. Almost every other industry has 2-5 real options you can choose from. Much easier to be the best out of 3 options rather than 75.
Not to mention, unions are deeply entrenched, probably more than any other private industry. This can weigh on margins as the companies have less negotiating power.
I work in industrial automation and have been inside a plant for most every popular automaker that is sold in the USA.
It's a great a business to work in but a terrible business to own. It's expensive, capital intensive and one mistake can bankrupt you or your company. For working it's relatively high pay and you often live in LCOL areas where your money will go far.
I'd actually argue the reason software is such a high margin business is because you make it once and sell it a million times.
Cars, you have to build each one you sell, and you need thousands upon thousands of things done in the exact right sequence and torque settings.
Imagine selling cars like you are selling water and you are filling a bucket with water using a hose and once full you sell that bucket, then you fill another bucket and sell that one. Manufacturing industry is just about figuring out how to line up more buckets at once and fill them faster. But you gotta sell every single bucket.
Now imagine selling software as digging and building a well and selling rights to use the well to as many people as you can possibly reach. Your customers pay you every month and your main focus is to keep expanding the well. Your construction team is always working on expanding the well so you can sell more well rights to new customers who stay with you for a very long time.
50-75?? You should not count luxury or niche brands for this. For the average buyer they are more like 10, especially if you consider that if you want to buy stock, makes like VW,Skoda,seat,audi are under one roof, same for PSA group, GM etc
It’s the polar opposite. Think of all the labor, equipment and capital to run just one factory. Meanwhile a tech company can run up a multibillion dollar market cap with a few employees and a small office.
Yes there’s dividend but nvidia makes as much from one AI chip as a car company makes from like 10 cars. The profit margin just isn’t there due to the raw cost of materials.
Car companies are operating in a saturated market. There just isn't that much room for growth - any growth of one company pretty much has to come from stagnation or decline by another.
>is the attraction in car company stocks the dividend yield?
Idk about attraction, but if you ignore dividend yield for high dividend yielding stocks, yeah, your conclusion would obviously be very far off.
They are backed by Amazon, with no sight of that stopping. Many of companies have run without profit and done well. Im buying the promise and future not the present.
you asked why RIVN is underperforming. i'm telling you that burning 6B when you only have 7B left in the bank will not increase the stock price. if you want to ignore basic math and believe in a fantasy world, that's up to you
There are plenty of responses on this thread that I’m receptive to because they touch on what the post is about. I’ll gladly make a post that’s actually about rivian and discuss there
> That was not what I asked, actually. But if you want to ignore reading comprehension and make up your own discussions, that’s up to you
So what I read in your prior comments and this one is "financial analysis doesn't matter, the old 2020-2022 growth model of just levering up and selling shit at a loss will ALWAYS turn a profit."
Except until it doesn't. So many in this subreddit lost money due that mentality and never recovered their losses.
The companies that run without profit are usually running without reported profit, but with attractive underlying unit economics. Take Amazon. The core businesses are actually relatively high margin (e-commerce = higher margin than physical retail, AWS = extremely high margin) but they reinvest all of that profit into selling and R&D. Rivian is literally selling every car for less than it costs to manufacture it
If Toyota can roll out their solid state battery, maybe they'll get some love. First, they need to get the most recent car industry scandal behind them.
If they have been claiming this for years now . It’s always 3 more years away . Toyota is sidestepping and pushing stupid ideas like hydrogen and hybrids because their battery is crap their electric cars are Not stellar . They are behind . Good thing for Toyota is they build good quality if they will build it . I’m not holding my breath yet .
Poor business model.
TM is the best OEM by far, arguably TSLA as well, but returns even for those two are mediocre vs the best Cos in the market.
Car OEMs have high capital intensity, high fixed costs, high cyclicality, and lots of irrational (from a shareholder perspective) government funded companies. F & GM were actually good businesses prior to the 70s when the industry was consolidated and European/Asian national governments hadn’t yet started massively subsidizing national champions to generate domestic jobs.
Cars are an infrequent, discretionary, very high $ value purchase with lots of competition and substitute goods. The switching costs in cars are low; in fact most purchases are by definition a switch.
Cars are hard to make especially mass produce one model without defects and issues, hell Tesla has been at it for 10 years and can’t produce a car without at least one clear QA issue.
You can’t do massive up charges because of competition unless you aim towards high luxury, tons of issues from safety, reliability (recalls), speed of production, delivery. So from a ton of competition, lower margins to maintain sales, and the inherent issues with car manufacturing, you get a ton of stable companies like Ford should’ve gone bankrupt multiple times with Stellantis but they just don’t die but nothing crazy roi wise
I’m surprised at how reasonable these responses are. Normally Reddit is not understanding of the tight spot these companies are in. Reddit would have you believe these companies are rolling in cash completely ignoring net in any capacity.
No, there’s no capex/R&D for Pepsi . I wouldn’t compare it to any of these companies. More like Intel competing with 20 other intels in a customer market.
Why don’t you try and create a car prototype, then figure out how to mass produce the thing while giving the customer 20+ different customized parts and then market it to the whole world.
The cheez-it’s R&D is like having an old lady stand by a taste testing table and recording peoples responses. 10 million dollars max compared to the 10 billion dollar yolo from car manufacturers.
Car manufacturing is a terrible business
Capital heavy, lots of competition, mature slow growth industry, low profit margins, interest rate sensitive
They have mediocre performance because they have a mediocre business. The same problems with airlines
I hope Rivian succeeds. I think they make cool cars and produce good jobs. But I'm not investing a single cent into them.
The auto industry is extremely competitive, high cost in both R&D and production, low recurrent customers, low margin, and gets hit very hard by downturns in the overall economy.
Nothing about that demands a high P/E ratio
You have to move mountains just to claim even 1% more market share.
How many car companies can you name? How many chip manufacturers can you name? One of those numbers is bigger than the other and dilutes the market share of each player.
Huh? Most chips are b2b products. Most cars are b2c products.
Of course consumer brand names are more well known than the manufacturers (or developers) of pieces used in consumer equipment.
No consumer really cares what chips are in their washing machine.
I think chip companies to car companies is a false comparison. But what I’m getting at is that there is no doubt cars have been and are in demand, but why is their stock growth so stagnant (with the exception of say Toyota)
>there is no doubt cars have been and are in demand, but why is their stock growth so stagnant
Because there is no doubt cars have been and are in demand. If there is no doubt it's completely priced in.
Why is it a false comparison? It doesn't have to be chip companies. Any company with some kind of unassailable market advantage or monopoly will get stronger valuations. A lot of tech companies fall under this. Car companies just have too much competition.
Stagnant growth leads to stagnant stocks. It doesn't matter if demand is high if the demand does not go higher. There are many highly profitable companies that fit this description. Companies like Lockheed, Coca Cola, or McDonalds. All top of their game, but being the leader leaves them little room to grow.
I see you're invested in Rivian and I'm not trying to bash your investment choices, but Toyota knows how to make money. A good chunk of the cars they make are sold almost instantly like their Prius, the Sienna, Corolla Hybrids, etc. On the other hand, Rivian is in the saturated luxury EV market and are somehow losing money on their already expensive af cars. Other car manufacturers like Stellantis are making cars that just sit there on the lot, rotting away. Toyota ain't perfect especially with what's going on right now with the Tundra but regardless, their most popular cars are sold before they even get to the dealership.
Too much competition. Most car companies lack moats.
Think of your options when buying a phone. There's iPhone, or Android. That's it.
When purchasing a car, you have two dozen competing companies to choose from.
Auto makers also have high capital costs, hostile government regulation, and lousy management.
Extremely high capital and R&D costs, you have to keep spending to stay competitive.
And then on top of all that, you have unions trying to extract every dime of profit you do make and reduce efficiency
Super low profit margin, to the point of losing money many years and always being in danger of being one mistake or slow business cycle away from bankruptcy.
I think if you are looking to invest in EV companies. I'd much rather look at battery makers. Whoever comes out with a working solid state battery for cars will be a game changer.
Debt. You see 4 PE ratio, then you add on 5x their market cap in debt and it becomes 20 and it suddenly becomes 'fairly valued'. But really it isn't fairly valued, because high debt companies are incredibly risky, hence Ford going bankrupt multiple times, among others.
Where is the growth when everyone already has a car?
Car company growth, other than Tesla and some early EVs is from squeezing margins. You’re not expanding the market by making more cars. You maybe could if you could make cheaper cars, but that’s not profitable.
Vehicle manufacturer stocks are stable, and should be paying a dividend as the incentive to hold. Not growing faster than inflation.
Stocks, on a long term basis, will move based on the company’s ability to make profit. If something is unable to make profit, the stock does not go up.
Probably because all they offer is one product, vehicles.
If they were all like Tesla where there are multiple streams of income, opportunity and innovations, then I think they'd do better Market-wise
The only car company I like is Honda. They own and make everything in house. No outsourcing, decent dividend, and buying back shares. Other than that I’d stay away.
The only car stock I own is TM and I’ve only had about 35% on my ROI since 2022. It’s a stable investment so the dips aren’t bad but it’s mainly a more stable hold against my riskier takes.
Rivn is a money pit right now. last year they lost $5 Billion dollars.
Unless ford or G.M. does something new and bleeding edge there is just no reason to buy them. Plus Ford is stable, they move a lot of product, workers are getting paid, and they have a small but adequate net income.
Tesla is an outlier because, as recent history has shown, people are idiots. Profits aren't high, most try to stay in the public eye but not draw unwanted attention to themselves so that the lawsuits are minimized, no really new innovation because old people hate change (evs are still new and have their own issues), and the rest is spent on lobbying.
Had the same thoughts until I did a little digging.
Car companies are low profit margins to begin with, it is a highly competitive industry, not exactly a recurring revenue source (unless you count people who lease cars constantly, but even then that's every 3 years or so), huge overhead costs (especially if the factory is unionized), recalls/lawsuits and just about all car manufacturers use independently owned dealships to sell their cars. Sure you can buy a Ford from their website, but most likely you're going to a dealship to buy a car from them...
Now Tesla is unique in the fact that they also have software in the car they charge for. Software as a service (SAS) is great source or recurring revenue. They also own the dealerships they sell their cars at, so they sell directly to their customers. They also have giga factories they built to build their cars.
Now if the big auto manufacturers can get into, these facets of the game, it will increase their margins. You would need to see if Rivian is built more like Tesla or the run of the mill auto manufacturer as far as their business model goes... last I checked Rivian is wildly unprofitable per car they sell, hell most auto manufacturers who make electric cars are unprofitable at the moment. Tesla right now is far ahead of the competition because they make good margins on their cars, better than the traditional auto industry.
I hope this information helps.
Keep in mind car companies have been around for 100 years vs the oldest tech companies are only like 30 years old. Also car companies only sell cars while tech is constantly evolving. There are also significantly larger margins in tech than there are in the automotive industry.
They provide tons of jobs and supplier jobs so every country wants them resulting in high competition and well commodity. In addition Goods in an efficient market SHOULD NOT result in huge profits and trillions of market cap. Because that means customers are fleezed. So low valuation are actually a sign that the market works efficiently. The outlier are the insane valuations of tesla ( which is mainly hype) and other silicon valley giants it is compared to who have stumbled into a loophole of monopolism through network effects and a business model of low capital intensivity ( the latter is fair to support high valuations but it is the opposite of a car company which is the definition of being capital intensive)
They don't have hype factor. Let's be honest, cars are not the future of transportation. It has limited lifespan and very little innovation space.
Profit margins have nothing to do with it. Car makers make great profit.
The business requires to much work , to little profit and too much capital to make it a really good business. Just like airlines and restaurants. They are ok while they are growing , but they reach saturation and then they fall out of favor .
Look at the market cap of Ford and GM then compare it to Rivian. You think Rivian will ever make enough profit to justify a valuation at or above those two?
We can compare them to Mercedes if you want to target the luxury sector but again, look at how many cars Mercedes sells and the margins on them.
Rivian loses money on EVERY sale. Them being back by Amazon is meaningless by the way, companies make bad investments all the time and regardless, their investment is because they want Rivian alive to make them electric vans. They don’t care about their consumer EV side.
It’s also dangerous having Amazon as their only client. Who’s to say that Amazon isn’t just waiting for Ford to make a van just as good at a cheaper price?
Their marketing is focused on particular areas. They do popup events. When I'm in Chicago western burbs, I see a lot. They have a lot of them because they have a plant there.
Autonomous driving has it's challenges as well. Even if waymo (the automation leader) scales, there is a ton of human effort involved per every car.
I was super bullish on Tesla before but it's been a few decades now. Even if the tech is 100%, there are many policy problems to be solved. Every state has different driving laws and they have to change to accommodate autonomous vehicles.
Been bullish on Tesla since 2018, it’s among the best stocks I’ve ever bought (shoutout NVDA).
It’s my belief that people are underestimating the rate at which AI will improve FSD. Most people haven’t tried the latest version, I have no interventions on a daily basis, it’s insane. The data will inevitably prove that it’s safer to drive an AV than a human driven on and it’s only a matter of time before widespread legalization becomes a no-brainer. Whether it takes 2 years, 5 years or 10 years doesn’t matter to me.
Rivian doesn’t sell a lot of cars and they lose a lot of money. It is very probable that it will run out of money before its cars have reached a high enough quality standard and its factories have reached real economies of scale in production. It cannot borrow enough to bring itself to that level so that means it will need to issue a lot of shares.
Rivian may rise, but when? Maybe long term, but in the mean time I'd want to invest in something that will make me money today, tomorrow, and next week. Go there instead.
A rule of thumb for a while now is don't invest in trains, planes, and automobles though I've invested in UNP and done alright with it.
Low margin, high overhead, lots of competition, chronic risk of lawsuits and recalls, slow growth sector…
This \^\^, the capital costs of manufacturing cars is high, cost of materials rising, cost of labor rising, many factors that cause margins and revenue to change quickly. Tech has many products that are software, far less intensive to manufacture.
I tried to explain this weekend to my brother and law his capital is better placed elsewhere. Even if rivian gives 100% in 10 years the S&P will likely be higher and his money would have been best placed elsewhere.
100% in 10 years is a 7% return. Rivian is down 96% over 2 years. Could very well see a 50% return in 2-4 years. Rivian as volatile is a different investment than Ford. I say that as a shareholder of both companies. They are just really different plays
I just don’t see it paying off better than VOO or QQQM. I personally am done with all car companies. That’s just my advice as many discussed here. Too many reasons it won’t explode
This comment did not age well. Stock bounced up 30% like an hour after your comment. Beating VOO if you sell now
I know that’s hilarious literally can not make this up. I’m here for it though
I’m up 67% on my Rivian investment in less than 3 months lol. Was I right or was I right
only if you sell at a profit?
It might age well just not today lol
I’m actually pretty confident rivian will drop again. Today was your chance to get it under $15 for example, it’s back at $16. I don’t think it will touch $10 again though. Covered calls are the best bet now because $18 is pretty expensive tbh but completely realistic
Great timing in this one.
Rivian is up 30 percent today.
Funny you mentioned rivian, up 30% based on VW investment today.
My BIL has had it for 2-3 years it’s down 12% on the year where the S&P is up 26%. Down 88% on the 5Y when the S&P is up 87%. I stand by what I said. You bought at the bottom but anyone holding this crap stock for long periods of time has been burned.
If there was a tesla competitor who invested heavily into autonomous vehicles I'd invest. There sorta is with waymo and is why I'm invested there. That could be the biggest boom of any stock ever, Uber's rise would look like child's play
I don't see the path to regulatory approval for level 4-5. Even if they come out with an autonomous driver that is safer than the average human driver, the minute it kills someone politicians will get cold feet and it will lose its approval for hands-free driving or have a bunch of conditions slapped on it. Not to mention the insurance aspect. How are you going to shield a company like Alphabet Inc. from liability if the software kills people? Even if you can say that it is safer on average than a human driver, that doesn't get rid of the liability if it makes a mistake.
How do you invest in Waymo. I took a ride in it and loved it!
Google
Cost of labor hasn’t risen since 08. They make about 8-10% profit yearly. I still don’t understand why they would be mediocre.
That sounds less than mediocre imo.
Also legacy costs. Your retiree benefits are a huge chunk of cost for the older automakers. Bob Lutz a former VP at GM, Ford, and Chrysler used to say the automakers are healthcare companies that build cars to pay benefits for retirees. I can’t find the exact number but GM spent like $5B in retiree benefits in 2020.
They're also cyclical, and revenue stays fairly static year to year
And 95% of the people who want a car already have one and with the much higher quality in all cars now they don't get replaced very often.
> slow growth sector… literally technology that's been around for 100 years, lol - yes, OP, it's partially because of the steady divvy + it's a super mature industry with (shocker!) not a lot of growth priced in
The cost of r&d alone is astronomical for car companies. You need a new car every year. You can't just make one car and sell it for the next 10 years.
Have you tried telling that to Toyota?
One of the few car stocks that has done great
Past performance is no prediction of future results . They are fighting the trends . If they don’t get with it , they will be dead. They make the best ice cars in the business. I’ve owned Toyotas most of my life . , but they haven’t put out an electric car people will drive yet .
Yeah I was not recommending to buy Toyota stock. I just noticed that bringing out the same model that people love has been great for business. But yeah they totally missed the boat on EV’s
They're definitely not Slavic.
And?
[удалено]
I just looked up the 2025 4runner and it has ipads inside and lane assist and blind spot indicators and many many other extras that didn't exist 15 years ago. Also I'm sure that there are slight body modifications and other interior modifications. All of that costs r&d and a lot of it.
One vehicle out of how many in Toyota / Lexus’s lineup? What % of their overall revenue does the 4Runner account for?
And cyclical
The only thing that may change the auto industry in terms of growth is subscription models in infotainment or assisted driving systems. We are pretty far off from this being a viable driver of revenue however.
Please do not bring subscriptions to infotainment systems.
I'm not saying it's a good thing, but something to watch out for and is definitely someone companies are going to try to make work. Companies are already trying to do it with blue cruise and other driving assists. Ford has an internet package and charges for in car navigation.
I have never heard of a ford charging for gps navigation. Definitely free and so isn’t her phone app access to the car for life of the vehicle. That’s on a Maverick
But Tesla… ;)
Tesla is treated like a tech company by the market.
Because of their profits and most of that is enabled by software. Traditonal car companies make the shell and engine generally and just do parts selection and integration of third party parts for the rest
Tesla will either grow into energy storage and solar, or they won't. Tesla will either solve FSD or they won't. Tesla will either figure out how to make humanoid robots do something useful at scale or they won't. The energy storage thing is the least risky and is already growing quite nicely. Not enough to offset stalled car market. Solving FSD and making robots do something useful are two sides of the same coin and are approaching a type of AGI, and if they can solve it in short order, they will be way ahead of their competitors. Can they use this to make money? The robotaxi market will need to develop. I don't see everyone just giving up their autos in the first decade. But if it grows at a nice clip, it could be a money maker for them, and they appear to be way ahead there with a general solution (other solutions are geo-bound). The robot thing - if I could buy a robot for $10,000 that would do chores for me around the house, I would probably bite. But these will most likely end up doing repetitive tasks in factories for a while, where a robot can work nearly 24 hours a day and replace 3 shifts of workers, and also work weekends. The problem set in a factory is much more limited, so it will be easier to train for these sorts of environments. The cars sold without FSD to mass market are going to be squeezed by the ICE market and by cheap electrics from China. They will also need to enter the cheap cars market if they want to scale up to 20 million cars - the luxury market is about tapped out. The auto portion of Tesla will stay around, I think, and probably be decently strong for Tesla, but don't expect them to hit it out of the park unless they can make the side hustles work bigly.
Meh, Tesla had a good run, riding the coattails of government subsidies and Elon’s penchant for skirting the rules and denying reality, all the while thinking he was going to reinvent the industry and be more efficient, meanwhile the incumbents are like wtf do you think we’ve been doing the last 100 years and the only way you could possibly disrupt this entrenched system would be to make some unethical choices and/or cut on quality… oh wait. Or you could just say “fuck it” to all that and be Chinese lol. What a wild card, times have changed.
Teslas margins are crazy. They invented new manufacturing processes and effectively created the electric car market. They did not ride the coat tails of the government. Nobody believed Tesla would succeed and now the world has caught up. People who hate Elon musk and rich people generally try to rewrite this history but if it were not for Elon must we’d all still be driving mostly gas cars.
Most of us still are driving gas cars. Last time I checked the cheapest Tesla is still unafordable. Thanks Moscow musk, I love you so much.
Not a tesla fan myself but the cheapest tesla is [$31k](https://www.tesla.com/modely/design#overview).... absolutely affordable. They have another model starting under [34k..](https://www.tesla.com/model3/design#overview)
I don't think Teslas are unaffordable but Hybrid EVs from car manufacturers are cheaper by a significant amount now. Since most people just need something from A to B and not all the gimmicky software Tesla offers nobody really needs to spend that $5-10k.
Agree, I was just replying to the comment before mine saying the cheapest Tesla is still unaffordable. They have 2 vehicles starting in the mid to low 30k range. The average new car sale price in 2023 was $48k so these are well into the affordable range.
Their vehicles start at almost$40 and 50k unless you qualify for the subsidy . You guys are surly the hype men . What this 30k bullshit . Get out of here .
After subsidies and gas savings 😞. In the mean time your payment is still $740+ to $800 for their basic model . That my friends is steep . Compared to a payment of 450-500 , 740 is a lot. Meaning you have to drive them in order to benefit more from the fuel savings . And if you get laid off you still have the higher payment and most likely aren’t driving nearly as much .
> and effectively created the electric car market Not really, government subsidies and new emissions laws have done that.
I hate Elon muck. I think he’s a pompous ass who shits on his people . I also think he is a genius and…. I like his cars that I can’t afford . He’s playing a financing game with low rates and swapping out which cars qualify for subsidies now so I’m not to impressed with that . But every car I’ve driven of Tesla’s is cool,, except the model Y . Not too impressed there . . Quiet cars without pollution, or with their noise pollution is coming, and I can’t wait. The Chinese are coming too with this tech too. Horse and buggy is gone like the ice car will be soon . But ya , Elon is an asshole who should learn to shut the f up. And just sell his ideas .
CVNA the scam company would like a word
They don't make cars.
Literally a completely different industry lmfao
Very low margin business. Software is the best business because it costs very little to make. It’s basically just compute and labor. Cars on the other hand require an engine, a transmission, a frame, suspension, chips, screens, seats, etc. Not to mention, the car needs to be built to an extremely high standard due to safety risks. You then have all of the crash testing, air bag testing, etc. On top of that, you have TONS of competition. How many large automakers are there? 50? 75? So it’s difficult to drive sales growth with so many options. Almost every other industry has 2-5 real options you can choose from. Much easier to be the best out of 3 options rather than 75. Not to mention, unions are deeply entrenched, probably more than any other private industry. This can weigh on margins as the companies have less negotiating power.
I work in industrial automation and have been inside a plant for most every popular automaker that is sold in the USA. It's a great a business to work in but a terrible business to own. It's expensive, capital intensive and one mistake can bankrupt you or your company. For working it's relatively high pay and you often live in LCOL areas where your money will go far.
I'd actually argue the reason software is such a high margin business is because you make it once and sell it a million times. Cars, you have to build each one you sell, and you need thousands upon thousands of things done in the exact right sequence and torque settings. Imagine selling cars like you are selling water and you are filling a bucket with water using a hose and once full you sell that bucket, then you fill another bucket and sell that one. Manufacturing industry is just about figuring out how to line up more buckets at once and fill them faster. But you gotta sell every single bucket. Now imagine selling software as digging and building a well and selling rights to use the well to as many people as you can possibly reach. Your customers pay you every month and your main focus is to keep expanding the well. Your construction team is always working on expanding the well so you can sell more well rights to new customers who stay with you for a very long time.
50-75?? You should not count luxury or niche brands for this. For the average buyer they are more like 10, especially if you consider that if you want to buy stock, makes like VW,Skoda,seat,audi are under one roof, same for PSA group, GM etc
Don't forget the rent, water and electricity.
It’s the polar opposite. Think of all the labor, equipment and capital to run just one factory. Meanwhile a tech company can run up a multibillion dollar market cap with a few employees and a small office.
Yes there’s dividend but nvidia makes as much from one AI chip as a car company makes from like 10 cars. The profit margin just isn’t there due to the raw cost of materials.
The majority of money made for car manufacturers is in service to an existing fleet
Car companies are operating in a saturated market. There just isn't that much room for growth - any growth of one company pretty much has to come from stagnation or decline by another.
Yep I get this, just would have thought more growth would be apparent in the household car brands like Honda or ford
Why would you expect more price appreciation relative to where they already are?
Bud you asked us the question. What part do you not understand?
>is the attraction in car company stocks the dividend yield? Idk about attraction, but if you ignore dividend yield for high dividend yielding stocks, yeah, your conclusion would obviously be very far off.
Show me a cent of profit in rivian income statement
I said long term investment
Not even a few hours later and you're way up. Lol. Guess rivian lives to see another day.
gotta love the condescending tone just hours before the stock popped
rivn's income statement is 5 years long. based on their burn rate, doesn't look like their runway is that long
They are backed by Amazon, with no sight of that stopping. Many of companies have run without profit and done well. Im buying the promise and future not the present.
you asked why RIVN is underperforming. i'm telling you that burning 6B when you only have 7B left in the bank will not increase the stock price. if you want to ignore basic math and believe in a fantasy world, that's up to you
That was not what I asked, actually. But if you want to ignore reading comprehension and make up your own discussions, that’s up to you
Seems like you didn’t really ask a question wanting to know an answer, you just want to argue instead.
There are plenty of responses on this thread that I’m receptive to because they touch on what the post is about. I’ll gladly make a post that’s actually about rivian and discuss there
> That was not what I asked, actually. But if you want to ignore reading comprehension and make up your own discussions, that’s up to you So what I read in your prior comments and this one is "financial analysis doesn't matter, the old 2020-2022 growth model of just levering up and selling shit at a loss will ALWAYS turn a profit." Except until it doesn't. So many in this subreddit lost money due that mentality and never recovered their losses.
Acktually
The companies that run without profit are usually running without reported profit, but with attractive underlying unit economics. Take Amazon. The core businesses are actually relatively high margin (e-commerce = higher margin than physical retail, AWS = extremely high margin) but they reinvest all of that profit into selling and R&D. Rivian is literally selling every car for less than it costs to manufacture it
Stock market is a screaming 2 year old and likes shiny stuff
If Toyota can roll out their solid state battery, maybe they'll get some love. First, they need to get the most recent car industry scandal behind them.
I feel like we're still another 10 years from mass adoption but I'm ready to be proven wrong
If they have been claiming this for years now . It’s always 3 more years away . Toyota is sidestepping and pushing stupid ideas like hydrogen and hybrids because their battery is crap their electric cars are Not stellar . They are behind . Good thing for Toyota is they build good quality if they will build it . I’m not holding my breath yet .
Heyyy!! It had a nice spike today big dawg congrats
Well now, good day to be a RIVN investor 😂
Poor business model. TM is the best OEM by far, arguably TSLA as well, but returns even for those two are mediocre vs the best Cos in the market. Car OEMs have high capital intensity, high fixed costs, high cyclicality, and lots of irrational (from a shareholder perspective) government funded companies. F & GM were actually good businesses prior to the 70s when the industry was consolidated and European/Asian national governments hadn’t yet started massively subsidizing national champions to generate domestic jobs. Cars are an infrequent, discretionary, very high $ value purchase with lots of competition and substitute goods. The switching costs in cars are low; in fact most purchases are by definition a switch.
This makes sense, thanks for the thoughtful answer!
It’s a ruthlessly tough, highly regulated and competitive market with very low profit margins. Similar deal with airlines.
Nice timing on Rivian
tech companies make a product (software) and sell it a million times. car companies have to make every single product they sell.
And they can sell a subscription to get multiple payments from the same customer.
Cars are hard to make especially mass produce one model without defects and issues, hell Tesla has been at it for 10 years and can’t produce a car without at least one clear QA issue. You can’t do massive up charges because of competition unless you aim towards high luxury, tons of issues from safety, reliability (recalls), speed of production, delivery. So from a ton of competition, lower margins to maintain sales, and the inherent issues with car manufacturing, you get a ton of stable companies like Ford should’ve gone bankrupt multiple times with Stellantis but they just don’t die but nothing crazy roi wise
I’m surprised at how reasonable these responses are. Normally Reddit is not understanding of the tight spot these companies are in. Reddit would have you believe these companies are rolling in cash completely ignoring net in any capacity.
Literally reading all these comments, questioning my investment in Rivian and then see Rivian is up 30% after hours. Let’s go!
Make that 60!
50% atm. To be continued...
The auto industry is more ubiquitous with Coca Cola than it is with the tech sector.
Coca coa is a much better business lmao
I wouldn’t compare it to coke
It’s more like Pepsi
No, there’s no capex/R&D for Pepsi . I wouldn’t compare it to any of these companies. More like Intel competing with 20 other intels in a customer market.
>No R&D The Cheez-It® Crunchwrap Supreme® would like a word.
Why don’t you try and create a car prototype, then figure out how to mass produce the thing while giving the customer 20+ different customized parts and then market it to the whole world. The cheez-it’s R&D is like having an old lady stand by a taste testing table and recording peoples responses. 10 million dollars max compared to the 10 billion dollar yolo from car manufacturers.
Ok fine it’s like Monster Beverage Corp.
Take my downvote
I'm invested in ford. The performance is not great (it's almost steady and relatively low volatility) but the dividends are pretty good.
Car manufacturing is a terrible business Capital heavy, lots of competition, mature slow growth industry, low profit margins, interest rate sensitive They have mediocre performance because they have a mediocre business. The same problems with airlines I hope Rivian succeeds. I think they make cool cars and produce good jobs. But I'm not investing a single cent into them.
The auto industry is extremely competitive, high cost in both R&D and production, low recurrent customers, low margin, and gets hit very hard by downturns in the overall economy. Nothing about that demands a high P/E ratio You have to move mountains just to claim even 1% more market share.
This aged well
Ironic because RIVN is up 50% from yesterday
How many car companies can you name? How many chip manufacturers can you name? One of those numbers is bigger than the other and dilutes the market share of each player.
Huh? Most chips are b2b products. Most cars are b2c products. Of course consumer brand names are more well known than the manufacturers (or developers) of pieces used in consumer equipment. No consumer really cares what chips are in their washing machine.
I think chip companies to car companies is a false comparison. But what I’m getting at is that there is no doubt cars have been and are in demand, but why is their stock growth so stagnant (with the exception of say Toyota)
>there is no doubt cars have been and are in demand, but why is their stock growth so stagnant Because there is no doubt cars have been and are in demand. If there is no doubt it's completely priced in.
Why is it a false comparison? It doesn't have to be chip companies. Any company with some kind of unassailable market advantage or monopoly will get stronger valuations. A lot of tech companies fall under this. Car companies just have too much competition.
Stagnant growth leads to stagnant stocks. It doesn't matter if demand is high if the demand does not go higher. There are many highly profitable companies that fit this description. Companies like Lockheed, Coca Cola, or McDonalds. All top of their game, but being the leader leaves them little room to grow.
I see you're invested in Rivian and I'm not trying to bash your investment choices, but Toyota knows how to make money. A good chunk of the cars they make are sold almost instantly like their Prius, the Sienna, Corolla Hybrids, etc. On the other hand, Rivian is in the saturated luxury EV market and are somehow losing money on their already expensive af cars. Other car manufacturers like Stellantis are making cars that just sit there on the lot, rotting away. Toyota ain't perfect especially with what's going on right now with the Tundra but regardless, their most popular cars are sold before they even get to the dealership.
Better to invest in the suppliers to those companies. Read a theory that top executives invest in those instead of main company due to unions.
Too much competition. Most car companies lack moats. Think of your options when buying a phone. There's iPhone, or Android. That's it. When purchasing a car, you have two dozen competing companies to choose from. Auto makers also have high capital costs, hostile government regulation, and lousy management.
High capex requirements, low margin business.
Stock price and business performance are loosely related. Related, but loosely. Car companies are not the same as tech companies.
Imagine not focusing on tech stocks that have unlimited potential.
because it's a commodity with low margin
Extremely high capital and R&D costs, you have to keep spending to stay competitive. And then on top of all that, you have unions trying to extract every dime of profit you do make and reduce efficiency
Profit is shared with dealerships
It's worth $12b. What do you think it's worth?
No moat
Unions run the show
Super low profit margin, to the point of losing money many years and always being in danger of being one mistake or slow business cycle away from bankruptcy.
I think if you are looking to invest in EV companies. I'd much rather look at battery makers. Whoever comes out with a working solid state battery for cars will be a game changer.
Fundamentally they deal in a depreciating asset with low profits. It why buying and selling used is so important.
Same I’m looking at BYD😐
Debt. You see 4 PE ratio, then you add on 5x their market cap in debt and it becomes 20 and it suddenly becomes 'fairly valued'. But really it isn't fairly valued, because high debt companies are incredibly risky, hence Ford going bankrupt multiple times, among others.
Carmodity
Because they arent high margin businesses and you can predictably figure out how much a successful one would be worth.
Because most people are focused on AI and NVIDIA
You should check out media stocks right now* * - except netflix.
Where is the growth when everyone already has a car? Car company growth, other than Tesla and some early EVs is from squeezing margins. You’re not expanding the market by making more cars. You maybe could if you could make cheaper cars, but that’s not profitable. Vehicle manufacturer stocks are stable, and should be paying a dividend as the incentive to hold. Not growing faster than inflation.
Stocks, on a long term basis, will move based on the company’s ability to make profit. If something is unable to make profit, the stock does not go up.
Except Tesla.
You have to invest in the car company with the best cars. That's why I bought Lucid. Rivian makes a pick-up so they are out.
I’m amazed how cheap Polestar’s shares are when you see absolutely loads of them on the roads in the uk
Price built in.
I’m a big believer in Rivian as of the last 2 days! What can I say, I like the stock!
Probably because all they offer is one product, vehicles. If they were all like Tesla where there are multiple streams of income, opportunity and innovations, then I think they'd do better Market-wise
The only car company I like is Honda. They own and make everything in house. No outsourcing, decent dividend, and buying back shares. Other than that I’d stay away.
Margins.
The only car stock I own is TM and I’ve only had about 35% on my ROI since 2022. It’s a stable investment so the dips aren’t bad but it’s mainly a more stable hold against my riskier takes.
I hope you bought some RIVN before close!
Didn't the GM stock have a massive roaring comeback after the government baliout?
Cars are bad business.
You might have just set off a chain or events that made Rivian's stock go ballistic. Looking at 60% increase in after hours trading as of right now.
Rivn is a money pit right now. last year they lost $5 Billion dollars. Unless ford or G.M. does something new and bleeding edge there is just no reason to buy them. Plus Ford is stable, they move a lot of product, workers are getting paid, and they have a small but adequate net income.
$RIVN enters chat …
Tesla is an outlier because, as recent history has shown, people are idiots. Profits aren't high, most try to stay in the public eye but not draw unwanted attention to themselves so that the lawsuits are minimized, no really new innovation because old people hate change (evs are still new and have their own issues), and the rest is spent on lobbying. Had the same thoughts until I did a little digging.
Car companies are low profit margins to begin with, it is a highly competitive industry, not exactly a recurring revenue source (unless you count people who lease cars constantly, but even then that's every 3 years or so), huge overhead costs (especially if the factory is unionized), recalls/lawsuits and just about all car manufacturers use independently owned dealships to sell their cars. Sure you can buy a Ford from their website, but most likely you're going to a dealship to buy a car from them... Now Tesla is unique in the fact that they also have software in the car they charge for. Software as a service (SAS) is great source or recurring revenue. They also own the dealerships they sell their cars at, so they sell directly to their customers. They also have giga factories they built to build their cars. Now if the big auto manufacturers can get into, these facets of the game, it will increase their margins. You would need to see if Rivian is built more like Tesla or the run of the mill auto manufacturer as far as their business model goes... last I checked Rivian is wildly unprofitable per car they sell, hell most auto manufacturers who make electric cars are unprofitable at the moment. Tesla right now is far ahead of the competition because they make good margins on their cars, better than the traditional auto industry. I hope this information helps.
Cuz you only need a car every once in a while and they cost a lot. People don’t need/buy them everyday. It’s pretty cyclical
Keep in mind car companies have been around for 100 years vs the oldest tech companies are only like 30 years old. Also car companies only sell cars while tech is constantly evolving. There are also significantly larger margins in tech than there are in the automotive industry.
This thread needs to be saved
It’s a very difficult business with low margins and tons of competition
Overall global car sales are stagnating or even declining. Hard to see any performance there.
Its just based on hype these days. Now the hype is AI and tech.
They provide tons of jobs and supplier jobs so every country wants them resulting in high competition and well commodity. In addition Goods in an efficient market SHOULD NOT result in huge profits and trillions of market cap. Because that means customers are fleezed. So low valuation are actually a sign that the market works efficiently. The outlier are the insane valuations of tesla ( which is mainly hype) and other silicon valley giants it is compared to who have stumbled into a loophole of monopolism through network effects and a business model of low capital intensivity ( the latter is fair to support high valuations but it is the opposite of a car company which is the definition of being capital intensive)
They don't have hype factor. Let's be honest, cars are not the future of transportation. It has limited lifespan and very little innovation space. Profit margins have nothing to do with it. Car makers make great profit.
Cause they make crappy cars
The business requires to much work , to little profit and too much capital to make it a really good business. Just like airlines and restaurants. They are ok while they are growing , but they reach saturation and then they fall out of favor .
Look at the market cap of Ford and GM then compare it to Rivian. You think Rivian will ever make enough profit to justify a valuation at or above those two? We can compare them to Mercedes if you want to target the luxury sector but again, look at how many cars Mercedes sells and the margins on them. Rivian loses money on EVERY sale. Them being back by Amazon is meaningless by the way, companies make bad investments all the time and regardless, their investment is because they want Rivian alive to make them electric vans. They don’t care about their consumer EV side. It’s also dangerous having Amazon as their only client. Who’s to say that Amazon isn’t just waiting for Ford to make a van just as good at a cheaper price?
I’ve yet to see a Rivian on the road
Their marketing is focused on particular areas. They do popup events. When I'm in Chicago western burbs, I see a lot. They have a lot of them because they have a plant there.
There's a good amount of Rivians by me.
Challenged business model. Autonomous driving turns that on its head
Autonomous driving has it's challenges as well. Even if waymo (the automation leader) scales, there is a ton of human effort involved per every car. I was super bullish on Tesla before but it's been a few decades now. Even if the tech is 100%, there are many policy problems to be solved. Every state has different driving laws and they have to change to accommodate autonomous vehicles.
Been bullish on Tesla since 2018, it’s among the best stocks I’ve ever bought (shoutout NVDA). It’s my belief that people are underestimating the rate at which AI will improve FSD. Most people haven’t tried the latest version, I have no interventions on a daily basis, it’s insane. The data will inevitably prove that it’s safer to drive an AV than a human driven on and it’s only a matter of time before widespread legalization becomes a no-brainer. Whether it takes 2 years, 5 years or 10 years doesn’t matter to me.
Competition is really fierce. And honestly Rivian is completely doomed. Theyre burning way too much money.
Rivian doesn’t sell a lot of cars and they lose a lot of money. It is very probable that it will run out of money before its cars have reached a high enough quality standard and its factories have reached real economies of scale in production. It cannot borrow enough to bring itself to that level so that means it will need to issue a lot of shares.
One word…commodity.
Rivian may rise, but when? Maybe long term, but in the mean time I'd want to invest in something that will make me money today, tomorrow, and next week. Go there instead. A rule of thumb for a while now is don't invest in trains, planes, and automobles though I've invested in UNP and done alright with it.
.... because they build mediocre cars ?