Yahoo Finance’s Pras Subramanian joins the Live show to discuss the losses Amazon and Ford are enduring from Rivian investments.

Video Transcript

- Well, let's keep on this discussion of Amazon. We saw the e-commerce giant taking a big hit, not just from inflation in labor but a $7.6 billion loss from its exposure to EV startup Rivian. That comes after Ford reported a $3 billion hit from its stake in Rivian earlier this week. For more on that, let's bring in Pras Subramanian who is, of course, our autos reporter here with me at the desk.

So these are the two names that were early backers for Rivian. Expectations were sky high when they went public. What has shifted?

PRAS SUBRAMANIAN: I think it's a kind of a back to reality kind of sense for Rivian, right? There was a lot of enthusiasm. These guys were a clean sheet company, pure play EV-maker, making these really, really cool-looking adventure vehicles that a lot of people on the coasts liked, right? Great design, great features, and seemingly the ones that have come out so far have been built very well.

It's the problem of ramping up that production in their plant in Normal, Illinois. They can't seem to get more than a couple of thousand a quarter. As of last quarter, they had around 2,500 I think last quarter. So if they want to get that 25,000 unit ramp for this year, it's going to be a lot of work. I think that's the issue with the stock right now, is people are kind of not believing this story maybe.

And look at the reflection with Amazon's quarter and also Ford's quarter, huge investments in the company, taking huge paper losses on them. So, you know, Ford commented on the call. They were asked about that investment and said, we're not going to comment on that investment as a lockup period approaches. So not exactly a glowing endorsement of its Rivian stake.

Amazon on the other hand, you know, Bezos is a fan. He had the Rivian trucks at his Blue Origin launch. They have 100,000 vans on order. So maybe Ford, I'm sorry, maybe Amazon Rivian might stick with that for a little bit. But the future of that, those stakes are uncertain. And looking at Rivian in the future, they really have to kind of deliver on those production delivery numbers to justify even a $30 billion value.

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- Yeah, some of those challenges, the headlines that have come out of the company, leading to a decline of more than 65% since the IPO for Rivian. You mentioned some of the challenges for the company in scaling up. We've heard them talk about their inability, or at least the challenges, in sourcing critical materials, being able to get to those parts that are in short supply. How much of that is a Rivian-specific story at a time when we've seen shutdowns from other car companies?

PRAS SUBRAMANIAN: So CEO RJ Scaringe was asked about that last week at the plant during some tours, and he said that 90% to 95% of the supply chain for battery materials is not there. Elon Musk has said the same thing. He says, we might want to get into lithium production because we need it. So it's a big story for the industry in general.

But I have to raise the question that when both GM and Ford say they have secured enough chips and battery materials to produce their near-term EV production forecasts, why hasn't Rivian done that? They've had years to ramp up here. They knew what they were going to do in terms of building battery electric vehicles.

I'm curious why they couldn't secure that. Ford and GM, they've been around for years. They know how to do these kind of long-term planning, secure stuff in a very efficient manner over time. So I can't knock Rivian too much for that. But questions can be raised why that hasn't been met yet, or why RJ Scaringe is concerned about that going to the future.

- Yeah, and important to note that the expectation for the car itself, for Rivian, hasn't necessarily shifted. It's a question about whether they can scale up and meet the demand.

PRAS SUBRAMANIAN: Right, and I shouldn't say that Rivian does not have the resources to make these things happen. They just were raising the question as to whether they can do it in the future with given where we are with the state of supply chains for the battery materials.

- OK, Pras, staying on top of it. Thank you so much.