Morgan Stanley: Why GM and Amazon may be investing in 'the next Tesla'

Key Points
  • Detroit start-up Rivian is leading the "next and potentially imminent" electric vehicle market of pickup trucks, Morgan Stanley says.
  • "The highly lucrative and US-dominated pickup truck market" is "an important area of investor focus," the firm says.
  • General Motors and Amazon are reportedly in talks to invest in Rivian, in a deal that would value the company at $1 billion to $2 billion.
A person places items into the front trunk cargo area of the Rivian Automotive Inc R1T electric pickup truck during a demonstration at a reveal event at AutoMobility LA ahead of the Los Angeles Auto Show.
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General Motors and Amazon are reportedly in talks to invest in Detroit start-up Rivian Automotive, and that indicates a massive shift in the "next and potentially imminent" electric vehicle market of pickup trucks, Morgan Stanley said Wednesday.

"The highly lucrative and US-dominated pickup truck market" is a key focus for investors due to the "culmination of battery cost reduction, architecture, duty cycle, and price point," Morgan Stanley analyst Adam Jonas said. Jonas earned a wide following on Wall Street due to his early calls on Tesla and the rise of electric vehicles.

Morgan Stanley featured Rivian earlier this week as the "next serious competition" for Tesla. The start-up's "clean sheet" approach could make it "the next Tesla," Jonas said.

"We have focused considerable research effort on the theme of electric pickup trucks in recent days," Jonas said. Rivian emerged as the firm's top pick to challenge Tesla in the coming years due to Rivian's "access to talent & capital focused on the fastest growing segments of pickup trucks & SUVs," he said.

How America fell back in love with trucks and SUVs

Rivian previewed its R1T electric truck prototype in November. Rivian CEO R.J. Scaringe said the R1T will deliver 400 miles of range, with four individual motors allowing for all-wheel-drive. The R1T will be able to hit 60 miles per hour in 3 seconds and tow up to 11,000 pounds. Rivian is also building the R1S, an electric seven-passenger SUV. Rivian says the R1S will also have a range of over 400 miles.

RJ Scaringe, founder and chief executive officer of Rivian Automotive, speaks after unveiling the R1S electric sports utility vehicle (SUV).
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The Amazon and GM deal would value Rivian at $1 billion to $2 billion, Reuters reported Tuesday.

Morgan Stanley said Amazon's involvement represents the e-commerce giant seizing the opportunity to use its own technology "to shape electric delivery vehicles to support its own logistics efforts."

"Amazon has spent the last few years building out and expanding its logistics network and recently invested in autonomous driving startup Aurora," Jonas wrote.

As for GM's involvement, Morgan Stanley pointed to comments from GM CEO Mary Barra on electric pickup trucks. Barra said GM believes "in an all-EV future," while GMC VP Duncan Aldred said an electric pickup truck is "certainly" an opportunity the company is considering.

Morgan Stanley is very bullish on the future of electric pickup trucks.

"EV powertrains have yet to be applied to the most profitable segments where established US automakers generate profit and cash flow," Jonas said. "We estimate the full sized pickup truck segment accounts for well over 100% of global auto profit for GM and Ford and the majority of [Fiat Chrysler]'s global profit."

Tesla's pickup truck plans

Tesla may unveil an electric pickup truck this summer, CEO Elon Musk said during the company's fourth-quarter conference call. In December, Musk talked extensively on Twitter about what he would like to include in a pickup truck design, including all-wheel drive with "crazy torque & a suspension that dynamically adjusts for load."

The buzz Jonas has seen about Tesla's pickup truck "suggests there may be greater excitement around the" pickup than for Tesla's anticipated Model Y. Based on the luxury Model X SUV, the Model Y is an "entry-level" crossover that would be comparable in price to Tesla's Model 3.

Elon Musk plans a truck he says looks like something out of 'Blade Runner'