Baron Opportunity Fund – Rivian Automotive:

The following segment was excerpted from this fund letter.

Rivian Automotive, Inc.

Rivian Automotive, Inc. (NASDAQ:RIVN) designs, manufactures, and sells consumer and commercial EVs that share a similar underlying architecture, as well as associated software services. We initially made a private investment in Rivian during the second half of 2020. Following years of engagement with Rivian’s team as a private company, a recent enlightening factory visit, where we interacted with over 20 members of Rivian’s leadership, and a deep product and strategy review, we participated in the company’s fourth quarter IPO, one of the largest IPOs in recent history.

We expect, over the next decades, that the automotive industry will continue its rapid shift from a combustion powertrain, human-driven, and unconnected fleet to an electrified, software-enabled, and connected industry. These are tectonic shifts that should meaningfully increase the size and profitability of the industry. With electric batteries and software as core competencies, the next generation of automotive leaders should be able to capture new and attractive growth opportunities, including software services, autonomous fleet operations, energy storage, and more. We believe Rivian has all the ingredients to follow Tesla (TSLA) as one of these leaders.

Rivian’s current product line, which received strong reviews from industry analysts, is addressing large and profitable segments of the automotive space that were slower to benefit from electrification, including last-mile commercial delivery vans, pickup trucks, and SUVs.

On the commercial side of its business, Rivian should be able to capitalize on its unique and strategic partnership with Amazon (AMZN). Amazon is both Rivian’s largest investor and a significant anchor commercial customer, committing to purchase 100,000 delivery vans from Rivian, a transaction estimated to be the largest EV deal in history, as well as license Rivian’s fleet management software, called FleetOS.

To better address its large market opportunity, Rivian is launching multiple vehicle programs focused on both the consumer and commercial markets during its first year of manufacturing. While a parallel vehicle program launch may be complex, we expect it should enable the company to reach scale and collect data faster than many of its competitors. Armed with lessons learned from our long-term investment in Tesla, we appreciate the risks and opportunities involved in creating a new automotive company. We believe that Tesla’s trailblazing success, though extremely hard to replicate, should help Rivian’s management better address these risks and opportunities.

We remain impressed with the Rivian management team, led by founder and CEO R.J. Scaringe, and believe that Rivian has the leadership, technology, vehicle design, manufacturing prowess, and market opportunity to scale to one million vehicle deliveries in even less time than EV-pioneer Tesla.

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.