This is an excerpt from The Atlantic’s climate newsletter, The Weekly Planet. Subscribe today.
Many fights about climate policy have been raging, basically unbroken, for the past 40 years. But something that sets this moment apart is that a subset of people who care about climate change, and who have founded companies to fight it, is becoming extremely wealthy.
On Friday, the electric-car start-up Rivian filed for its initial public offering. If you’re not familiar, Rivian makes electric trucks that look sleek, friendly, and alert, almost Pixarian. Its initial customers, however, are drawn more from the Gucci set than the Wall-E set. Its entry-level truck, the R1T, starts at $67,500; the highest trim is more than $73,000. Even though Americans now regularly pay $40,000 for luxury family-haulers that look like pickup trucks, Rivian’s cars are upmarket. (It says that more affordable models will come in a few years, after it hones its technique on luxury offerings. Tesla followed the same path.)
The start-up hopes to raise $8 billion in an IPO around Thanksgiving that would value the company at $80 billion. If successful, the EV maker would enjoy one of the largest IPOs in an American market in the past decade, raising roughly the same amount as Uber did in 2019.
Another historical comparison is also eyebrow-raising. In 2010, General Motors emerged from bankruptcy and raised $20 billion in an IPO. By that point, GM had sold hundreds of millions of vehicles over its 102-year history. Rivian is 12 years old, and it claims to have delivered its first vehicles to customers last month. But if Rivian has its way, the stock market will, by the end of the year, value both firms at about $80 billion.
Without getting rah-rah about it, Rivian does represent the ideal of President Joe Biden’s economy. It has a technical founder. It actually makes something useful, a physical good that you can drive and touch. Its production facility is not only in the Midwest, but in a town literally called Normal. It’s going public through a traditional IPO, not a trendier and more founder-friendly special purpose acquisition company, or SPAC, deal, because it needs cash quickly.
At the same time, Rivian is clearly a type of technology company, and it has learned from the modern-day West Coast giants. Like Apple, it wants to be vertically integrated: Much like buying a new iPhone, you will buy a new device from Rivian directly, buy intangible Rivian services through that device’s software, and bring the device into a Rivian Store when it breaks. The physical device will be designed by in-house Rivian engineers and optimized to run Rivian software. The only difference is that the device will be a four-ton truck, not a phone.
And Rivian has arrived at its current position with help from two giants of the U.S. economy. Amazon owns at least 5 percent of Rivian’s stock and has placed an order for 100,000 delivery vehicles with the company, which is the largest single purchase of EVs ever; the megaretailer’s name appears in Rivian’s IPO filing more than 80 times. Ford also owns a large share of the company. (The old-school automaker and Rivian initially planned to collaborate on an electric SUV, but the deal fell through.)
Before the pandemic, one of the truisms in financial journalism was that private markets had supplanted public markets—that in the 2010s, so much cheap money was sloshing around that the Ubers and Airbnbs of the world could run at an indefinite loss on the back of private-equity and venture-capital firms, without having to face the scrutiny of going public. It’s unclear whether that preference for private markets will survive the pandemic recovery, but you can see how Rivian might have gone that route. Its IPO filing shows that the company is bleeding money—it has lost more than $1 billion since the beginning of the year and plans to spend billions more over the next few years—but so was Uber; in 2019, the year that it went public, the ride-sharing company lost $8.5 billion. (There’s another way to look at this, too: It’s so expensive to commission a new car factory from scratch and spin up a global production line that it’s of the same order of magnitude as subsidizing more than 6 billion ride-hailing trips.)
But one sector where public markets are clearly superior, at least from the founders’ point of view, is electric automaking. And here, with apologies to Grimes, we have Elon Musk to thank. Musk successfully enticed retail investors—that is, people who don’t work in finance, who are sitting at home with Robinhood or E-Trade open—to bankroll the high costs of the energy transition. Since August 2019, Tesla’s valuation has swelled from about $43 billion to $784 billion—experiencing, in other words, 1,700 percent growth. Tesla, which sold just shy of 500,000 cars last year, is now more than twice as valuable as Toyota, which sold more than 9.5 million. Its stock price has risen so much that shorting the stock has become too expensive, and the company’s doubters have all but given up.
Musk proved that the public will fund a specific subset of the energy transition, the switch from internal-combustion engines to electric cars. I would call that an invaluable accomplishment, except that it enriched Musk personally by $100 billion. Manufacturers of EV components, chargers, and batteries now go public so frequently that, unless you’re paying close attention to financial markets, you are probably missing them. The EV-charging firm Wallbox went public through a SPAC deal yesterday; Polestar, Volvo’s EV spin-off, went public last week. The EV market is now getting so frothy that climate advocates should maybe start worrying: Is Tesla really almost 10 times more valuable than General Motors? And if not, can the EV industry as a whole survive the popping of Tesla’s bubble?
Would-be decarbonizers may have no choice. The venture capitalist William Janeway has argued that some kinds of financial bubbles are good because they are how a capitalist society “can mobilize sufficient resources to invest in the technologies of the future.” Maybe that’s what we’re seeing now with Rivian.
Emphasis on perhaps. I’m writing about Rivian because the energy transition is far enough along that individual firms participating in it now matter. The window is closing for new EV companies to leap in. And that means that Rivian’s history is getting written—and society is deciding how to interpret its cultural politics.
In its filing, Rivian revealed that it has given 1 percent of its equity to a new philanthropic initiative called Forever that will support environmental and conservation causes. In that, it resembles the outfitter Patagonia, which has pledged 1 percent of its own profits to conservation. And you can see a crux there for the automaker, a decision that is not entirely in its hands. Rivian could become Apple, a wildly profitable firm that merges engineering and upscale design to bring new high technologies and a certain cultural aesthetic into the mainstream. Or it could resemble Patagonia, an upscale brand that represents expedition-level quality, yes, but speaks to a smaller, more cosmopolitan segment of society. Its choice, and ours, will help determine the role that EVs play over the next few decades or so of America’s decarbonization.