Weekly Brief: Amazon Takes 100,000 EV Punt on Start-Up With No Sales

Commentary By Andrew Tolve

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23rd September 2019

Delivery vehicles are a fixture of the US landscape.

From brown UPS trucks to boxy white US Postal Service vans, from the glaring yellow of DHL to the purple and orange of FedEx, delivery vehicles fill our cities, our suburbs, and even our lonely country roads. However, now Amazon wants to make them all obsolete. Last week the e-commerce giant placed an order for 100,000 electric delivery trucks, in a bold attempt to go carbon neutral by 2040 and turn the parcel delivery industry on its head. BEV maker Rivian will manufacture the emissions-free vans starting in 2021, albeit the company has yet to market a single commercially available vehicle. Amazon wants all 100,000 in the field by 2030.

This is a big deal for many reasons. For one, it establishes Rivian, a mysterious start-up out of Michigan, as an overnight power player in the EV market. The start-up has now secured the largest ever order in the history of EVs. In addition to its newfound commercial traction, Rivian is set to produce EVs for the consumer market as well, including the all-electric R1T pickup truck and R1S SUV, both of which debuted to fanfare at last year’s LA Auto Show and will hit the market in 2020. Sensing this momentum, Rivian has been picking up investors left and right. In February Rivian raised $700M. Amazon was the lead investor on that round. Ford then invested $500M in Rivian in April, and Cox Automotive pumped another $350M into the company last month. Rivian, thus, has a rich network to draw on looking to its future prospects.

Amazon’s announcement is equally significant for itself as it is for the start-up. A hundred thousand delivery vans is a massive fleet. Behemoth FedEx only has 85,000 delivery trucks and vans worldwide as a point of comparison. Most analysts, and even executives from the likes of FedEx and UPS, believed that the complexity of overseeing a worldwide transportation network in addition to the infrastructure and the scale needed to run that network, would keep Amazon from ever declaring war on its delivery partners. Wherever those analysts and executives are now, they‘re eating some serious crow. Amazon clearly wants the power to deliver its own packages and, while it’s at it, it wants to disrupt and dominate the parcel delivery industry the same way it’s done the retail and book industries with unmatchable prices and door-to-door speed.

Part of Amazon’s strategy as a disrupting agent is going green. Short-haul and last-mile delivery vehicles that operate within small geographies are some of the best candidates for electrification. They don’t have to travel far, so range isn’t a limiting factor, and they’re highly visible to the end customer. As a result, you can curry favor as a carbon neutral, emissions-free brand, which may motivate that same customer to use your service rather than old school delivery companies like FedEx or UPS the next time they go to ship a parcel. No wonder UPS and FedEx both like the idea of electrifying their fleets and have placed orders for electric vans as well but the size of those orders is 1,000 vans apiece – tiny by comparison to Amazon’s hundred-fold EV gambit.

Love or hate Amazon, there’s no doubt that its latest investment will motivate the parcel delivery industry to speed up its investment in electric trucks and vans. As a side benefit, this will probably lead to faster development of EV charging stations which should lead to a lot more charging stations for all of us in the near future. Before long we’ll all be stopping at Amazon charging stations to charge our EVs that we’ve bought on Amazon. While we wait we’ll read our Amazon books on our Amazon Kindles and buy our Amazon clothes and our Whole Foods food which, of course, is now owned by Amazon. Then we’ll go home to our Amazon-appointed homes and our Amazon-curated music and we’ll fall asleep to our Amazon-filled dreams.

If that sounds far-fetched, you don’t know Jeff Bezos.