Big news last week in the realm of robotaxis: Uber Technologies (UBER 3.70%) agreed to invest up to $1.25 billion in electric vehicle (EV) maker Rivian (RIVN +2.09%) — and to purchase thousands of Rivian R2s equipped with self-driving technology.
For Uber, this builds on last year’s similar deal with Lucid Group. It confirms that the ride-sharing giant is putting its robotaxi eggs in multiple baskets as it girds for battle with Alphabet‘s Waymo and (perhaps, eventually) Tesla.
For Rivian, this deal is a big vote of confidence in its effort to develop a Level 4 autonomous-driving system in-house. It also provides a nice chunk of cash in the near term, just as Rivian is preparing to ramp up production of its midsize R2 model.
But quietly, Rivian gave up something for this deal — something that shareholders shouldn’t overlook.
Image source: The Motley Fool.
What makes the deal a (mostly) good one for Rivian
Headlines after the deal was announced last week noted that Uber will invest “up to” $1.25 billion in Rivian and has agreed to buy “up to” 50,000 Rivian robotaxies through 2031. You won’t be surprised to hear that “up to” is doing some heavy lifting in both cases. But it isn’t entirely hot air.
Uber will invest $300 million in Rivian by purchasing newly issued stock as soon as the deal is completed and approved by regulators. Uber will make up to four other investments in Rivian between now and 2031 as certain milestones are hit. (We don’t know what the milestones are.)
Uber will also buy 10,000 robotaxis from Rivian. Those might be R2s with Rivian-developed self-driving systems, or they might be another Rivian model. Deployments will begin in San Francisco and Miami in 2028 and expand to 25 cities across the U.S., Canada, and Europe by the end of 2031.
Uber also has the option — but not the obligation — to buy up to 40,000 more Rivian robotaxis starting in 2030. And Rivian has agreed to deploy its robotaxis exclusively via Uber’s ride-hailing and delivery platform.
Long story short, Rivian has agreed to accelerate the ambitious self-driving development program it announced in December in return for a locked-in path to deployment on Uber’s network, some guaranteed robotaxi sales, and some cash.
All of that seems good for Rivian. But it appears that Rivian had to give up a significant goal to make the deal work.
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The thing that Rivian gave up to make this deal with Uber
Rivian outlined the legal structure of the deal in a regulatory filing shortly after it was announced. Most of it is what you’d expect: details on how Rivian shares will be transferred to Uber and when, that sort of thing.
But toward the end of the filing, there was this note:
“The Company no longer expects to be adjusted EBITDA positive in 2027 due to an expected increase in R&D spend associated with the acceleration of its autonomy roadmap.”
That was a goal the company had discussed for a while. If the R2 launch went well and other factors fell into place, it could generate a profit on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis in 2027.
Should investors be concerned? Is Rivian chasing the robotaxi dream at the expense of its core business?
What it really means for Rivian investors
While some financial pundits have made a big deal about Rivian abandoning that particular profitability goal, I don’t think it’s worth much worry.
I like this deal for Rivian. Here’s why.
Lots of investors believe that robotaxis will be a huge business. I don’t disagree. But I think many robotaxi enthusiasts overlook the difficulty of building and operating a robotaxi network at scale. It’s very different from the business of building EVs — or rockets, for that matter.
The companies that will successfully run robotaxis at scale will likely be those already operating ride-hailing networks at scale. In the U.S., that’s Uber and Lyft. Waymo might join them — it looks to have done enough of the early groundwork to succeed — but I think it’ll be a hard uphill climb for anyone else.
Long story short: This deal ensures that Rivian’s robotaxis will be able to operate on a huge network that Rivian won’t have to build. That’s huge — huge enough that I wouldn’t worry about the profitability postponement.
