Electric vehicle start-up Arrival said it has raised $118m from funds managed by BlackRock, the latest investor bet on new technology upending the auto sector.

The investment values the UK-based manufacturer at around €3bn, according to a person familiar with the matter.

BlackRock, the world’s biggest money manager overseeing $7.8tn in assets, is joining the start-up’s existing backers — auto manufacturers Hyundai Motor and Kia Motors. Those companies together invested a total of €100m in January.

BlackRock is investing at the same valuation as Hyundai and Kia because it had started its negotiation around the same time as the other two investors. However, the coronavirus pandemic slowed its talks, according to the person familiar with the matter. US delivery company United Parcel Service is also an investor but the amount it has contributed couldn’t be learned. Together, the four investors will own an undisclosed minority stake, according to the person.

The fundraising is the latest in a wave of investment betting on the growth of electric vehicles as governments and consumers push the auto industry to cut carbon-dioxide emissions and the surging stock-market valuation of industry leader Tesla shows the potential of big profits from the new technology.

Tesla shares are up about fivefold in 2020, and the auto maker’s market value now exceeds that of Toyota, General Motors and Ford combined.

BlackRock’s investment in Arrival comes after the New York-based asset manager topped up its holding in July of Rivian Automotive, an electric pickup truck start-up backed in part by Ford. Rivian’s other backers include T. Rowe Price Group, Soros Fund Management and Fidelity Investments. The two investments also suggest BlackRock might be hedging its bets, underscoring the challenges of picking the ultimate winners. Like Arrival, Rivian makes delivery vans and those are slated for Amazon.com’s fleet.

The risks of investing in the electric-vehicle sector were also highlighted by the controversy over the technology of U.S. electric-truck maker Nikola Corp. That company’s stock is down almost 70% since June amid allegations that the company’s founder, who resigned last month, misled investors. He denies wrongdoing.

Founded in 2015, Arrival is based in London and is majority-owned by Denis Sverdlov, a former mobile-telecom executive. Arrival makes electric-powered city buses and commercial vans, claiming its vehicles can travel up to 300 miles without recharging and lower ownership costs by 50%, according to its website.

It currently has an order to deliver 10,000 vans to UPS in the US and Europe through 2024. The company is also running a trial of its electric vehicles with DHL Group, the Germany-based logistics company, and Royal Mail, the UK postal service. Money for the latest financing will help fund Arrival’s network of what are called micro factories in Europe and the US, including a new facility in South Carolina, which is part of its US expansion plans. Former GM executive Mike Ableson is overseeing the US operations.

Currently, Arrival loses money as is typical for start-ups that are required to make major upfront investments to launch a business. However, it believes the lower investment cost of its smaller-size factories and its focus on the commercial electric vehicle market will help it achieve profitability faster than its rivals.

At the same time, Arrival could seek additional financing and potentially a public listing to further fund its growth plan, investment bankers have said. One way to achieve this goal could be merging with a publicly-traded special-purpose acquisition company, a route that has proven popular with other electric vehicle start-ups such as Los Angeles-based Fisker.

Arrival declined to comment on any potential future fundraising efforts.

Source: Wall Street Journal

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