Is Rivian going out of business? For several months, the situation facing the up-and-coming maker of electric vehicles has not been favorable. Being able to mass-produce vehicles is a challenging and critical period for any startup vehicle business. Many potential partners give up and file for bankruptcy during this stage.
Rivian Automotive is still spending billions of dollars. One year had passed since the business had given customers its ground-breaking R1T electric pickup. They need help manufacturing commercial and residential vehicles at their Normal, Illinois, plant.
Their production continues to be restricted by the supply chain. The business stated this in a letter outlining its second-quarter financial results that were sent to shareholders on August 20, 2022. “Rising prices affected our cost of materials during the quarter, and we anticipate that they will do so going forward as well.”
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Is Rivian in trouble?
Rivian reported a staggering $1.7 billion loss for the second quarter of 2022. But some experts in the auto business feel this needs to be more critical. When a new automaker expands, significant losses are to be predicted.
Spending billions on labor and equipment is necessary to produce millions of vehicles. Factory interiors need to be completely redesigned. The supply networks are organized. Engineers need time and money to build vehicles from the bottom up and include all they require, like propulsion, chassis, and brakes. Additionally, those engineers require a human resources division.
Since Chrysler did so in the 1920s, Tesla was the first business to establish itself as a widespread American automaker. Rivian now wishes to imitate this. The US startup is viewed as having the best chance due to its substantial resources, A-list investors (such as Amazon and Ford), and engineering expertise.
As of November 2021, Amazon-owned around 18% of Rivian and had placed an order for 100,000 delivery cars. 2019 saw Ford make a $500 million investment in Rivian. Ford officials had previously served on the company’s board of directors.
Some analysts argue that $1.7 billion is a minor deal in such a context. The new automaker has $15.5 billion in cash and a successful vehicle. (Rivian has around 100,000 orders in the queue.)
James P. Womack, writer of the widely referenced book “The Machine That Changed the World” on the history of the automobile industry, described Rivian’s losses. He described it as “a measurement of nothing.” “They might have lost much more money if they had fully expanded the valve on their Georgia factory.”
According to Rivian, a $5 billion plant in Georgia will be able to produce 400,000 cars annually. However, everything is currently assembled in an old Mitsubishi factory in Normal, Illinois.
But it has only sometimes been smooth sailing. In May 2022, the corporation changed the manufacturing director. In July 2022, it also fired 6% of its workers. Inflation, high rates of interest, and higher commodity costs are to blame for this. Later, it was also compelled to increase the cost of its products.
Despite Rivian’s loss, investors haven’t responded angrily. The announcement caused the stock to increase marginally. Wedbush analyst Daniel Ives stated in a note, “We anticipate Rivian is in an excellent position to exploit the large surge of present and future EV demand.” He cited Rivian as evidence that things are beginning to improve. This indicates that the company is scheduled to produce 25,000 vehicles in 2022, as planned.
Rivian already manufactured only 1,015 vehicles in 2021. As a result, even if 25,000 vehicles are produced annually, Rivian’s direct competitors have significantly fewer. For instance, Tesla made 930,422 cars in 2021—a considerable increase.
Is Rivian still in business?
Rivian Automotive has cautioned that the supply chain problems that have affected automakers since 2021 will be a “significant constraint.” RJ Scaringe, the chief executive, claimed that Rivian had more accessible access to parts in the third quarter than at the beginning of 2022. However, because it was missing a single component, manufacturing at its Illinois factory was halted for five days.
Since going public for $78 per share, Rivian has needed help. One significant customer, Amazon, decided to purchase trucks from a competitor. Its market valuation of $26 billion is about one-third of what it was during its initial public offering. Almost all of the automobiles it had produced had to be recalled due to a faulty nut.
Scaringe & Rivian’s chief financial officer, Claire McDonough, claimed that the factory became more effective. So, the firm no longer needs to spend money introducing four new models because prices have dropped, he added.
According to Rivian, it produced 7,363 automobiles in Q3, a 67% rise from Q2’s output. It had 6,584 cars as compared to 4,467 in the second quarter. It is an increase of 47%.
Altogether, 14,317 automobiles were produced by Rivian in the year’s first three quarters. This means that to reach its goal of 25,000 for 2022, it will need to manufacture more than 10,000 in the final quarter.
The EV manufacturer had to update forecasts as a result of production issues faced by Rivian earlier this year. On December 12, 2022, Rivian Automotive said that it was postponing plans it had begun just three months earlier. The goal was to produce commercial electric vehicles in Europe alongside Mercedes-Benz. On hearing the news, Rivian’s stock dropped 5%.
The company is examining its “growth potential,” according to CEO RJ Scaringe. Also, the company aims for “the highest risk-adjusted yields on the capital investments.”
In a statement released on December 12, he stated, “At this time, we feel like concentrating on our consumer business.” Our current commercial company offers the most appealing near-term possibilities to gain profit for Rivian.
The firms hoped to establish a brand-new facility in Central and Eastern Europe, which already contains a Mercedes-Benz facility. Manufacturing for the joint venture was scheduled to begin “in a few years.”
Conclusion
If Rivian can maintain its speed, it appears to have an equal chance with Tesla’s American competitors. Rivian stated at its inaugural shareholder gathering on June 6 that as of March 31, 2022, it had $17 billion in cash on hand. It thought it could finance its R2 vehicle platform launch and rollout in 2025.
Rivian warned that the battery supply would be complex during the next ten years. “the world’s capability for rechargeable batteries must increase by 20 times over this time.”Rivian claims that, as a result, it is concentrating on forging alliances with cell providers and raw material suppliers.
Starting an auto company is a huge undertaking. It’s because it involves finding new employees, developing a new management structure, and manufacturing a new product at a new site.