Officials at Rivian Automotive Inc. are hopeful its newest car models can provide a jump-start to the electric vehicle maker, after a challenging start to 2024.
Last week, the electric vehicle manufacturer (Nasdaq: RIVN) unveiled its mid-size lineup of three new EVs, called the R2, R3 and R3X, at Laguna Beach’s Rivian South Coast Theater, the first marquee event since it purchased and renovated the 11,000-square-foot theater.
“Every single decision in the vehicle—there’s millions of decisions that have been made across thousands of engineers—were incredibly focused on ensuring every one of those was not only optimizing what the ownership experience will be, but optimizing our ability to make this very affordable and very accessible,” Chief Executive RJ Scaringe said at last Thursday’s unveiling.
The R2 SUV, a smaller, more affordable version of its R1S vehicle, isn’t the only aspect of Rivian that’s been slimmed down of late.
Even though the Irvine-based EV maker surpassed its production goals last year, its latest forecast for the coming year, announced last month, disappointed investors. While the company’s stock climbed 27% in 2023, it’s fallen nearly 40% this year.
At press time, Rivian sported a $12.5 billion market cap, well below its post-IPO high of more than $120 billion in November 2021.
The company disclosed a few weeks ago that it’s laying off 10% of its salaried workforce of almost 17,000.
About 190 workers based in Orange County across Irvine and Tustin were let go, and another 149 in Palo Alto, according to state employment records.
Rivian reported employing nearly 2,200 people in Orange County as of last year.
Pivotal Year
The recent tumult comes during a pivotal year for Rivian, which is racing to move toward profitability, after burning through billions of dollars since its inception nearly 15 years ago.
The unveiling of its new R2, which is priced lower than its R1 units that start at $69,000, is one part of that equation. Production of the R2 is scheduled to begin at the company’s Normal, Ill. plant in 2026, with the R3 and R3X models to follow.
“We do think we’re in a very interesting moment in time where there is a lack of choice of highly compelling EV products in that $45,000 to $55,000 price range,” Scaringe told analysts on an earnings call in February.
“We built out the high price side of our portfolio, but we hadn’t brought in the more affordable variants of R1.”
Rivian recently added a “standard range” option for the R1 SUVs and pickup trucks that lends a lower price point to help the more “price-sensitive” customer.
The R2 has a starting price of $45,000 and the R3 crossovers will be priced even lower.
On the day the company revealed its new vehicles, shares in the company jumped 13% to $12.51 a piece.
Elon’s Advice
Rivian’s problems even brought advice from rival Tesla CEO Elon Musk, who wrote on X, “They need to cut costs massively and the exec team needs to live in the factory, or they will die.”
Musk, who famously slept at his factory when ramping production for Tesla, said Rivian may go bankrupt in about six quarters on its current trajectory.
During the company’s February conference call, analysts questioned Rivian executives about its performance compared to Tesla (Nasdaq: TSLA), which counts a roughly $550 billion valuation and is the world’s most-valuable automaker.
“When we look at the competition that exists, we often get immediately drawn into competing directly with Tesla,” Scaringe said. “But we need to recognize only 7% of the market has electrified, meaning, really, we’re talking about how do we get the 93% of the market that’s not buying an EV to get excited about the product?”
Scaringe restated the firm’s belief that the entire automotive industry will be electric in a couple decades.
“As an industry, we’re replacing roughly 1.5 billion internal combustion passenger cars across the planet over the next couple of decades,” he said. “Rivian’s mission is to accelerate this transition.”
Production Costs
Since it began production in 2021, Rivian has produced 82,500 units, including 57,000 last year, which was 7,000 higher than its initial target.
Its production goal for 2024, however, is also 57,000, which is below the average 81,700 expected by eight analysts, according to Reuters.
Officials said expectations have been tempered by rising interest rates.
“Our business is not immune to existing economic and geopolitical uncertainties, most notably, the impact of historically high interest rates,” Scaringe said.
While the company reported $4.4 billion in revenue in 2023, it also had a loss from operations of $5.8 billion.
This year, analysts are expecting revenue to rise 8.9% to $4.8 billion.
The company forecasts its loss from operations will be about $2.7 billion this year. Its executives said it will have enough cash to fund operations through 2025.
The company raised nearly $14 billion in proceeds in its blockbuster 2021 IPO.
Rivian reiterated it’s on a path to a “modest gross profit” in the fourth quarter. The company reported $9.4 billion in cash and equivalents as of Dec. 31, 2023.
With plans to launch the R2 line at Rivian’s manufacturing facility in Illinois, total savings are estimated to be over $2.3 billion as compared to its original forecast.
Rivian said it’s focusing on reducing costs this year, such as adding new suppliers and renegotiating with existing suppliers.
It has also pushed back the opening of its new manufacturing plant in Georgia.
The automaker is planning a multi-week shutdown at its existing manufacturing facilities in the second quarter to make engineering design changes and incorporate new battery packs.
While the shutdowns will affect deliveries, the company said the new technologies are expected to increase the rate of R1 production by approximately 30%.
“Importantly, we believe our next-generation R2 platform will benefit from the scalable technology being introduced in the R1 products,” Rivian said in the most recent shareholder letter.
Another focus to increase customer demand is a retail concept dubbed Spaces. The automaker opened 10 locations in 2023 which have recorded over 130,000 visitors so far.
The company plans to open another 17 retail locations this year.
Its Laguna Beach retail center, which opened late last year, is described by the company as its “brand awareness headquarters.”
ExpectationsÂ
Analysts reacted to last month’s earnings report and 2024 production forecast by lowering their price targets or reducing their “buy” recommendations.
“It will be several quarters before Rivian emerges from its production stoppage with a leaner cost structure and a redesigned R1 platform,” said a Piper Sandler report. The firm kept its “neutral” rating and lowered the automaker’s price target from $21 to $15.
“Unlike some, we don’t think Rivian should ditch its vertical integration strategy,” Piper analysts added.
D.A. Davidson also maintained a “neutral” rating for Rivian and updated its price target from $19 to $17.
“It seems the company is trying to mature internally (improved purchasing; new trim levels; staff reductions) while at the same time managing growth as EV markets are turning bumpier,” D.A. Davidson’s Senior Research Analyst Michael Shlisky said.
Rivian “is still multiple years from the wider-audience R2 platform at this point,” Shlisky added.
