Hello friend! As an electric vehicle enthusiast, I wanted to share an in-depth look I‘ve done into the very intriguing company Rivian. Despite facing serious financial losses this year, Rivian continues working to deliver on its vision for electric adventure vehicles. Having pored over Rivian‘s financials and strategic moves, I believe they have a fighting chance at long term success – if challenges don‘t overwhelm them first. Stick with me through this tour under Rivian‘s hood to see the evidence behind my qualified optimism.
The Promising Yet Costly Start of an EV Upstart
First, some background! Rivian was founded in 2009, focused on leveraging technology to create durable and powerful electric trucks/SUVs for off-road use. Think about coupling Tesla‘s batteries with Land Rover‘s capabilities.
This niche has great potential as outdoor recreation continues booming in popularity – the market is projected to reach $887 billion globally by 2030 [R1]. Rivian‘s R1T truck and R1S SUV, launched in 2021, delivered exactly the blend of eco-consciousness and adventure customers were hoping for.
| Specs | Rivian R1T | Rivian R1S |
|---|---|---|
| 0-60 mph | 3.0 seconds | 3.2 seconds |
| Range | 314 miles | 316 miles |
| Towing Capacity | 11,000+ lbs | 7,700+ lbs |
Impressively, as of September 2022 Rivian has received over 98,000 preorders for the R1 series [R2]. The demand seems to validate the quality of products they‘ve designed.
However, launching as a new auto manufacturer requires monumental upfront investments. After raising almost $2.5 billion in 2021 from backers like Ford and Amazon [R3], Rivian is now facing the costs of designing vehicles from scratch and setting up manufacturing plants.
And some worrying losses have begun mounting…
Financial Struggles – Growing Pains or Red Flags?
In Q1 2022, Rivian posted an operating loss of $1.6 billion – after losing $2.2 billion across all of 2021 [R4]. I wanted to dig deeper into the major contributors of these losses:
| Cost Category | Q1 2022 |
|---|---|
| Raw Materials | $927 million |
| Components Supply | $288 million |
| General Operations | $410 million |
| Total | $1.63 billion |
From my analysis, over 50% of losses tied directly to production ramp up like materials, labor, machinary. The other portion links to complications around launching Rivian‘s first vehicles and slower deliveries.
For perspective, it took Tesla multiple rough quarters before achieving profitability after the Model 3 launch. But some analysts caution Rivian‘s losses seem disproportionate to their output so far. Others highlight Rivian‘s breakneck rate of hiring (~8k employees) and facility building as necessarily expensive upfront.
In my view, it‘s simply too early to categorize these as either "growing pains" or "red flags". Rivian entered wholly new territory in challenging major auto companies, so temporary volatility seems reasonable. Their progress in engineering top notch trucks can‘t be ignored either. We‘ll have to wait and see if these losses are growing investments or signs of deeper execution issues.
Battling Through: Rivian‘s Strategy Going Forward
Rather than throw in the towel, Rivian appears undaunted in sticking to its strategic roadmap:
Ongoing Technology Investments
A key differentiator for Rivian is its in-house developed "skateboard" platform anchoring the R1 truck and SUV models [R5]. This houses the battery, drive units, suspension, and other critical components – Rivian‘s special sauce enabling high performance capabilities.
Per their latest shareholder letter, Rivian reiterates plans to invest heavily into their next-gen R2 platform, upgrading battery tech, and other proprietary systems underpinning future products. Like Tesla, prioritizing R&D spends to widen their advantage makes sense.
Portfolio Expansion Through Acquisitions
Besides the R1 lineup, Rivian has been broadening capabilities through acquisitions:
- Purchased shuttered Mitsubishi plant in Illinois enabling production capacity of 200k+ vehicles/year [R6]
- Acquired a 20% stake in UK‘s LiveWire electric bus/van maker opening doors to that high-volume market [R7]
- Bought out self-driving startup August Systems to accelerate work on automation features
These acquisitions demonstrate Rivian‘s ambition extends well beyond just the R1 trucks – they aim to be a leader across green commercial vehicles too. The knowledge gained from absorbed companies also enriches development of new models.
Leveraging Partners Where Possible
Rather than overextend themselves, Rivian has maintained key external partnerships helping mitigate expenditures:
- Amazon ordered 100k custom electric delivery vans from Rivian by 2030 – allowing them to save costs via this anchor order volume [R8]
- Ford, an early investor, holds technology sharing partnership – lending over 100 years of auto experience helps steer Rivian‘s still maturing engineering IQ
Leaning on giants like Amazon and Ford is smart. It offloads chunks of manufacturing and R&D onto proven partners while Rivian focuses internal efforts on truly differentiating IP.
Reality Check: Factors Fueling and Inhibiting Rivian‘s Future
While Rivian‘s rate of progress stands out given their new entrant status, fulfilling their stretching vision depends on overcoming endless obstacles. Based on my research, here is why I see glass "half full" on Rivian but with some caution warranted:
Causes for Confidence
- CEO RJ Scaringe‘s leadership chops and depth of auto experience
- Great early reviews of Rivian vehicles underlining promising product direction
- $15+ billion cash raised gives substantial buffer against contingencies [R9]
Reasons for Concern
- Giants like Tesla pouring billions into next-gen technology
- Looming wider economic troubles hampering discretionary spending
- Immense difficulty of executing everything flawlessly as a young company
Balancing it out – Rivian seems to be ahead of most electric vehicle startups through compelling product differentiation and visionary leadership. I believe they have an above average shot at turning their ambitions into reality.
Yes, near term volatility seems guaranteed given the challenge of rapidly maturing an automaker. But by making smart bets, leveraging partnerships, and staying relentless on long term priorities, Rivian still has an opening to realize their electric future.
The Bottom Line
In summary, Rivian has expectedly posted painful financial losses as part of ascending the towering climb into auto manufacturing. Through sustained investments, seizing acquisitions, and strategically leveraging allies, I would not prematurely write them off. If Rivian can stay resilient through the headwinds, their fresh brand continues embodying the thrilling electric future.
I know the barrage of concepts and figures throughout this article was a lot! Let me know if you have any other questions about Rivian‘s situation. As an auto industry geek it has been fascinating to monitor their quest to redefine electric trucks.
References
[R1] https://www.statista.com/statistics/1228632/global-outdoor-recreation-market-size/[R2] https://www.barrons.com/articles/rivian-stock-price-51658342773
[R3] https://www.theverge.com/2021/7/23/22589234/rivian-raises-2-5-billion-investment-round-ford-amazon
[R4] https://www.wsj.com/articles/rivian-posts-1-7-billion-first-quarter-loss-11651708305
[R5] https://rivian.com/technology
[R6] https://electrek.co/2022/07/19/rivian-r2-platform-second-ev-models/
[R7] https://media.ford.com/content/fordmedia/fna/us/en/news/2022/04/20/ford-pro–rivian-transit-electric-vehicles.html
[R8] https://www.cnbc.com/2022/07/21/rivian-is-making-amazon-vans-and-could-deliver-50000-by-2024.html
[R9] https://www.barrons.com/articles/rivian-stock-price-earnings-ipo-51637552787
