The looming recession & your place in line for a Rivian [WARNING: NO POLITICS]

[R1Sky Business]

I agree with your prediction. I think we will see a recession starting in Q4 of this year.

Is this recession prediction #12. ?

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[yizzung]

Nothing but good news....happy Friday

User name checks out.

 

[R1Sky Business]

I agree. The truck is already at the very top of what I'm comfortable spending and climbing interest rates look like they may soon price me out of play. Will also obviously make Rivian's survival that much trickier.

Even if you can sell it for a profit....at least in the near future

 

[R1Sky Business]

Both Elon and Jamie Dimon (fellow billionaire and Chairman of the Board/CEO JP Morgan Chase) have both recently been quoted as having very dire outlooks for the near term (8mo+) US and global economy.

Do we simply ignore the opinions of these two sage investors?


Two good things about the extended Rivian delays is later delivery customers get less buggy vehicles and we also get more time to squirrel away $$ for our down payment. If my delivery actually takes place as "promised" in Q4 this year, I should only need to finance less than $20k which is pretty easy to pay off monthly.

Most people are probably not as diligent saving $$$ as u.

 

[R1Sky Business]

I think there are many reservation holders where you are.

Based on the responses from the March 1st price hike, many people said they were stretching at current prices and would be priced out with the higher prices.

Unless people have the funds set aside for a cash purchase, the rising prices that eat into available monthly free cash combined with higher interest rates will price people out as well.

I think the longer Rivian takes to convert pre-orders to sales, the lower the conversion rate will be on those pre-orders.

Any chance Rivian is doing this on purpose.

 

[R1Sky Business]

Well 30 year mortgage rates have nearly doubled from the low of December 2020. There is pretty much no way we are getting a soft landing from this mess and really it's one of those things that seems so obvious you think maybe it can't be true.

I think two big factors will hit Rivian pre-orders......a number of buyers will drop out for financial reasons and a very large number of buyers have multiple vehicle reservations and orders (I have SEVEN including a Dec' 2018 R1T) -- many of them will end up with something other than a Rivian.

Seven...details please. What's your plan for these vehicles? If you don't mind me asking

 

[R1Sky Business]

User name checks out.

Masochist here

 

[manitou202]

Based on the responses from the March 1st price hike, many people said they were stretching at current prices and would be priced out with the higher prices.

Unless people have the funds set aside for a cash purchase, the rising prices that eat into available monthly free cash combined with higher interest rates will price people out as well.

A $82,000 loan at 72 months goes up about $100 per month from a 3% interest to a 6% interest rate. If you were this tight on buying a Rivian to begin with, you probably weren't making a good financial choice. Unless interest rates on auto loans jump above 10% I don't think they will have a big impact on auto sales. Other factors like loss of jobs and other rises costs will have a bigger impact.

 

[yizzung]

A $82,000 loan at 72 months goes up about $100 per month from a 3% interest to a 6% interest rate. If you were this tight on buying a Rivian to begin with, you probably weren't making a good financial choice. Unless interest rates on auto loans jump above 10% I don't think they will have a big impact on auto sales. Other factors like loss of jobs and other rises costs will have a bigger impact.

Unfortunately you can't look at these things in a vacuum. Rent is up 11.3% nationally in the last year. Adjustable mortgates and HELOCs are up (and rising). What's discretionary? The roof over your head or your electric fun-time weekend wheels?

Also, lending standards are going to tighten significantly. One can go from a 3% car loan today to a "sorry you don't qualify for $82K of credit anymore" overnight. The housing bubble didn't burst solely because of a few percentage points of interest rates. Some people were cut out entirely.

 

[yizzung]

R1T, R1S, Cybertruck, Hummer EV, Range Rover Sport PHEV, Bronco Raptor, Ineos Grenadier. I will at most end up with two of these and possibly only one as the last two are more in the off-road toy category.

I don't have a delivery date in sight for a single one of them btw.....

Impressive.

 

[Engi_Nerd]

A $82,000 loan at 72 months goes up about $100 per month from a 3% interest to a 6% interest rate. If you were this tight on buying a Rivian to begin with, you probably weren't making a good financial choice. Unless interest rates on auto loans jump above 10% I don't think they will have a big impact on auto sales. Other factors like loss of jobs and other rises costs will have a bigger impact.

That $100 (obviously) adds $7200 cost to an already expensive vehicle, essentially negating the benefit of the fed rebate. My comfort with purchasing has nothing to do with my ability to make the payments and everything to do with the long term value proposition versus both ICE vehicles and other BEVs.

Many Tesla buyers came from less expensive vehicles not because that's all they can afford but because they are value-focused and the long term benefit has been substantial.

Regarding resale, I think it's too speculative to guarantee the price hike will keep it strong long term. If the company runs in to any substantial issue, the flesh hungry media would see it sour in a hurry.

 

[Gator42]

Caveats: I work in tech / private equity and have a July 2020 order for an R1T.

While I've been somewhat confident that we might pull off a soft landing, my economic outlook has darkened over the last few months. Pick your poison: war in Europe, Russian oil/gas embargo, China lockdown, 40-year high in inflation, supply chain problems (scarcity AND glut), rising interest rates, stock market sell-off, crypto bubble, housing bubble, pandemic, monkey pox, need I go on?

The inflation numbers out today indicate that the Fed has to get way more serious, which means recession is on the way. I'm seeing lots of companies freeze hiring and a trickle of early layoffs. But out in Silicon Valley, down-rounds, bigger layoffs, and liquidations of the more speculative startups are just around the corner.

To date, we've only heard about a steady uptick in Rivian orders. 90,000 (I think) in the last earnings call. But I'm increasingly convinced that a significant number of these orders are going to vaporize. Somebody placing their order 18 months ago when their stock portfolio was 30% higher than today or when they had access to a dirt cheap home equity loan or (worse) when they were gainfully employed, is in a different position today (or very likely will be in a different position six months from now). Not to mention that many folks seem to be hedging by putting multiple deposits on multiple cars.

I suspect that the recession is going to be uglier than most are anticipating. And when perception catches up to reality, I think a lot of people are going to be dialing back their purchases of boats and ski cabins and electric adventure toys. The good news? Well, I suspect that you might get your Rivian sooner than you expect, assuming you decide keep your place in line...

We’re in similar space and probably looking at the same indicators and seeing they’re all flashing red. Unemployment below four and inflation above four means recession to me…We’ve got a real inflation problem and will for some time. There will be pain.

Does that mean a level of pain that frees up the waiting list or the pain that dries up a conservative burn rate for a auto company will a multi billion dollar burn rate? My tin foil hat is for protection, not prediction?…

 

[thrill]

A $82,000 loan at 72 months goes up about $100 per month from a 3% interest to a 6% interest rate. If you were this tight on buying a Rivian to begin with, you probably weren't making a good financial choice. Unless interest rates on auto loans jump above 10% I don't think they will have a big impact on auto sales. Other factors like loss of jobs and other rises costs will have a bigger impact.

If the only thing that was costing more was this single vehicle, then yeah, a $100 a month price increase would be nothing. But for many their entire lives are costing 1% more month after month and so on for significantly longer than they likely have savings to ride it out. Eventually decisions have to be made to spend that $100 a month on gas for the perfectly operable vehicle in hand or take on 10x that debt for the shiny new thing.

IMO, Rivian needs to be aggressive about recognizing the financial wherewithal of their current reservation holders and either chop them off at the knees and sell to whomever ponies up the cash (which is what I think they will do, based on their shortsightedness and tone deafness in the recent price raise process), or they need to play the long game on the finance side too, in addition to long term planning to building out a worldwide manufacturing firm, and to use perhaps a significant portion of that cash holdings to deliver good financing deals to their customers who are otherwise teetering on the fence. Take away the attention of that loyal base and you're all that much more unlikely to recover very quickly since you have to realize how much effort it took to attract those early participants in the first place.

 

[bigtex]

I expect you'll get a Rivian sooner than you'd expect. I took delivery last week on a Sept 2021 preorder. Someone fell thru and my guide let me scoop up a completed launch edition that matched my config. Rivian is on a push right now to deliver as many vehicles as possible in this quarter.

I financed 70k at 2.9%. Kept cash handy. Fully expecting further market corrections. Making a killing off inverse leveraged ETFs right now.

 

[SANZC02]

A $82,000 loan at 72 months goes up about $100 per month from a 3% interest to a 6% interest rate. If you were this tight on buying a Rivian to begin with, you probably weren't making a good financial choice. Unless interest rates on auto loans jump above 10% I don't think they will have a big impact on auto sales. Other factors like loss of jobs and other rises costs will have a bigger impact.

But you are not factoring in the other budget impacts with utility increases, food, household goods, insurance. Let’s say your monthly budget was 3k a month, it has gone up 12%, now you are spending an extra 360 a month, now add in that extra 100 and what you planned for 3 years ago you now have 460 a month less.

I agree, if it was that tight before maybe not a good decision to begin with but it certainly is more than 100 a month. Based on how many people said they would be priced out with the price increase before, they did not have much room where they felt comfortable moving forward. 15k at 5% over 72 months is 240 a month. The above example is almost a 2x hit to their budget over the price increase.

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