Rivian Layoff 10% Staff and Lowers Production Forecast for 2024

[RivianRunner]

Tesla needed 17 years to become profitable. No way will Rivian become profitable with the next three years.

If Rivian became net profitable in 3 years (2027), that would be 18 years that it took them (from 2009), a year longer than Tesla.

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[SANZC02]

Like I said, you are confusing gross automotive profits with corporate net profits. Tesla had to spend billions on the Supercharger Network, their service network, and corporate overhead. That left them far from a net profit all those years. But auto manufacturing had positive gross profits, unlike Rivian.

Each car Tesla built and sold improved their financial position. The more cars Rivian builds and sells, the more they lose. They need manufacturing with a better cost structure. This is fundamental to becoming more valuable, not less valuable. More volume alone cannot get them there.

You are just not paying attention, a lot of the loss is from fixed cost, the more cars delivered the lower the loss as those fixed cost are spread over more vehicles.

This is my last response to you as you clearly have what you think is proper information, you do you but think about this last chart, if they lost more money the more cars they made this number would be increasing not decreasing and with the savings they should yield with the q2 shutdown they will shrink even more in q4 2024. The q4 number was up from q3 as deliveries fell in q4 mostly because of Amazon deliveries being down.

 

[RivianRunner]

You are just not paying attention, a lot of the loss is from fixed cost, the more cars delivered the lower the loss as those fixed cost are spread over more vehicles.

This is my last response to you as you clearly have what you think is proper information, you do you but think about this last chart, if they lost more money the more cars they made this number would be increasing not decreasing and with the savings they should yield with the q2 shutdown they will shrink even more in q4 2024. The q4 number was up from q3 as deliveries fell in q4 mostly because of Amazon deliveries being down.

You need to look in the mirror when you accuse me of not paying attention!

Yes, the name of the game is to increase production volumes to reach both gross profitability and net profitability. But there is a persistent inaccuracy that is repeatedly endlessly in this thread. Specifically, that Tesla had negative gross margins for many years. The fact is, Tesla has positive gross margins every year from 2012 and even before. In stark contrast, even when looking at comparable timeframes in a company's existence, Rivian's gross margins are strongly negative. It's a night and day difference.

I believe the R1T and R1S are structurally unprofitable to manufacture due to their design and features. A key component of success is both the design of the vehicle to make it easy to produce at a relatively low price, and the design and engineering of the production facility to make it easy to produce quickly at a low cost. There will be some improvements here in Q2 when they reconfigure the production line, but I think the complex nature of both the R1T and R1S will result in it still being unprofitable (even on a gross margin basis) to manufacture.

A related problem from a cost perspective is Rivian's lack of vertical integration. Seats are one of the larger component costs after the battery and Rivian pays Hyundai to make them. In other words, Hyundai makes a nice profit every time a Rivian is manufactured, while Rivian loses money. If Rivian would grab the bull by the horns and make their own seats, they could probably reduce their loss per vehicle by a substantial amount. Of course, that assumes they can make seats in an efficient manner.

Why are there so many people that think manufacturing efficiently is easy? That if Tesla or Toyota can do it, then it's just a matter of buying the equipment, setting it up, ordering the components, and screwing them together efficiently enough to make a profit? Why do people assume it's a given that any company organized for the purpose of manufacturing, and hiring a bunch of people with experience manufacturing, can manufacture competitively? That it's a given that they can? All they need is a desirable product and everything else, including cost structures, will simply fall into place? Manufacturing efficiently is more difficult than people realize. And if the product design doesn't lend itself to efficiency of manufacture, then that product will probably never get to profitability.

Once again, it comes down to manufacturing efficiency which is apparently much more involved than people here realize. Rivian has made hundreds of small non-optimal decisions to get where they are today. That's not to say the product is not desirable, it's that it's not being produced at a cost below what it can be sold for. That is a huge problem and the fact that it's been in production for years without reaching gross profitability is a huge problem that has no easy answers.

Yes, Tesla was gross profitable right from the get-go. I don't think all the FUD spread by the mainstream media to create the opposite impression is an excuse any investor should hide behind. Because it's right there in all of Tesla's annual reports going back to the IPO in 2012.

BTW, the trajectory of loss per vehicle you embedded in your reply represents gross loss per vehicle. Net loss per vehicle is much higher! Why are you having such a difficult time understanding that Tesla had positive gross margins per vehicle every year since 2012?

 

[LetsgoRIVN]

I don't care what you attribute Tesla's success to, because I already know. It was a very long list of correct decisions and superior vision. Call it genius or call it a lucky streak, just know that not giving credit where credit was due does not help you become a better investor.

I have a dim view of people who minimize Elon's accomplishments simply because they don't like him. That's no way to create prosperity for you and your family. You have to have your eyes wide open and leave your preconceived biases behind or you will personally pay for the price for being irrational. That is one thing I knew when I started investing many decades ago and the number one thing I attribute my success to.

Just know that many people falsely believe they are unbiased, and that they see the investment landscape for what it is. Just know that the vast majority of them are fooling themselves, it's a lot more unlikely to be unbiased than most people can even realize. The funny thing is, it's not all that difficult to be unbiased, you just have to make it happen. Most people don't want to, so they fool themselves into thinking they already are unbiased. Question everything you think you know and keep your eyes wide open. Don't construct complex constructs in your mind, look at things simply.

Ofcourse Elon is lucky, he said himself “he was few hours from filing chapter 11”. I have no political views on Elon and all I stated were facts. Not sure why you got excited lol

 

[RivianRunner]

Ofcourse Elon is lucky, he said himself “he was few hours from filing chapter 11”. I have no political views on Elon and all I stated were facts. Not sure why you got excited lol

I never got excited, I simply disagree that Elon's success is due to luck.

Luck doesn't work over many years and many companies, for Elon to get where he is today he had to have the superior vision and make tens of thousands of decisions that were correct decisions. Many of them had counter-intuitive correct answers. Luck does not allow you to thread the needle that many times in a row. Give credit where credit is due - don't try to pawn it off as luck. There is only one new American auto company in the last century that has become profitable (and over a hundred that have already gone bankrupt). The barriers to entry are huge and those are terrible odds. You need an exceptional leader to survive..

As to his dramatic statements about bankruptcy, it was true back in 2008-2009 (or there abouts) but the investment capital came through. He also said they were weeks from bankruptcy in 2018 (or was it 2019). In any case, Elon is over-dramatizing that one because they had access to all kinds of private equity capital. The only reason Elon didn't use it, is because he didn't want to dilute the value of the company. He thought they could squeak by, and they did. He probably was in internal debates with his CFO (or other execs/board members) and he's proud that he was the one that threw caution to the wind and won, against their concerned advice.

Never bet against a man like Elon Musk. And it's not because he's naturally lucky. He has an uncanny ability to see the true essence of the core of any problem and figure out how to solve it in the most efficient manner. He's far from perfect, but I know of no one who can match his abilities.

This is a bit off-topic but it has parallels to how one should think about Rivian. This auto manufacturing is hard stuff, not at all as easy as it looks on the surface to most on-lookers.

RJ seems like a good guy but he holds stuff pretty close to his chest, so we don't have good visibility into how he runs the company. I don't think he has previous business experience. If Rivian makes it with RJ at the helm, I will credit RJ for making that happen, not say he must have been lucky. And he fails, I won't call it bad luck either. I will say RJ didn't have the "right stuff" to make it happen. Always give credit where credit is due.

 

[Electrified Outdoors]

It's a false narrative to base how well each company was doing by the volume of vehicles they produced.

Tesla was focusing on building EVs at positive gross margins and losing money on building out a global fast charging network. In 2012 they kicked off the Supercharger network with 6 fast charging locations in North America. The following year they launched the Supercharger Network (and service and delivery networks) in Europe and China because they knew this would greatly expand their addressable market. Spending the money on building a world-class Supercharger Network in all major automotive markets was a necessary component of success and they could do that because they weren't losing money building cars.

Rivian cannot hope to create a ubiquitous fast-charging network, which is why they mostly focus on building limited fast chargers around National Parks and leave the heavy lifting to third-party charge networks (and now Tesla). If they could build cars at positive gross margins (like Tesla did through their history), then they could spend their money on charging infrastructure and building out the delivery/service networks as they expanded their EV manufacturing at a gross profit.

True point but I was not basing it on how many vehicles they produced. I'm simply saying they produced vehicles for 8 years (I'm not counting the original roadster) before they started turning a profit.

Every situation is unique so comparisons are probably not all that relevant.

Message I'm trying to convey is that Rivian has only really been producing vehicles for a little over 2 years. Let's say 2 and 1/2 years. Tesla was producing vehicles for more than 3x as long before they were profitable.

Let's also remember that during that time there were virtually no other chargers available. Tesla had no choice as a pure EV company but to build an infrastructure to make its vehicles viable for driving outside of their normal range. Not the case in the 2020s (though there are still some charging deserts).

Tesla is very special in that they are an energy play, and AI play, and a vehicle play. I am a shareholder and I mainly interested in the energy and AI portions. I believe that's where Tesla's value resides.

Rivian's vehicles are still underpriced even Sandy Monroe said this is $120,000 vehicle easily when he reviewed it.

There are some immediate things I think Rivian needs to do.

They need to do some cost cutting in the R1 and come out with the explore trim that they originally advertised.

They need to start charging for premium connectivity and in order for them to start doing that they need to put some kind of video entertainment into the infotainment software. Having the ability to watch Netflix or YouTube or others Will make it a no-brainer to go for a premium connectivity plan.

They need to allow other EVs to charge at their chargers using a strategy similar to what Tesla is doing. Let Rivian owners pay the lower rate of 36 cents per kilowatt hour but charge a membership fee or a higher per kilowatt hour charge for non-members. One important thing they need to do here is make sure that they don't allow other EVs to ruin the charging experience by doing things like charging to 100% at a busy station or really slow charging EVs clogging up the station. By pricing it higher it makes it available to folks in an emergency but discourages using it to charge to 100% frequently.

I'm confident Rivian can do it but we are in for a difficult time during the next 12 to 18 months. I think it will be interesting to see what the economy as a whole does.

 

[Zoidz]

...
Why are there so many people that think manufacturing efficiently is easy? That if Tesla or Toyota can do it, then it's just a matter of buying the equipment, setting it up, ordering the components, and screwing them together efficiently enough to make a profit? Why do people assume it's a given that any company organized for the purpose of manufacturing, and hiring a bunch of people with experience manufacturing, can manufacture competitively? That it's a given that they can? All they need is a desirable product and everything else, including cost structures, will simply fall into place? Manufacturing efficiently is more difficult than people realize. And if the product design doesn't lend itself to efficiency of manufacture, then that product will probably never get to profitability.
...

Exactly.

Manufacturing at volume is difficult. Scaling up a new product is incredibly difficult. I've done engineering work for companies building their 3rd or 4th manufacturing plant for an existing product. They still face unexpected challenges and delays even with in-house experts who have done it before. Many/most times, incremental manufacturing efficiencies can't be identified and optimized until the line is first up and running. It's just the nature of the manufacturing business.

Paraphrased quotes posted here - "Rivian should set up tents like Tesla did and build the R2 in Normal." If it was that easy, did it occur to the author(s) that Rivian has plenty of smart people and they would have already done it if it was a feasible, short term, profitable solution?

 

[RivianRunner]

True point but I was not basing it on how many vehicles they produced. I'm simply saying they produced vehicles for 8 years (I'm not counting the original roadster) before they started turning a profit.

Not to belabor the point, but it's not clear whether you understand the distinction between turning a corporate profit and making vehicles at a gross profit. The latter is something Tesla did from the beginning and something Rivian is still nowhere close to. I don't say this to bash Rivian, I say it because it lies at the root of Rivian's challenges. I have no problem with Rivian showing a corporate net loss every year for the next decade, but they need to make vehicles with positive gross profits now to be considered viable.

Message I'm trying to convey is that Rivian has only really been producing vehicles for a little over 2 years. Let's say 2 and 1/2 years. Tesla was producing vehicles for more than 3x as long before they were profitable.

Please stop this! Tesla was showing a gross profit per vehicle from the start! Elon demanded that. In fact, it's why he reluctantly took over the CEO role, he didn't want to, but he needed to because the previous CEO was OK selling EVs at a gross loss. That means the more they sold, the more they would lose, exactly the situation Rivian finds themselves in. Elon fixed it and maintained a gross profit per vehicle every year since. Do you get this? It's like no one wants to see the honest truth.

Let's also remember that during that time there were virtually no other chargers available. Tesla had no choice as a pure EV company but to build an infrastructure to make its vehicles viable for driving outside of their normal range. Not the case in the 2020s (though there are still some charging deserts).

Yeah, Tesla is extending an olive branch to all other EV manufacturers and it could be a lifesaver for Rivian. I think they can ease off capital spending on charging infrastructure and re-direct it towards their service network. But that doesn't fix the fact that they are building vehicles at a gross loss, even after over two years of production optimizations. This is the real problem. And, no, I don't believe RJ when he says they will be gross profitable per vehicle in Q4 unless it's a one-off result due to stacking everything to favor Q4 so they can re-capitalize. Problem is, smart money is not going to fall for that.

They need to do some cost cutting in the R1 and come out with the explore trim that they originally advertised.

Rivian has been negligent by having such a high cost structure to begin with. I'm not convinced RJ can make the tough decisions necessary to get to where they need to be now.

They need to start charging for premium connectivity and in order for them to start doing that they need to put some kind of video entertainment into the infotainment software. Having the ability to watch Netflix or YouTube or others Will make it a no-brainer to go for a premium connectivity plan.

Rivian doesn't have enough vehicles on the road for this to make a significance difference. They would be better off fixing the real problem, the high cost of manufacture and making the software more robust.

They need to allow other EVs to charge at their chargers using a strategy similar to what Tesla is doing. Let Rivian owners pay the lower rate of 36 cents per kilowatt hour but charge a membership fee or a higher per kilowatt hour charge for non-members. One important thing they need to do here is make sure that they don't allow other EVs to ruin the charging experience by doing things like charging to 100% at a busy station or really slow charging EVs clogging up the station. By pricing it higher it makes it available to folks in an emergency but discourages using it to charge to 100% frequently.

That's all just noise in the bigger picture of the real problem at Rivian. They have to make cars at a gross profit per vehicle. That's the only thing that will allow them to ramp to high volumes.

I'm confident Rivian can do it but we are in for a difficult time during the next 12 to 18 months. I think it will be interesting to see what the economy as a whole does.

The economy hasn't helped, but Rivian would still have negative gross margins, even if there was a goldilocks economy with low interest rates and people were flush with cash. The R1T and R1S are nice cars but they are unsuitable for manufacturing efficiency. Compounding that, it appears Rivian is particularly inefficient at manufacturing (and that is a necessity to succeed in automaking). It's a faulty business plan to start out without positive gross margins, no matter how tiny they are. This is basic business of any mass-produced item. Ramping a product that has negative gross margins is a recipe for disaster. But that's exactly what Rivian has done.

Rivian cannot re-write the rules of capitalism by ramping products that cannot be profitable. I think RJ has finally understood that (which is why he is no longer expanding production) but has decided to make bullish projections anyway. I think it's a "hail Mary" pass in an attempt to raise more money in early 2025. That will dilute the value of current shares and, Rivian will still be struggling along, running at negative gross margins (note that RJ didn't say they would have positive gross margins going forward, just for Q4).

 

[Electrified Outdoors]

Not to belabor the point, but it's not clear whether you understand the distinction between turning a corporate profit and making vehicles at a gross profit. The latter is something Tesla did from the beginning and something Rivian is still nowhere close to. I don't say this to bash Rivian, I say it because it lies at the root of Rivian's challenges. I have no problem with Rivian showing a corporate net loss every year for the next decade, but they need to make vehicles with positive gross profits now to be considered viable.

I understand what your saying. Its an important distinction, however turning a profit is still something that needs to happen in order to be sustainable. What I am trying to convey is that the companies are different, but they are the same in that this is a long term proposition.

Expecting Rivian to start producing vehicles and be profitable this quick is not reasonable. Just one year ago, very few people even knew what a Rivian was. When I towed my camper in May of 2023 I had 5 people at the campground approach, mouths open, in complete amazement asking questions like "what is that" or "who makes it" and "who makes Rivian".

Tesla had a different approach, but the thing that's the same is that this will take patience, persistence, time, really smart execs, and tons of money.

 

[Rivian Head]

Ford announced $8100 price reduction on Mach E, now Hyundai said it will slash Ioniq’s price by $7800. Race to the bottom has just started even before R2 is announced. Plus a prospect of Chinese EV invasion to the US soil? It’s a cutthroat business.
As an owner of 2 Rivians, I Hope Rivian survives, but I wouldn’t bet on Rivian with my money.

 

[LetsgoRIVN]

Ford announced $8100 price reduction on Mach E, now Hyundai said it will slash Ioniq’s price by $7800. Race to the bottom has just started even before R2 is announced. Plus a prospect of Chinese EV invasion to the US soil? It’s a cutthroat business.
As an owner of 2 Rivians, I Hope Rivian survives, but I wouldn’t bet on Rivian with my money.

How many EVs did these guys sell ?

 

[R1TS]

How many EVs did these guys sell ?

Ford sold 40,000 Mach-E’s in 2023.

Hyundai sold 47,000 Ioniq5 and Ioniq6 in 2023.

Both more than the R1T and R1S.

 

[MXA121]

Cool retro Tesla article. They were building ~50k cars a year, burning cash, only had 1.15B in cash remaining. It was 2015. Meanwhile, Rivian just hit 50k units a year and has 9B cash. They are burning it faster but already have 3 products, with 2 more on the way.
https://www.cnbc.com/2015/08/10/tesla-burns-cash-loses-more-than-4000-on-every-car-sold.html

 

[RivianRunner]

Cool retro Tesla article. They were building ~50k cars a year, burning cash, only had 1.15B in cash remaining. It was 2015. Meanwhile, Rivian just hit 50k units a year and has 9B cash. They are burning it faster but already have 3 products, with 2 more on the way.
https://www.cnbc.com/2015/08/10/tesla-burns-cash-loses-more-than-4000-on-every-car-sold.html

The 2015 article is reporting on one of the few quarters in which Tesla had a negative gross margin on every car sold. Quarterly results vary, but when Tesla's historic results are looked at on an annual basis, the gross automotive margins were always positive. The comparison here is that Rivian's gross margins have never even been close to break even.

It's a notable article though as it points out Tesla's 5-year guidance for 500,000 EVs in 2020, a target they managed to barely hit, even as COVID hit near the beginning of the year. Whoever said Tesla has lofty goals they never manage to hit? Plenty of naysayers said that 500K by 2020 was absurd, impossible, not practical, dreaming, not gonna happen.

Tesla does set "stretch goals" when they don't see any major impediments. What's surprising is how often they are able to meet or exceed such goals.

Capitalism requires that businesses not only bring high quality products to market, but that they do so at a cost that makes them compelling. One without the other doesn't cut it in capitalism. This is how the end user gets good value.

 

[Ecupip]

Ford announced $8100 price reduction on Mach E, now Hyundai said it will slash Ioniq’s price by $7800. Race to the bottom has just started even before R2 is announced. Plus a prospect of Chinese EV invasion to the US soil? It’s a cutthroat business.
As an owner of 2 Rivians, I Hope Rivian survives, but I wouldn’t bet on Rivian with my money.

I hope Rivian survives too. Unfortunately, a new product (R2) even if it was hugely profitable wouldn't help them much right now. With current gas prices and interest rates, the appetite isn't there. I don't expect either changing much in the next 12 months too.

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