Article: Rivian's path to survival is now remarkably clear -- agree / disagree?

[Electric Rivilution]

Rivian's path to survival is now remarkably clear
New and updated vehicles could help it succeed where others fail

https://www.autoblog.com/2024/06/09/rivians-path-to-survival-is-now-remarkably-clear/

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[ndmiller]

This has been clear for a long while. RJ has been telling the same story on the same strategy for more than a year I've been listening.

 

[DuoRivians]

This is originally from TechCrunch.

 

[jjswan33]

Read this the other day and thought it was a very fair analysis. It's been clear to us long term investors for a while. Rivian needs to prove they can make a profit selling vehicles on the R1 platform and then they have may have a path to scale R2.

 

[lefkonj]

Feel like I have been reading these for more than a year now, minus the Gen2 stuff.

 

[beyondgravity]

Tesla is profitable; but why is the stock tanking. I have to say, it is growth. They need to bring R2 sooner to appeal to wider market. I hope this Gen 2 is just a path to R2 faster. This was the reason I was disappointed with Gen2. They should have added the NACs or new scroll wheel or glove box…..so that it rolls them into R2 quicker.

I sincerely hope they are using the made-to-order R1T to quickly at least converting one production line to manufacture and sell R2 by Q4 this year.

 

[Gentilly7]

I disagree. Or I should say it’s not any more clear than it was before the R1 refresh. Yes, they have made some good cost reduction moves under the skin. But, I’m still concerned about the number of options Rivian has, especially on the higher trims. They should really limit configurations to produce as many vehicles as possible with reduced manufacturing complexity. Time will tell in Q4 if Rivian is really able to turn a profit like RJ said but I’m still waiting for the proof of concept.

 

[CobraJerky]

 

[RivianRunner]

Yeah, I think it's a fair article. But if you read it with a critical eye, it doesn't say much.

All it really says is that Rivian has laid out the path forward, in terms of the model line-up and where they will be made. It doesn't offer an opinion on the chances of that being sustainable, of it bringing them to profitability.

I think RJ is smoking hopium if he thinks the new models will make them profitable.

 

[reindeer]

Yeah, I think it's a fair article. But if you read it with a critical eye, it doesn't say much.

All it really says is that Rivian has laid out the path forward, in terms of the model line-up and where they will be made. It doesn't offer an opinion on the chances of that being sustainable, of it bringing them to profitability.

I think RJ is smoking hopium if he thinks the new models will make them profitable.

I'm not sure the Gen2 was part of the plan to profitability. If anything the business structure, and factory efficiency changes allowed them to generate a more lean product which by happened stance, brought us a Gen2 R1 line. The work they did negotiating new contracts/parts and becoming more vertically stacked are extremely positive signs of a business making the efforts for survival. Had they not had the ability to agree upon contracts (interoperability, raw materials, etc.) that would be a red flag to us that they don't have the runway to survive. Consider all of this in the light of survival is more sure now, than it has been. Again on the Gen2 point, it's rare (so far in the EV space) to receive a refresh within 2-4 years of a product. Generally its a 5-7 year refresh cycle when buying in bulk to expire the use of your existing contracts.

Rivian's doing fine.

 

[RivianRunner]

Tesla is profitable; but why is the stock tanking. I have to say, it is growth.

The auto business is strongly cyclic, always has been. Profits fluctuate with the economy, model lineups, profit margins. And so do stock prices.

TSLA is over well over 10X where it was just 5 years ago today. 5 years ago, it was trading around $14/share. Today it's trading at $170. The company can't help it if the mo-mo crowd pushed the stock price too high, too soon. The stock price isn't tanking, it's constantly readjusting as investors try to guess it's future value. My guess is that within 2 years from now it will be at least double its current price. Don't try to analyze the price on a day-to-day basis, that's just investors being uncertain about what the future holds.

The next wave of production and sales growth will see higher revenues, higher margins and a higher stock price. And never forget, Tesla is not just an auto company, they have a lot of non-automotive irons in the fire could suddenly become strongly additive to the share valuations, so it's not out of the question that TSLA could be worth 5X what it's worth now, in less than 3 or 4 years. Those kinds of non-automotive future earnings are more speculative, even if I believe they are likely. But it's what I look for as an investor, solid companies that probably won't crash and burn, with the potential to undergo massive appreciation. The former keeps risk low, the latter is what can supercharge your returns.

 

[Supratachophobia]

Tesla is profitable; but why is the stock tanking. I have to say, it is growth. They need to bring R2 sooner to appeal to wider market. I hope this Gen 2 is just a path to R2 faster. This was the reason I was disappointed with Gen2. They should have added the NACs or new scroll wheel or glove box…..so that it rolls them into R2 quicker.

I sincerely hope they are using the made-to-order R1T to quickly at least converting one production line to manufacture and sell R2 by Q4 this year.

Tesla is tanking because their unhinged CEO convinced people that they weren't a car company. Well, they are. And as such, they are way too overvalued

 

[Electron]

In my opinion, 2025 is an important year for EVs in general, especially affordable EVs. This is why I think it would have been more beneficial for Rivian to fast track the R2 and arguably even more so the R3s as much as they could for a 2025 release.

Easier said than done I know, but the point that I'm making is that we need volume sellers and the R2 and R3 would have been perfect if it were to be released in 2025, while the best selling car in the World, the Model Y is in a weird limbo at the moment.

Tesla doesn't want to take away from the new Model 3 (Highland) sales, going as far to say publicly that there will be no refreshed Model Y this year, when in reality project Juniper is undoubtedly in the works in the background.

All this to say, I think putting more focus on the R2 and R3 would have been more beneficial than even the new R1 Refresh as awesome as it is. It's quite a gamble and of course we can only speculate as there are a ton of things we don't know as investors/owners on the outside looking in.

Rivian's approach with the R1 is clearly banking on the luxury segment and class of buyers who have money to spend. It's no surprise that the only category without a major decline is in the luxury car segment, because those with money will still spend.

Tesla on the other hand is banking on the volume sellers and the release of the new Model 3 is no surprise at all as they could milk those sales like an appetizer, before coming out with the main course, the new refreshed Model Y. Guess who will make more money? This is what Rivian needs to do with the R2 and R3.

We need volume and need it really bad. Like I said, we don't know what we don't know, but just sharing my thoughts and emphasizing that focusing on volume in this case with Rivian would be more beneficial than spicing up the flagship. I do get that they had to rework the R1 so that it didn't remain a bucket without a bottom, just losing money. It's not sustainable so we can't blame Rivian for doing this either.

 

[RivianRunner]

I'm not sure the Gen2 was part of the plan to profitability. If anything the business structure, and factory efficiency changes allowed them to generate a more lean product which by happened stance, brought us a Gen2 R1 line. The work they did negotiating new contracts/parts and becoming more vertically stacked are extremely positive signs of a business making the efforts for survival. Had they not had the ability to agree upon contracts (interoperability, raw materials, etc.) that would be a red flag to us that they don't have the runway to survive. Consider all of this in the light of survival is more sure now, than it has been. Again on the Gen2 point, it's rare (so far in the EV space) to receive a refresh within 2-4 years of a product. Generally its a 5-7 year refresh cycle when buying in bulk to expire the use of your existing contracts.

Rivian's doing fine.

I think where my analysis differs the most from yours, is I don't think the efficiencies Rivian has been touting will be anywhere near enough to make the company viable as an automaker. The reason Rivian refreshed earlier in Gen 1's life than is typical in the industry is because Gen 1 was an efficiency disaster. It was not engineered to be manufactured quickly.

Most neophyte investors base their analysis on how good the product is. But it's like Elon says, anyone can build a great car, the trick is building a great car that can manufactured efficiently enough to be sold profitably.

If it costs you more to build the car than you can sell it for, there is no point in building that car. Even the first year's production of the Model S was profitable on a gross profit basis. Rivian has NEVER been gross profitable on either model. And gross profit (selling the car for more than the direct manufacturing and sales costs) is only the first hurdle. That's the one I think Rivian is going to have trouble with, even with the Gen 2 platform. The next hurdle, assuming they ever reach gross profitability, is to sell enough of them, at a high enough gross profit, that it can make the corporation as a whole profitable. That's a very tall order. The fact that Tesla did it doesn't mean it was easy or a given.

As I recall, RJ has been predicting one quarter of corporate EBITA profitability (in Q4 of 2024 if I recall). I'm not investing in RIVN so someone can correct me if I'm wrong. While that's always possible, and while it might give investors a ray of hope, to me it sounds more like gaming neophyte investors, insignificant in the overall trajectory Rivian needs to be on to succeed in the long-term. Stacking things up to eek out a quarter of EBITA is not something Rivian should be doing, even if they could actually do that (which is far from clear).

Has RJ backed down from this prediction, or has he doubled down on it, or is he just ignoring that he ever said it? IMO, it was a massive mistake to put that out there. Even if they hit it, it was an unnecessary risk and the focus should never be on one quarter's results, it should be on the overall trend.

Good luck to Rivian, I'm not sure most people can even comprehend what an uphill battle it would be to succeed.

 

[Electron]

What exactly happens to lessees and owners if Rivian files for Chapter 11? They likely will be bought out but how much of a drop of service and OTA updates should we expect?

That's a great question. Here's my take.

If Rivian does go under, it'll highly likely be bought out and hopefully things will continue as normal with the infrastructure and teams in place. At the end of the day it's all about that $$$$$, which is the fuel to keep the wheels turning. Let's just hope that it's an American company that would buy Rivian out so that it doesn't become a Volvo/Polestar that's not really even Swedish anymore.

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