📊 2022 Q4 and Full-Year Earnings Results & Shareholder Letter: 50K production goal for 2023, ~400 Mile Range for Max Pack

[Guy]

I remember reading the story of People’s Express airlines in The Fifth Discipline, Art and Practice of the Learning Organization back in the 90’s. Going off feeble memory here, so hope I get the essence if not detail correct. They started out with a very high service quality which made them very popular and they grew very quickly. Unfortunately, too quickly. Faster than they could keep up with the training and acculturation of new employees, which was a large part of what enabled their service model. Service quality slipped causing a downward spiral and they ultimately went bust. The story was used to illustrate a systems dynamic called ’limits to growth’ if I remember correctly; the key lesson being that growth needs to be throttled to the rate that allows for all the key enabling factors to keep up. I hope that this is what Rivian are trying to do. If so, it will be for the best longterm provided they can get there.

That is a good story and I can see it working. Unfortunately they have cost pressures and with Georgia pushed back a year they are going to need to raise additional capital. Coupled with a lower than expected 2023 and 2024 volume this adds to the problem. As to quality they are having, even with low run rates and therefore additional time at the factory to get it done right, numerous minor issues like alignment and wind noise which are clogging up the SCs which were not expanded quickly enough. This does not help the brand, or their cash situation.

They still have time to fix things and I would hope quality at the factory improves which with the incremental increase in SCs help reduce waiting times.

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[jbssfelix]

I remember reading the story of People’s Express airlines in The Fifth Discipline, Art and Practice of the Learning Organization back in the 90’s. Going off feeble memory here, so hope I get the essence if not detail correct. They started out with a very high service quality which made them very popular and they grew very quickly. Unfortunately, too quickly. Faster than they could keep up with the training and acculturation of new employees, which was a large part of what enabled their service model. Service quality slipped causing a downward spiral and they ultimately went bust. The story was used to illustrate a systems dynamic called ’limits to growth’ if I remember correctly; the key lesson being that growth needs to be throttled to the rate that allows for all the key enabling factors to keep up. I hope that this is what Rivian are trying to do. If so, it will be for the best longterm provided they can get there.

Not necessarily this exact story, but the overall lesson is a common business school case study. Small startups often do well by being scrappy, being very customer oriented, and having loose rules in order to allow them to adapt and learn on the fly. As they grow, however, those loose rules start to move from being a feature to being a bug, creating chaos and losing control of how the business should operate. Many organizations fail around the 100-employee (would obv need to adjust for something like an auto manuf startup) mark because what worked when they were a scrappy startup starts to bite them in the ass and they struggle to create order and structure without losing the scrappy culture that got them there in the first place.

 

[dfx]

For 20+ years prior to Covid the logistics efficiency in the US was amazing and then it came to a screeching halt. Management no doubt had to have planned for a much different environment than what arrived as they entered the vehicle production phase. Nonetheless, they are managing to bring to the market an extremely high quality product at a reduced run rate while continuing to innovate and improve their product mix. There is a lot of value in what they've accomplished and I hope success comes to them. Having driven Model S' for 10 years I can say the R1S is simply an amazing vehicle.

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