Rivian Reports 2022 Q3 Earnings. R2 Vehicle Platform Launching in 2026

[Longreach]

They will have much more competition for their R2 products (just a naturally more competitive part of the market), but they have little to no competition or threat to selling 30k/year each of the R1's for the foreseeable future, which is all they aspire/have the capacity to do.

And therein lies the problem… selling 30k/year is not sufficient to justify the valuation by any stretch of the imagination.

You may be right about the preference for a mid size truck, but how long do you think it will take for the people who already build mid size trucks to built a functional equivalent at scale with a corresponding price. There is no barrier.

As for R2, by the time it arrives the market will be filled with comparable vehicles, some that will be entering their 3rd year of production, again built by companies with scale. At best, Rivian will be a niche offering which will not justify the valuation.

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[Jac]

I know everyone has their perspective and opinion, but I don't think anything mentioned actually competes with Rivian. Especially for the truck. People cross shopping is not the same as competing, there's a difference. Having a bed and electric motors doesn't make something competitive or in the same market. Case in point, the majority of people buying R1Ts have never owned a truck before (and it's not because there wasn't an electric option). They never owned a truck because they were too big, sucked to drive and/or had far too many compromises for a bed they would rarely use. Frankly, I doubt there will ever be anything truly competitive with the R1T, because there isn't another company with the same DNA and perhaps more importantly, the market is too small to try. It would require someone like Porsche deciding to make a Cayenne truck. Or, probably most likely, Tesla making a different truck than the one they are (Cybertruck is not competitive either).

They will have much more competition for their R2 products (just a naturally more competitive part of the market), but they have little to no competition or threat to selling 30k/year each of the R1's for the foreseeable future, which is all they aspire/have the capacity to do.

My recollection is the Normal plant’s unconstrained annual production capacity is well beyond 60k R1 vehicles - even adding in EDV annual production there is room to build more R1 vehicles in Normal. Maybe the rumored R1X will ultimately be added?

To your point about the Ford and GM EV products not really competing directly with Rivian’s product positioning, Rivian also has the opportunity to deliver post-sale customer experience in a altogether different class than those franchise dealer service model companies. Not a high bar to surpass.

 

[DJG]

And therein lies the problem… selling 30k/year is not sufficient to justify the valuation by any stretch of the imagination.

You may be right about the preference for a mid size truck, but how long do you think it will take for the people who already build mid size trucks to built a functional equivalent at scale with a corresponding price. There is no barrier.

As for R2, by the time it arrives the market will be filled with comparable vehicles, some that will be entering their 3rd year of production, again built by companies with scale. At best, Rivian will be a niche offering which will not justify the valuation.

30k/each for the consumer vehicles (32.5k actually), plus 100k of the vans. But regardless, yes that doesn't support the business/valuation, but it was never intended to. The barrier to R1T competition is desire. None of the legacy companies will find it worth their time and effort to compete for a 60k/year market. If they did, they would be developing products to do it, which they aren't as far as anyone can tell. Thus far, all they have done is create electric versions of their existing products, which is great, but it's not encroaching on Rivian's market (which is cobbled together by stealing small slivers of several markets, not enough for any one of them to care about; that's the brilliant part of their go to market strategy). Legacy makers will let Rivian have that and focus on their own market. I assure you Ford could give two shits about the R1T and their entire focus is on what GM and Ram are doing. For every one customer Rivian might steal, those two can steal 10,000.

In addition to the above, Rivian plan to sell 200k/year of other vehicles out of another plant, which is underway. Then after that, expand internationally, which they have also made strides in doing (JV plant in Europe). So, nothing has changed from that plan. There will always be competition, so that's not a new variable to consider.

The only valuation that matters is the one from the IPO, but even that is old news in a new capital markets world we are now in. They don't need to justify any valuation, because they don't control a large part of that equation. What they do control and what matters is the business plan that valuation was based on, which is still largely intact and going to plan (regardless of what happens with the stock price).

 

[DJG]

My recollection is the Normal plant’s unconstrained annual production capacity is well beyond 60k R1 vehicles - even adding in EDV annual production there is room to build more R1 vehicles in Normal. Maybe the rumored R1X will ultimately be added?

To your point about the Ford and GM EV products not really competing directly with Rivian’s product positioning, Rivian also has the opportunity to deliver post-sale customer experience in a altogether different class than those franchise dealer service model companies. Not a high bar to surpass.

It's 150k, with 85k of that being the EDVs. Normal will only make R1T and R1S consumer vehicles. They have plans to expand it (to 200k I think), but have not said which line that would add capacity to. Perhaps it will be both, but that would still yield less than 100k consumer vehicles.

 

[Jac]

It's 150k, with 85k of that being the EDVs. Normal will only make R1T and R1S consumer vehicles. They have plans to expand it (to 200k I think), but have not said which line that would add capacity to. Perhaps it will be both, but that would still yield less than 100k consumer vehicles.

Can you point me to where Rivian communicated this 85,000 annual EDV production goal? I somehow missed that important goal.

I did find reports from back at the beginning of this year that Rivian‘s planned expansion of the Normal plant, when completed, will increase its annual production capacity from 150,000 to 200,000.

 

[mkg3]

Polestar is not the competition and not really comparable to Rivian. First, Polestar benefits heavily from Geely development resources so it’s not really comparable to a cash dependent start up. .....

Rivian might very well survive in some form, but from a valuation perspective you really have to consider what Rivian has compared to what Ford/GM have or can do in terms of design capability, scale, cash, brand equity, and commitment to building EVs people will buy in volume.

Polestar relies on Volvo engineering and Geely deep pockets, in addition to Volvo being owned by Geely. Polestar being spun out was pure financial engineering play.

Mostly agree with the statement. However, its also important to mention that GM and F are straddled with legacy cost structure (pension liabilities, SG&A, , union workforce) and steeped in traditional auto manufacture culture and adverse reactions to non-traditional processes and thinking.

Just look at their gross margin of 10~13%, whereas Tesla's consistent 27~30+%. Tesla's margin already absorbs multiple gigafactories constructed, vertical integration of critical components and running of the energy business too. Both GM and F are just starting down the battery factory path with lot of expenses ahead of them. The only way GM and F can possibly get close to Tesla margins at this point is to spin out all EV activities as a new company and put themselves out of business to get rid of the legacy issues. It is interesting to hear Mary Barra saying GM EVs will be profitable by 2025. What are they excluding??

Without R2, Rivian will become a division of one of the legacy automaker, I'm guessing. Even with R2 that may still end up being one but it will all depends on how much of a success R2 it is - both financially and sales wise. The longer it takes, field is getting more and more crowded. History is filled with the first mover being out flanked by more agile later entrants...

 

[Guy]

Can you point me to where Rivian communicated this 85,000 annual EDV production goal? I somehow missed that important goal.

I did find reports from back at the beginning of this year that Rivian‘s planned expansion of the Normal plant, when completed, will increase its annual production capacity from 150,000 to 200,000.

I heard the expansion to 200knhas already happened. As for EDV I don’t see them selling anywhere near 85k for years since Amazon only want 100k by 2030 and have first refusal before Rivian can sell to anyone else. Also Ford and GM both have electric delivery vehicles out so the target should easily be 120k R1s as soon as possible.

 

[dp351]

Timely for this discussion.

 

[DJG]

I heard the expansion to 200knhas already happened. As for EDV I don’t see them selling anywhere near 85k for years since Amazon only want 100k by 2030 and have first refusal before Rivian can sell to anyone else. Also Ford and GM both have electric delivery vehicles out so the target should easily be 120k R1s as soon as possible.

That's not how it works. Those aren't fluid targets, they are physical capacity limits. Given they built the EDV line the way they did with the existing knowledge of the Amazon order, they clearly have more information/confidence than you do in their ability to sell them.

Competition matters far less in the commercial van space, as there are far fewer barriers to demand than in the consumer world. You don't have range anxiety, it's all dollars and sense, and that is wildly in favor of electric. There are millions of vans to be replaced with EV's as soon as someone can make them.

I also believe the 100k from Amazon was accelerated to by 2026, not 2030. In either case, those are outside dates and Amazon will take them as fast as Rivian can make them. I would imagine there are clauses in the contract that open Rivian up to more sales opportunities once they deliver as well.

 

[DJG]

Can you point me to where Rivian communicated this 85,000 annual EDV production goal? I somehow missed that important goal.

I did find reports from back at the beginning of this year that Rivian‘s planned expansion of the Normal plant, when completed, will increase its annual production capacity from 150,000 to 200,000.

It was in the S1 from the IPO, and probably other documents over time. Also, not production goal, factory capacity on each line (so I guess ultimately it's the same as a goal, but more importantly a physical limitation to ever increasing that goal).

 

[R1T_Observer]

I personally feel RIVN is really a bit like all EV companies, including TSLA. You have to look back a bit as to how strained Tesla was... it went public 6/2010, during one of the worst pullback of the stock market, starting in 2008... it took TSLA stock nearly a full 10 years to 'start' being worth anything. I'm not saying the same is true for Rivian, but I would say, this one is a buy/hold type stock for anyone willing to wait. I'd give Rivian 5 years because EV's back in 2010 was so new, there wasn't as many charging stations as there are today so lack of infrastructure to charge the batteries, kept purchases fairly consistent for those 9-10 years when the stock wasn't doing much. That's no longer true for Rivian, using the same chargers and thus, less worries. Still, for people like me that retired, I may or may not take the loss. In my case, this stock hurts for now but seeing how this company operates from being an employee for 2.3 years, I'll hold onto it until I turn 70. If it's negative, so be it. It's small fry compared to the rest of my portfolio. My wooden nickels worth.

 

[Prime]

I personally feel RIVN is really a bit like all EV companies, including TSLA. You have to look back a bit as to how strained Tesla was... it went public 6/2010, during one of the worst pullback of the stock market, starting in 2008... it took TSLA stock nearly a full 10 years to 'start' being worth anything. I'm not saying the same is true for Rivian, but I would say, this one is a buy/hold type stock for anyone willing to wait. I'd give Rivian 5 years because EV's back in 2010 was so new, there wasn't as many charging stations as there are today so lack of infrastructure to charge the batteries, kept purchases fairly consistent for those 9-10 years when the stock wasn't doing much. That's no longer true for Rivian, using the same chargers and thus, less worries. Still, for people like me that retired, I may or may not take the loss. In my case, this stock hurts for now but seeing how this company operates from being an employee for 2.3 years, I'll hold onto it until I turn 70. If it's negative, so be it. It's small fry compared to the rest of my portfolio. My wooden nickels worth.

Tesla margins were much better at comparable sales numbers compared to Rivian. Video below did a nice job comparing Rivian and Lucid to Tesla based on delivery numbers. Thought it was interesting. Title a bit click baity, but the video goes into the numbers which I appreciate.

 

[EVRider]

I am curious, who gets this letter? I bought stocks but didn't get this email.

 

[R1T_Observer]

Tesla margins were much better at comparable sales numbers compared to Rivian. Video below did a nice job comparing Rivian and Lucid to Tesla based on delivery numbers. Thought it was interesting. Title a bit click baity, but the video goes into the numbers which I appreciate.

wow, that's eye opening for sure. Still, the environment that we call COVID coupled with the resulting supply chain shortages, culminated in a correction in the overall market which we're at right now, but was also long overdue. And assume we are in a full blow recession in 2023... this presentation tells me, for someone with deep pockets, to buy RIVN... this then becomes an issue with the long term individual investors but sometimes, this is what happens to companies. I hope if it happens, it's Amazon that will buy Rivian.

Thanks for that video. It's good to see someone explain things that has a grasp on digesting these financial reports. I was never good at these things.

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