RJ Scaringe: "Big efficiency updates to our plant are officially underway!"

[SANZC02]

They are reorganizing parts of the plant for more efficient manufacture, they have renegotiated quite a few supplier contracts and in some cases using new suppliers and they are making major changes to the number of computer chips and computer architecture which cuts down on parts needed.

They also targeted 4th qtr to be done with inventory write downs based on prices and required quantity penalties encountered related premiums and missed purchases because of slower initial ramp related to Covid.

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[DuoRivian]

They also targeted 4th qtr to be done with inventory write downs based on prices and required quantity penalties encountered related premiums and missed purchases because of slower initial ramp related to Covid.

Agreed as well as the end of pre March 2022 pricing.

 

[Gen(R3)Xer]

Someone asked about CarPlay one too many times and it got a little heated.

Or someone tried to carjack the R3X and RJ pulled his shoulder throwing them to the ground.

 

[Supratachophobia]

Someone asked about CarPlay one too many times and it got a little heated.

This is the head-cannon I will never waiver on.

 

[Narendra82]

Actually Rivian does lose money on every car they sell (except for the edv) and they admitted as much on the last earnings call.

Revenue minus direct cost of parts / labor is what Rivian calls their "contribution margin" and they said they were still negative on it for the quarter even for post price hike R1s.

Sad but true.

That said, after the rework they will definitely be in the positive on contribution margin and moving towards positive gross margins.

Shareholder letter for 4th quarter 2023 nowhere mentions contribution margin. Its says Gross profit per vehicle was -43000. Here is the exact quote

Gross profit per vehicle delivered was approximately negative $(43,000). During the fourth quarter costs of goods sold were negatively impacted by $70 million, or approximately $5,000 per vehicle delivered. These costs include supplier related expenses, accelerated depreciation, and other expenses primarily related to the new technology and design changes going into the R1 platform. While we could incur additional costs associated with our planned shutdown and technology and design changes in the near-term, we do not anticipate these costs to be part of our normal course of business in the longer-term.

 

[SanCarlosJeff]

Shareholder letter for 4th quarter 2023 nowhere mentions contribution margin. Its says Gross profit per vehicle was -43000. Here is the exact quote

In the Q42023 earnings call transcript there is this:

"Onto your second question around the contribution margin of the vehicles. We were very close in achieving positive contribution for current priced vehicles in Q4 and see direct line of sight, as is evidenced by our continuation of committing to our Q4 positive gross profit as we look to the future and the impact that the material cost reductions will have driven by our shutdown in Q2."

No details, but looks like they are still slightly negative in contribution margin.

 

[Sgt Beavis]

RJ’s shoulder was being just a tad bit too adventurous.

 

[Rivian Head]

Exciting stuff. These efficiencies will have to carry Rivian until the R2 comes out in 2026. My hope is that they stop losing money on each vehicle and continue with great lease deals until interest rates come down. Maybe have a premium version and a standard version of the R1T and R1S.

The single most critical issue Rivian is facing is to cut cost without sacrificing its quality. Rivian cannot burn thru its cash like they are doing now. I still think they will need to raise cash next year. Hope I am wrong.

 

[Autolycus]

I believe RJ has also mentioned significant material cost savings from lower battery cell costs, thanks to significantly lower raw material costs. Hopefully Rivian is going to end up benefitting from the massive spool up of raw mineral and battery production that is already happening and that could outpace the demand from vehicle manufacturers as Ford, GM, and maybe others slow their own spool up a little in the short term.

 

[mini2nut]

The original dual 12v battery setup was way too complex and a nightmare for technicians. A revision of the electrical architecture was overdue from the get go. The new architecture should increase reliability and help cut manufacturing costs.

 

[Krs71]

Wonder if any of those efficiency upgrades include an OTA update to get more miles out of the existing batteries

 

[zipzag]

Revenue minus direct cost of parts / labor is what Rivian calls their "contribution margin" and they said they were still negative on it for the quarter even for post price hike R1s.

What you describe is not contribution margin

 

[R1TS]

If it’s THIS BIG of a production efficiency upgrade, how come those 3 weeks of downtime amount to only a slight improvement of annual production level from last year? Do the upgrades only improve efficiency by about 8% (~34 weeks of production from end of April to EOY versus 37 weeks without shutdown).

 

[feifan]

If it’s THIS BIG of a production efficiency upgrade, how come those 3 weeks of downtime amount to only a slight improvement of annual production level from last year? Do the upgrades only improve efficiency by about 8% (~34 weeks of production from end of April to EOY versus 37 weeks without shutdown).

IIRC, they're increasing shift efficiency/output by about 30%, but also cutting a shift (from 3 to 2). So net output for the year will be about flat.

 

[zymolysis]

Revenue minus direct cost of parts / labor i

Are you sure there aren't any fixed costs in there? Costs associated with building service centers, building DCFC chargers, acquiring/preparing for the future Georgia plant, designing and prototyping the R2 and R3 vehicles?

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