WSJ: CFO says Rivian will prioritize growth over profits

[cmiller]

word of mouth is great, but can be damaging. I have told people about how I want a rivian. They ask about it, but in the end I just say "If you don't mind waiting years to get one then check them out" Everyone that has heard me say that has basically said F that and just like that their interest is gone.

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[sevengroove]

word of mouth is great, but can be damaging. I have told people about how I want a rivian. They ask about it, but in the end I just say "If you don't mind waiting years to get one then check them out" Everyone that has heard me say that has basically said F that and just like that their interest is gone.

I agree with this because it has happened to me as well - but what stays is the brand awareness. Their interest might be gone but now your friends know about Rivian and will perhaps consider looking into the brand for a purchase a few years down the road. Not to mention, “I want what I can’t have” is a deceptively strong motivator.

 

[Zoidz]

It seems likely that the delay on the Max pack deliveries is a fairly large money loss, given that many will drop their orders or shift to the less expensive Large pack, providing less margin and less sales for Rivian (if we assume that it costs less than $10k additional to build the Max pack version). But, in trade, they have more Large packs on the roads sooner. Hence the "long game" approach.

i think it's the opposite. Delaying Max pack increases profits compared to producing Max packs. Since Max pack requires ~25% more battery cells, and RJ has said that batteries are a constraint, they can product 10,000 large pack vehicles for every 7,000 max pack vehicles. 3,000 more vehicles means the fixed costs are spread over more vehicles, it keeps the line running at higher production, keeps more workers employed, etc. All of those efficiences, or lack thereof, affect profits.

Assume gross profit is 25% on a large pack, and 30% on a max pack. I really doubt max pack makes 5% more margin, but let's go with it anyway.
10,000 vehicles @$75k = $750m: 25% profit = $187.5m
7,000 vehicles @ $85k = $595m: 28% profit = $178.5m

By producing large pack, they make more profit, not less, AND gain manufacturing efficiencies, labor efficiences, market share, visibility, etc, etc. There's really no downside other than pissing off reservation holders.

 

[Eeyore]

I'd argue Amazon Vans is a growth channel, not a profit center, currently. They're not going to make a ton of money off those deliveries, but EVERY company is going to want EV last mile vehicles soon, so Rivian getting into that game now will help them grow into profit in the long term.

I'm sure that there are regular people that would buy a Rivian van given the opportunity.

 

[Eeyore]

For a business, the ultimate goal will always be increased profits. What Rivian is stating is that they are playing the long game, not the short.

Kind of like Amazon in their beginning. They didn't make a profit for several years when they started. They put growth over profit and look where they are now, buying 100,000 EV vans.

 

[RideAlong]

Claire's words sound confident , but her face says worried/scared.

 

[DuckTruck]

Kind of like Amazon in their beginning. They didn't make a profit for several years when they started. They put growth over profit and look where they are now, buying 100,000 EV vans.

I like all that I heard from Claire. I'm all-in with Rivian for the long haul. I don't recall ever seeing such a well-funded startup. Especially not one funded by so many major players, companies with great track records and long-term goals that align with Rivian's.

 

[AdamsFan1983]

you have a lot of people who don't know about rivian, don't want to buy a truck they haven't seen in person, don't know is in production, won't get in 3 years, etc.

Additionally, I would *assume* Georgia will produce a totally different line of vehicles. Like a lower cost SUV and or a CUV, and maybe an adventure van.

71k preorders is basically an early adopter number. It's like saying "where will tesla get more orders" based on their initial preorder number for the model S back in 2009 or whenever that occurred.

And if they can get their backlog dealt with quickly, they'll have less of a wait time for a 400 mile variant in 2024 than Chevy will with the SIlverado. So people will have to look at both and go "do I want the truck I can get now, or the silverado in a year"

More than that, I would expect the ga factory to produce the next gen batteries.

My assumption is that when ga is up and running it will be producing a crossover, the van, and the R2S, R2T.

And then normal shuts down to retool for added capacity on the new/upgraded consumer vehicles.

Would also expect some sort of incentive package for senior production personnel to move, so that they can get a modicum of experience on the news lines when then come online.

 

[Gearhead500]

I get all this, but just wish they’d move even quicker. 2024 for GA is forever from now.

 

[AdamsFan1983]

I get all this, but just wish they’d move even quicker. 2024 for GA is forever from now.

I mean, it’s not a lego set, it’s a 3,000 acre development site with $5 billion worth of labor and materials. 2 years to complete is, frankly, miraculous.

 

[Forager]

I mean, it’s not a lego set, it’s a 3,000 acre development site with $5 billion worth of labor and materials. 2 years to complete is, frankly, miraculous.

Exactly right. Building that large a factory in that length of team will be remarkable. Keep in mind their entire design and construction team has never designed and built a new factory. The Normal plant was bought from Mitsubishi and then retrofitted for their line. While their design team may have experience in previous roles at other companies, they’ve never worked together, and many don’t have experience doing industrial, infrastructure, or mission critical work.

 

[Zoidz]

I get all this, but just wish they’d move even quicker. 2024 for GA is forever from now.

I've mentioned this before - a site this size will require 4-6 months or more of site planning and local, state and federal reviews and approvals BEFORE they move one shovel of dirt. Been there, done that.

 

[BigSkies]

Yep, growth is the key, and profitability will never come without it. A key question investors should ask is what volume of production the company becomes profitable. As they’re following Tesla’s roadmap, I’d guess they’ll hit the cash-flow break even point at roughly the same production volume that Tesla did. I recall that was around the 500k to 750k annual delivery range?

Rivian has no problem with demand today, as the market is severely supply constrained. Things will get interesting around 2024 or 2025. There’s a TON of battery production slated to come online around that time. I think I recall reading that it was enough to supply something like 20M annual EV’s by the end of 2025. That’s the point where we’ll figure out which EV companies will own the market and which will bow out.

 

[Gearhead500]

I mean, it’s not a lego set, it’s a 3,000 acre development site with $5 billion worth of labor and materials. 2 years to complete is, frankly, miraculous.

LOL. Dude I get it, but I was just “wishing” the company grew faster. I do understand the reality that they are quickly going to be competing with a lot of other EVs.
I have my shares for the long termstock hold plus

5/22R1T
1StHalf2023 R1S

I’d say I’m in the believer camp

 

[AdamsFan1983]

LOL. Dude I get it, but I was just “wishing” the company grew faster. I do understand the reality that they are quickly going to be competing with a lot of other EVs.
I have my shares for the long termstock hold plus

5/22R1T
1StHalf2023 R1S

I’d say I’m in the believer camp

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