WSJ: CFO says Rivian will prioritize growth over profits

[cmiller]

Either way I hope they stick around. More competition is good a thing. Just hope they can ramp up production to actually make a dent in the market because their competition is starting to grow from companies that can outproduce them

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[Pixelshot]

True, but not all of those ways can be correct.

We simply don't know whether the profit margin is higher or lower for one pack size or another (although it is very reasonable to assume the Max pack has the higher profit margin). In fact, Rivian may currently be selling everything at a loss to drive volume (lower retail price increases sales). But, assuming a hypothetical scenario where all pack sizes have the same profit margin, there is certainly a scenario where increasing volume would also increase profit.

What we can say without question is that fewer trucks is fewer trucks and that is the antithesis of capacity growth. Capacity growth will ultimately lead to efficiencies of scale (both in process and material costs) which will ultimately increase profits.

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.

well said @electruck

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.

 

[electruck]

well said @electruck

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.

And more vehicles on the road is basically free advertising for Rivian. Not only that, but it builds brand trust (ie, people see Rivian as a real car company that will stick around rather than as a high risk startup that might not exist next year a la Fisker v1). Rivian benefits in many, many ways from getting more vehicles out on the roads and trails.

 

[lostpacket]

I haven't prioritized growth since my teenage years


Well not vertically anyways

 

[SEARivian]

One question I have is where are they going to get more orders from? I know there have been rumors of a third consumer market vehicle in the near future. But with 71k preoder backlog and 100k vans going to Amazon, that's only 170k vehicles while the article says Normal/Georgia combined will have capacity for 550k vehicles. I wonder what kind of sales campaign they will start putting out there to drum up more orders.

 

[virgnia_rivian]

One question I have is where are they going to get more orders from? I know there have been rumors of a third consumer market vehicle in the near future. But with 71k preoder backlog and 100k vans going to Amazon, that's only 170k vehicles while the article says Normal/Georgia combined will have capacity for 550k vehicles. I wonder what kind of sales campaign they will start putting out there to drum up more orders.

They will bring product offerings to Europe and other markets abroad. I'm sure they have a plan for Asia as well. Think big picture. In addition, they will try to establish their commercial brand and pick up additional large fleet customers.

Tesla did not become a 1-million vehicle a year company overnight. This took them a decade. Rivian is focused on accelerating that growth timeline.

All of us on this forum have a vested interest in Rivian delivering our trucks, but basically what Rivian is saying is they are focused on not just delivering our vehicles, but the next million+ vehicles.

 

[SEARivian]

They will bring product offerings to Europe and other markets abroad. I'm sure they have a plan for Asia as well. Think big picture. In addition, they will try to establish their commercial brand and pick up additional large fleet customers.

Tesla did not become a 1-million vehicle a year company overnight. This took them a decade. Rivian is focused on accelerating that growth timeline.

All of us on this forum have a vested interest in Rivian delivering our trucks, but basically what Rivian is saying is they are focused on not just delivering our vehicles, but the next million+ vehicles.

Totally get the big picture and less worried about my truck. I would presume North America will be their primary market, especially given how important trucks and SUVs are here. I'm pondering what they plan to do to increase sales beyond the 71k they have preordered. No doubt these things take time and you've got to build infrastructure first. But they've talked a lot about capacity but haven't dedicated as much space (from what I've seen at least) to how they plan to grow sales. That's all I'm really saying.

 

[SeaGeo]

Totally get the big picture and less worried about my truck. I would presume North America will be their primary market, especially given how important trucks and SUVs are here. I'm pondering what they plan to do to increase sales beyond the 71k they have preordered. No doubt these things take time and you've got to build infrastructure first. But they've talked a lot about capacity but haven't dedicated as much space (from what I've seen at least) to how they plan to grow sales. That's all I'm really saying.

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"

 

[Trandall]

Totally get the big picture and less worried about my truck. I would presume North America will be their primary market, especially given how important trucks and SUVs are here. I'm pondering what they plan to do to increase sales beyond the 71k they have preordered. No doubt these things take time and you've got to build infrastructure first. But they've talked a lot about capacity but haven't dedicated as much space (from what I've seen at least) to how they plan to grow sales. That's all I'm really saying.

As of time of writing orders continue to outpace production by a good margin. IMO they will be capacity constrained for the next 5 years. I suspect all my nighbors and coworkers are going to want one after the see me rocketing around in the snow after I get my R1T.

 

[Craigins]

I'm pondering what they plan to do to increase sales beyond the 71k they have preordered. No doubt these things take time and you've got to build infrastructure first. But they've talked a lot about capacity but haven't dedicated as much space (from what I've seen at least) to how they plan to grow sales. That's all I'm really saying.

Advertise? Right now everything is pretty much word of mouth, and a few press events for the IPO. The company awareness is pretty much non existent at this point.

As more vehicles get out, and production rates increase, it will be time to start advertising for sales. Trying to drum up preorders now with a promise you'll get a vehicle in 2-3 years is a tough sell for most.

 

[mkg3]

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"

Agree with this.

Price elasticity for demand is real. I recall seeing Rivian with 2 motor patent. R2 series may just be a smaller 5 seater SUV/CUV and perhaps a smaller truck at less than $50k at today's pricing. And most importantly, this smaller vehicle will sell in EU, Asia/China very well, whereas R1 series are too big for most of the countries outside of NA and Middle East.

As an early shareholder and observer of Tesla, Model S didn't (and still doesn't) have a demand problem. Its just that market size for that price is significantly smaller than Model 3/Y.

If Rivian can maintain building 50K R1 vehicles/year and focus on R2 series and commercial eVan, it will be very successful, I believe. But if it takes another 5 years to get to R2 and cannot penetrate eVan beyond Amazon, I think they will be in trouble very quickly. They will burn through the cash pile very quickly setting up GA factory and bringing Normal production rate up.

Sales wise, the direct to consumer market will win out. All those that think the dealer model is the way to go, or that F or GM makes better products will over time change their views. All things being equal, or very similar, I would never buy from another dealer, if I don't have to. Reading about "Market Adjustments" of $30~$50K on the top of MSRP should be treated as ripoff and be illegal.

 

[jplblue]

Advertise? Right now everything is pretty much word of mouth, and a few press events for the IPO. The company awareness is pretty much non existent at this point.

As more vehicles get out, and production rates increase, it will be time to start advertising for sales. Trying to drum up preorders now with a promise you'll get a vehicle in 2-3 years is a tough sell for most.

Agreed. Locking up $1000 for that amount of time is not an insignificant barrier to entry for many who would otherwise be interested. Once Rivian can deliver w/i 1-3 months of a placed order, buyers will come.

 

[DuckTruck]

And more vehicles on the road is basically free advertising for Rivian. Not only that, but it builds brand trust (ie, people see Rivian as a real car company that will stick around rather than as a high risk startup that might not exist next year a la Fisker v1). Rivian benefits in many, many ways from getting more vehicles out on the roads and trails.

Electruck,

In addition to the free advertising that comes from having more R1's on the road, the same is true for having an increasing number of Amazon EDVs rolling down every roadway in America. I also think the stigma of a startup will dissipate more quickly when people see those very distinctive Amazon/Rivian vans everywhere the look, especially as one quietly comes and goes through their neighborhood.

Beyond the distinctive appearance of all Rivian products, there will be an additional "wow" factor when people see them cruise by, but do so almost silently. As impressive as the growl of a powerful engine is when a performance vehicle goes by, I think a lot of folks will be stunned at seeing a performance vehicle fly by without any sound of propulsion. And once they ride in one....here comes that perma-grin....

 

[E.S.]

Advertise? Right now everything is pretty much word of mouth, and a few press events for the IPO. The company awareness is pretty much non existent at this point.

Despite not being the highest quality of advertising, word of mouth is still a form of 'advertising'. Granted, Rivian could make use of more advertising methods and venues, but I do not agree that this company is pretty much non-existent. Not well known throughout the U.S? Yes. Non-existent? No

 

[Forager]

And this should be a surprise to absolutely nobody...

Not a surprise to anyone here, but these kinds of statements are necessary to provide messaging to new investors.

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