Thursday investor event Rivian Cars Efforts focused on cutting costs, improving efficiency and in-house technology and software were not enough to underpin the company’s sharp gains this week.
Shares of the all-electric vehicle startup were down about 2% to 6% for much of the event, after rising 23% a day earlier on news that the company would invest $5 billion. Volkswagen Group. Shares are still down about 40% so far this year due to heavy cash burn and slowing electric vehicle sales.
Rivian on Thursday reiterated guidance for 2024, which includes producing 57,000 vehicles and a path to positive gross profit in the fourth quarter, which includes regulatory credits. It also outlined long-term growth, such as plans to achieve adjusted EBITDA in 2027.
“Everything you hear from us, including our products, how we operate our business, how we achieve profitability, I hope you feel a real sense of extreme urgency,” said Rivian CEO RJ Scullin. grid said during the event. “We are driving the necessary improvements very, very quickly to achieve positive free cash flow this year and positive margins before that.”
Rivian Stock Performance
Rivian also outlined long-term financial goals of roughly 25% gross margin, 10% free cash flow and “high teens” adjusted margins. The company did not announce a timetable for these goals.
Scaringe spent much of his roughly four-hour presentation discussing product and manufacturing efficiencies, which he said are expected to result in a 20 percent reduction in material costs for its current vehicles, followed by targeted improvements for the upcoming “R2.” The 45% reduction is expected to begin production in early 2026.
The cuts range from physical savings, such as R2 vehicles being designed to cost 54% less compared to current models, to cost reductions in more complex systems such as battery packs and electrical hardware. For example, the company eliminated 10 internal electronic control units (ECUs) in its recently redesigned R1 vehicle, reducing wiring harness length by 1.6 miles and vehicle weight by 44 pounds.
Rivian’s software expertise is at the core of Volkswagen’s plan to invest $5 billion in the automaker by 2026, which includes an expected joint venture between the two companies to create electrical architecture and software technology.
Scaringe said in the investment announcement that Volkswagen expects to use Rivian’s electrical architecture and software stack in vehicles starting in the second half of this decade. He said the joint venture does not involve any battery technology, vehicle propulsion platforms, high-voltage systems or autonomous driving and electrical hardware.
Picture provided by Volkswagen Group CEO Oliver Blume and Rivian founder and CEO RJ Scaringe. The two companies announced their joint venture plan on June 25, 2024.
Courtesy: Business Wire
Rivian Finance Chief Claire McDonough reiterated on Thursday that Volkswagen’s funding is expected to strengthen the startup’s balance sheet, which ended the first quarter with $7.9 billion in cash.
The capital inflow is expected to allow Rivian to ramp up production of the small R2 SUV starting in 2026 at its Normal, Illinois, plant and build a midsize electric vehicle platform at its currently suspended Georgia plant.
Rivian is betting on its next generation of all-electric vehicles to achieve the automaker’s growth and targeted profitability in the second half of the decade.
The company said Thursday it expects production of its next-generation R2 vehicle to account for 72%, or 155,000 vehicles, of its more than 200,000-vehicle capacity at its Illinois plant. The plant currently has the capacity to produce 150,000 commercial trucks as well as its flagship R1 SUV and pickup electric vehicles.
The automaker’s $2 billion plant in Georgia, which earlier this year paused construction to save money, is expected to have a capacity of 400,000 vehicles across two production lines.
The construction pause is a major part of the company’s plan to reduce planned capital expenditures by $2.5 billion through 2025, including a 55% cut in manufacturing and a 20% cut in product development. McDonald said Thursday that the company still expects to spend about $2.7 billion through 2025.
“We’re focusing on material costs and really reducing the overall cost of goods sold and our operating expenses,” she said. “Capital expenditure is another key lever we have been focusing on over the past few years and will be critical to our long-term success in introducing and scaling R2 in the market.”
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