An investor event on Thursday for Rivian Automotive The focus on cost-cutting efforts, efficiency gains and in-house technologies and software was not enough to capitalize on the company's significant share growth this week.
Shares of the all-electric vehicle startup fell between 2% and 6% during much of the event, paring some of its 23% gain in shares the day before on news of an investment of up to $5 billion. of dollars from Volkswagen GroupRivian shares closed down 1.8% on Thursday at $14.47 per share, down about 39% so far this year, amid investor concerns over consumer spending. cash and a slowdown in electric vehicle sales.
Rivian on Thursday reconfirmed its 2024 guidance that included production of 57,000 vehicles and a path to positive gross profit during the fourth quarter, including regulatory credits. He also outlined longer-term growth, such as plans to achieve positive adjusted earnings before interest, taxes, depreciation and amortization in 2027.
“Everything you’re hearing from us — about our product, about how we’re running the business, about how we’re moving toward profitability — my hope is that you’re really seeing an extreme sense of urgency,” Rivian CEO RJ Scaringe said during the event. “We’re moving very, very quickly toward the improvements necessary to achieve positive free cash flow and, before that, positive margins this year.”
Rivian Stock Performance
Rivian also outlined long-term financial goals of approximately 25% gross margin, 10% free cash flow and an adjusted profit margin at the “high end.” The company did not release a timeline for these goals.
Scaringe devoted much of his time during the roughly four-hour presentation to discussing efficiencies in products and manufacturing, which he said are expected to lead to material cost reductions of 20% on its current vehicles, followed by targeted reductions of 45% on its upcoming “R2” vehicles, which are anticipated to begin production in early 2026.
The reductions range from physical savings, such as a 54% decrease in design costs for its R2 vehicles compared with current models, to lower costs on more complex systems, such as battery packs and electrical hardware. For example, the company is using 10 fewer internal electronic control units, or ECUs, in its newly redesigned R1 vehicles, allowing it to remove 1.6 miles of wiring harness length and 44 pounds from the vehicle.
Rivian's software expertise is at the center of VW's plans to invest $5 billion in the automaker by 2026, including a planned joint venture between the companies to create electrical architecture and software technology.
Volkswagen is expected to use Rivian’s electrical architecture and software for its vehicles starting in the second half of the decade, Scaringe said during the announcement of the investment. He added that the joint venture does not include anything related to battery technologies, vehicle propulsion platforms, high-voltage systems or autonomy and electrical hardware.
A provided image of Volkswagen Group CEO Oliver Blume and Rivian Founder and CEO RJ Scaringe as the companies announce joint venture plans on June 25, 2024.
Courtesy: Business Wire
Rivian CFO Claire McDonough reaffirmed Thursday that VW's capital is expected to strengthen the startup's balance sheet, which ended the first quarter with $7.9 billion in cash.
The capital influx is expected to help Rivian ramp up production of its smaller R2 SUVs at its plant in Normal, Illinois, starting in 2026, as well as production of its midsize EV platform at a currently paused plant in Georgia.
Rivian is betting on its next-generation all-electric vehicles to drive the automaker's targeted growth and profitability over the second half of this decade.
The company said Thursday it expects production of its next-generation R2 vehicles to account for up to 72%, or 155,000 units, of its more than 200,000-unit production capacity at its Illinois plant. The plant currently has the capacity to produce 150,000 commercial delivery vans, as well as its flagship R1 SUV and electric pickup trucks.
The automaker's $2 billion plant in Georgia, construction on which was halted earlier this year to save capital, is expected to be capable of producing 400,000 units on two lines.
That construction halt was a major part of the company’s plans to reduce planned capital expenditures by $2.5 billion through 2025, including reductions of 55% in manufacturing and 20% in product development. The company still expects to spend about $2.7 billion through 2025, McDonough said Thursday.
“We have been focused on material cost and really reducing our overall cost of goods sold as well as our operating expenses,” he said. “Capital spending is another key lever for us that we have also focused on over the last several years and will be critical to our long-term success in bringing and scaling our R2 to market.”
