Rivian Layoff 10% Staff and Lowers Production Forecast for 2024

[EmPickle]

Yup, and stock tanks as a result. I think Rivian's guidance has always been to under promise. Obviously this isn't going to be a banner year with interest rates the way they are, but I bet their real internal estimate is more than a duplicate of last year.

The layoffs are concerning though, but likely on the heels of the hard development that went into the R2 and to make way for the employment bump coming as the Georgia plant starts to break ground. Right now they need to focus their resources on staying afloat until R2 rolls of the line.

That said, if anybody was waiting to get an R1, I'd do it now. Why do you ask? Because the refresh is likely to have some cost cuts and more cutting will come in the years following. You'll lose little niceties that add up to dollars for Rivian. This first edition of both vehicles was exactly how they wanted everything to be, design, components, quality, etc. These cars should cost a lot more than what we paid which is what new companies need to draw interest. Your first shot needs to be a slam dunk and aside from some new car issues, I feel like it's a solid package. The next version might not be noticeably different, but I be you it's going to be a lot of small things like the number of fasteners, metal gauge, number of welds, frame parts, plastic parts going from paint to mold in color, metal finishes changing, wrapped parts going to straight plastic, etc.

Same thing that Tesla went through.

They actually said a lot of that in the Q&A that followed. I'd do it now mostly because they're shutting down production and it'll take them some time to bring it back and when they do, they'll naturally start with the highest profit options first.

A lot of the cost-cutting options are internal - wiring harneses, computer consolidation, etc. But they also mentioned that they're renegotiating everything from seats and other components given that they now can say they've had $1.3B in sales and have largely out performed even large automakers in the electrified market. Some of their suppliers are looking to partner with them to develop further expertise in different markets.

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[Twitter Fingers]

I agree. The widening loss per vehicle is concerning. At this point I wonder whether they'll ever be able to make a profit on the vehicle. They're burning $5b a year for operations and they need to find a new multi billion $ factory. They gonna have to raise cash to make it to R2 production. Or somehow, they can cut a ton of cost from their R1S platform.

There is no widening loss per vehicle. They guided to a larger gross margin loss in Q4 due to the lack of EDV deliveries. The margins per vehicle have continued to improve despite the larger total gross margin loss. Claire reiterated that R1 is basically contribution margin positive right now for the first time.

 

[R1TS]

RJ knows darn well, he cannot answer those questions, without taking on more water than they already have today and tomorrow. He didn't bring an ounce of optimism to the analysts or the big backers for that matter. They will (should) survive, but at what cost and under which umbrella will they ultimate reconfigure under?

This is going to be a rough couple of years, but we love our R1T and R1S and the idea of Rivian. I'm afraid the R2 could be too little too late. Does anyone really think the R2 will deliver in Q1 2026?

In reality, meaningful deliveries won’t start until 2027 IMO.

2026 is a best case estimate. Just like their downward revision guidance in 2022 from 50k to 25k units. And, now today, from 80k to 50k-ish for 2024.

 

[Zoidz]

Very disappointing to see the guidance, I didn’t care much about revenue and earnings but I expected much better from guidance. I truly hope this is a tactic from management to be very conservative and it’s not the most likely output. Expecting negative sales growth for a growing company is a disaster!

Better to see disappointing guidance now (which is not disappointing in the sense that they have studied the market and are being honest), as opposed to rosy guidance and crashing and burning when the next quarter’s actual figures are released.

 

[dhagn]

My faith as an investor has been shaken by the evasiveness of RJ’s responses. You are spot on about the oblique comments to the most important questions on the earnings call. It casts doubt on whether RJ is trustworthy and anything the management states can be relied on. While this may sound like a harsh take, there has been multiple instances of conflicting statements from RJ.

Instance 1 - Don’t see a need for capital raise (stated in Aug-Sept by RJ only to issue another convertible bond)

Instance 2 - As recent as last earning calls, RJ maintained there is robust demand and backlog stretching into 2024. This was when everyone including Elon sounded beaten down. Today’s shareholder letter states order book has been reduced down by a significant extent and highlights risks due to macro factors. Surely things didn’t change overnight.

I am sure Analysts are still trying to wrap their head around Claire’s repeated confirmation that Rivian will be gross margin positive by Q4. This has been an extremely stressful investment to hold and has been exacerbated by the continued burn in Opex (R&D, Selling & Admin expenses), even if we were to trust their guidance on bringing COGS down

 

[VSG]

Just like their downward revision guidance in 2022 from 50k to 25k units. And, now today, from 80k to 50k-ish for 2024.

They did NOT revise their guidance in 2022 - the 50k number was an ASSUMPTION from an analyst.

Likewise for 2024. The 81k number is NOT something Rivian ever said. The 57k announcement today is the first time they've given a number for 2024.

The R1 line currently only has a capacity of 65k units, but it will go up to 85k later this year after the reconfiguration. A prediction of 81k total shipments for 2024 is pretty extreme, since that would require essentially 100% use of the R1 capacity plus a big EDV order (in addition to Amazon).

Basically, the only way to double their sales from the Normal plant is through the EDV. While the capacity to build is there and they have demonstrated a great run rate, they need get some big customers to sign on now that the Amazon exclusivity is ended. The EDV business is profitable right now - they just need to show they can move beyond the 1 customer.

 

[Dark-Fx]

Instance 2 - As recent as last earning calls, RJ maintained there is robust demand and backlog stretching into 2024. This was when everyone including Elon sounded beaten down. Today’s shareholder letter states order book has been reduced down by a significant extent and highlights risks due to macro factors. Surely things didn’t change overnight

I'm sure Rivian didn't anticipate how rapidly the shift was in their rate of order follow through. They probably had a pretty healthy backlog still in the areas that aren't proximal to service, and people who were invited have been largely discouraged, even by "Rivian Fanboys", to follow through with it.

Lots of backlog was likely also people pushing their purchase off hoping the interest rates or their circumstances would improve. Tech layoffs are pretty high right now, which is the income level of folks looking at vehicles of this price.

Things are still going to get worse before they get better. Rivian needs to get their shit together and reduce initial quality issues, so the people on the fence and not close to a service center are more comfortable buying.

 

[mini2nut]

The premium priced automotive landscape is saturated. There are only so many affluent buyers at the $70k+ price point.

Its going to be tough going for Rivian until the R2 comes to market.

 

[NineElectrics]

Rivian is doing better than Tesla three years in. They have only had two full years of production.

Minor trivia: Tesla in 2014 was actually 11 years in from founding, since they were founded in 2003. But, Rivian was founded in 2009, so they're 15 years in! It's interesting that both of these companies spent a long time "existing" before they shipped their products in volume.

 

[Antonio]

Honestly, they need to start charging us for data usage and other services, just like Tesla does (with the understanding that they will continue to improve the services) and they need to open up the RAN to other cars. We can’t expect for them to succeed financially, and provide us free services.

 

[evhelphub]

This stinks. Layoffs and slashing production by quite a lot isn't fun. Hopefully it turns and towards end of year if interest rates improve.

Not to get into politics but broadly speaking that might introduce some macro noise in q4.

 

[SANZC02]

Honestly, they need to start charging us for data usage and other services, just like Tesla does (with the understanding that they will continue to improve the services) and they need to open up the RAN to other cars. We can’t expect for them to succeed financially, and provide us free services.

They did mention they are opening the RAN later this year to other vehicles to help with the fixed cost of running the stations and to make some of the government funding available to continue the buildout.

 

[UnsungZero_OldTimeAdMan]

My faith as an investor has been shaken by the evasiveness of RJ’s responses. You are spot on about the oblique comments to the most important questions on the earnings call. It casts doubt on whether RJ is trustworthy and anything the management states can be relied on. While this may sound like a harsh take, there has been multiple instances of conflicting statements from RJ.

Instance 1 - Don’t see a need for capital raise (stated in Aug-Sept by RJ only to issue another convertible bond)

Instance 2 - As recent as last earning calls, RJ maintained there is robust demand and backlog stretching into 2024. This was when everyone including Elon sounded beaten down. Today’s shareholder letter states order book has been reduced down by a significant extent and highlights risks due to macro factors. Surely things didn’t change overnight.

I am sure Analysts are still trying to wrap their head around Claire’s repeated confirmation that Rivian will be gross margin positive by Q4. This has been an extremely stressful investment to hold and has been exacerbated by the continued burn in Opex (R&D, Selling & Admin expenses), even if we were to trust their guidance on bringing COGS down

No more evasive than any other responsible CEO. Thousands of jobs and livelihoods at stake. He simply has to have the discipline to choose his words carefully, and not over-promise. With these earnings reports, as with any (from investor POV), you really have to take it in with your own emotions in check. None of them would paint a rosy picture just so the investors can feel warm and fuzzy. They, as responsible captains, have to take care to manage risk.

As pessimistic as it seems, his words echo a broader economic sentiment that you would find if you read about other sectors in the economy. The key indicators are all over the place. No one knows exactly what to make of it. Uncertainty is rampant. Caution is abundant, even with the fed (if you listen to what they say). Plus, this is an election year. And what you find in the market in any election year is uncertainty. His words may not be what you wanted to hear, but it's not out of line from the broader landscape. If he painted a rosy picture while everyone else is sounding cautious, I would be worried. Like any storm, this too shall pass. Until the next. So it goes. And, at least there are steady hands at the helm of this ship (take comfort in that).

I feel for those affected by layoffs. Especially if they loved their work and believed in the company's mission—because this would feel like a personal betrayal. Jobs... they tend to teach you to care less.

 

[R1Tom]

No more evasive than any other responsible CEO. Thousands of jobs and livelihoods at stake. He simply has to have the discipline to choose his words carefully, and not over-promise. With these earnings reports, as with any (from investor POV), you really have to take it in with your own emotions in check. None of them would paint a rosy picture just so the investors can feel warm and fuzzy. They, as responsible captains, have to take care to manage risk.

As pessimistic as it seems, his words echo a broader economic sentiment that you would find if you read about other sectors in the economy. The key indicators are all over the place. No one knows exactly what to make of it. Uncertainty is rampant. Caution is abundant, even with the fed (if you listen to what they say). Plus, this is an election year. And what you find in the market in any election year is uncertainty.

Like any storm, this too shall pass. Until the next. So it goes. And, at least there are steady hands at the helm of this ship (take comfort in that).

This is the one counterpoint to my concern that they took the too long road to production of R2 by building a completely new plant from ground up. I have had concerns that by when they can actually build R2's that the market will be full of competition.
But.....and maybe it is more brilliant than I have considered much, is maybe this R2 new plant can realize efficiencies that others cannot. And will allow Rivian to enter with an R2 that out performs and and lower cost....than all that competition. And by then...service centers built up...RAN....interest rates should be lower...people should be back to work....and Rivian perfectly poised with a state of the art plant and product. Maybe that is the real game plan....long game....regardless of short term stock implications.

 

[UnsungZero_OldTimeAdMan]

This is the one counterpoint to my concern that they took the too long road to production of R2 by building a completely new plant from ground up. I have had concerns that by when they can actually build R2's that the market will be full of competition.
But.....and maybe it is more brilliant than I have considered much, is maybe this R2 new plant can realize efficiencies that others cannot. And will allow Rivian to enter with an R2 that out performs and and lower cost....than all that competition. Service centers built up...RAN....etc... And by then....interest rates should be lower...people should be back to work....and Rivian perfectly poised with a state of the art plant and product. Maybe that is the real game plan....long game....regardless of short term stock implications.

Unless they could invent the time machine and change timing... There's really nothing to be done but stay the course, do the best they can to meet their time table, and hope for the best? I mean, isn't that how it is in life for anyone?

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