Rivian Layoff 10% Staff and Lowers Production Forecast for 2024

[DuoRivian]

I think Rivian’s leadership team knows how to make great products. I love my R1T and it’s the best car I’ve driven.

But, I’m not convinced that this leadership team knows how to run a profitable company or get there. I’d like to consider myself a patient investor. But, my confidence has diminished after today’s earnings call.

Notably, I feel like the team can:

- Act with a greater sense of urgency where they can, eg open up RANs now and charge money to all, get data subscriptions going asap
- Provide more details on the potential size and scope of these RDV pilot programs. RJ mentioned that they can bear fruit in 2025, but what are we looking at? Potentially 5K, 10K, or 20K RDVs per year, besides Amazon?
- Pay more attention to the stock price. I don’t mean to suggest micro-managing the price, but setting proper expectations and giving more transparency along the way.

I’m venting a bit, but feeling very frustrated as an investor.

Wow things must be bad since you have been a huge cheerleader for them on this forum.
I agree with your general points. However charging for data subscription is going to raise less than $1M a month (70k vehicles at say $10 a month). Should be done but won’t really move the needle.

The key thing is the production figures and I am sure they were conservative and waiting to see how long the planned shutdown actually takes and how effective it is. If both work out to plan then I would expect production raised to mid 60s to show some growth from 2023. Guiding for production to be slightly lower than last year was not a good move.

Sponsored

 

[LetsgoRIVN]

Wow things must be bad since you have been a huge cheerleader for them on this forum.
I agree with your general points. However charging for data subscription is going to raise less than $1M a month (70k vehicles at say $10 a month). Should be done but won’t really move the needle.

The key thing is the production figures and I am sure they were conservative and waiting to see how long the planned shutdown actually takes and how effective it is. If both work out to plan then I would expect production raised to mid 60s to show some growth from 2023. Guiding for production to be slightly lower than last year was not a good move.

I think they will miss the 57k target!
- they said Q1 will 10% to 15% lower, let’s assume 15k cars produced
- Q2 and Q3 very slow because of the shutdown ( let’s assume 10k) it seems then they need to produce 35K in Q4, is that possible ?

 

[DuoRivians]

I've been pondering this since I read about the layoffs. Rivian could certainly beneift by shipping the R2 sooner. It's theoretically possible that they could shift R2 production to Normal, but I'm not sure it would provide a significantly quicker launch.

We don't know if Normal has room "under roof" to install a new line. If they have to build new buildings, there's no advantage at all. But let's assume the Normal facility has "under roof" space for new lines, or they chose to rework one existing R1 line for the R2. Here are just some of he challenges:

- Work Force - Are there enough people available in Normal at this point to hire for an R2 line with the expected volume?
- Plant Floor Machinery - Rivian provided the equipment manufacturers with a delivery timeline. Could those manufacturers speed up their production to deliver the equipment faster?
- OEM Suppliers - Rivian provided their OEM suppliers with a timeline for delivering components. Could those OEMs speed up their timeline to meet a shortened Rivian timeline?

My gut feelings are that these obstacles would make it quit difficult to produce the R2 in Normal significantly faster than the Georgia factory timeline.

These are good points. And certainly, out of my expertise.

But, I just don’t see Rivian selling 150K R1 + EDV vehicles per year any time soon, if ever. And currently, Rivian is allocating resources for such numbers.

Seems like an 80K (R1, EDV) + 70K (R2) split would be a more realistic allocation of plant space.

 

[dhagn]

Normal has a 150K production capacity for R1 + EDVs.

In current market conditions, Rivian isn’t portraying a confident picture that they can sell 150k of these vehicles per year, in any combination of R1 and EDVs. (If Rivian is confident, I beg of them to communicate and show that please!)

So, would it be possible to allocate 80k of floor space to R1 + EDV. And, the rest for R2 units? If they could, I think even getting 50-70K/yr of R2 production capacity in Normal would be viewed very favorably by the markets.

Considering that R1 is the best selling in 70k+ price range, not sure how much more room there is to grow further unless the overall EV market expands at a faster rate with interest rates trending down. A lot depends on incremental EDV sales from non-Amazon customers in F25. The two year gap for R2 is going to be significantly hard to deal with in the absence of clear growth path for R1. This prompted analysts to question if there is a way to bring R2 launch forward. It was almost as if everyone has thrown in the towel on growth prospects for R1

One question that wasn’t raised in potential global expansion for R1. Ofcourse this comes with associated costs but high sticker price items like Lotus Eletre have gained decent sales globally. If the EV winter lasts longer and EV credits are revoked due to change in administration, things might get harder and Normal plant might have to run at less than half its capacity.

 

[DuoRivians]

Considering that R1 is the best selling in 70k+ price range, not sure how much more room there is to grow further unless the overall EV market expands at a faster rate with interest rates trending down. A lot depends on incremental EDV sales from non-Amazon customers in F25. The two year gap for R2 is going to be significantly hard to deal with in the absence of clear growth path for R1. This prompted analysts to question if there is a way to bring R2 launch forward. It was almost as if everyone has thrown in the towel on growth prospects for R1

One question that wasn’t raised in potential global expansion for R1. Ofcourse this comes with associated costs but high sticker price items like Lotus Eletre have gained decent sales globally. If the EV winter lasts longer and EV credits are revoked due to change in administration, things might get harder and Normal plant might have to run at less than half its capacity.

If EDVs are expected to take off big in 2025, RJ totally missed communicating that more clearly. An analyst even asked about it, and RJ just said we have pilots today that could bear fruit in 2025.

I don’t think there’s much global opportunity for R1 vehicles. They’re too big for most countries.

 

[Electrified Outdoors]

The demand for EVs is significantly higher now than it was a decade ago. Not a fair comparison.

And the cost of components much higher a decade ago. Tesla was in a much worse situation than Rivian and look where they are now.

Unlike Tesla RJ seems to under promise and over deliver. I'm not a "fan boy" ... I will point out shortcoming when I see them. Given the hit EVs and the car market in general has taken recently producing almost the same amount isn't that bad.

I see no reason to panic. Does anyone here really think RJ expected huge massive numbers with such an expensive model? No, they're making their name and setting themselves up for the mass market.

I'm sure Rivian would like for demand to continue to be high like in 2022 and 2023. In reality the market for 80-100k+ vehicles is limited even when rates are low.

Jan and February are very slow months for car sales even without all the other economic factors. Rivian is shifting gears now and adapting to market conditions and setting themselves up to execute on the long term plans for R2 and eventually R3.

Things will change, probably multiple times over, before R2 starts deliveries. Let's not hit the panic button just yet everyone comes on.

The glass is half full ?

 

[dhagn]

I think they will miss the 57k target!
- they said Q1 will 10% to 15% lower, let’s assume 15k cars produced
- Q2 and Q3 very slow because of the shutdown ( let’s assume 10k) it seems then they need to produce 35K in Q4, is that possible ?

Claire stated 13500 factory gated units in Q1 with 10% to 15% sequential decline in deliveries compared to Q4. This sounds bad since Amazon EDV contributed to only about 8% revenue in Q4 and there is a batch of EDV inventory that is shifted to Q1. The 10% to 15% decline in deliveries is despite this shift that seems to imply a steep fall in R1 sales. If anyone read this situation differently, please provide your insights.

 

[DuoRivian]

These are good points. And certainly, out of my expertise.

But, I just don’t see Rivian selling 150K R1 + EDV vehicles per year any time soon, if ever. And currently, Rivian is allocating resources for such numbers.

Seems like an 80K (R1, EDV) + 70K (R2) split would be a more realistic allocation of plant space.

Completely agree the Normal factory will be nowhere near full production for a long time. I thought there had been talk of expanding it to 200k.

 

[RivianMatt]

I know this is really simplifying it, but rates are simply killing them right now. For many reasons, I think the Fed needs to start cutting sooner than later.

Unfortunately (as I imagine you know), the recent CPI and PPI prints were higher than anticipated. Inflation can be crazy difficult to kill, and I don't think the Fed is going to aggressively cut rates until it's confident that its 2% target is close.

 

[DuoRivian]

I think they will miss the 57k target!
- they said Q1 will 10% to 15% lower, let’s assume 15k cars produced
- Q2 and Q3 very slow because of the shutdown ( let’s assume 10k) it seems then they need to produce 35K in Q4, is that possible ?

I would be surprised if production was that low for both Q2 and Q3. I haven’t heard how long the shutdown is but 4 or so weeks seem reasonable. Part of the reason for the shut down in additional to cost savings was a more efficient line arrangement so they should do better than Q4 2023 production. They will meet their target (if not then they are in real problems).

 

[ironpig]

And they are losing $30k on average with every vehicle they sell. Rivian is burning through cash at an alarming rate.

What's a non-alarming rate for spending cash at a new car company?

 

[LetsgoRIVN]

I would be surprised if production was that low for both Q2 and Q3. I haven’t heard how long the shutdown is but 4 or so weeks seem reasonable. Part of the reason for the shut down in additional to cost savings was a more efficient line arrangement so they should do better than Q4 2023 production. They will meet their target (if not then they are in real problems).

They keep saying several weeks and they don’t give estimates of the impact on production , I hate they not transparent about it!

 

[ironpig]

I ordered a Model S early and got it in 2014. Watched all the same doom and gloom "alarm bells" conversations happen for the 8 years that I enjoyed driving my car. Every month someone told me Tesla was going to fail and I'd be screwed.

Well we all know how that turned out.

Rivian is obviously a different company in a different EV marketplace than Tesla was when they started, but there is absolutely no reason to panic.

Drive your truck and enjoy it.

 

[SASSquatch]

If you are buying Rivian stock, you need to understand that we are likely nowhere near the bottom yet.

Rivian, like most OEMs, is seeing a falloff in demand. The problem is, nearly every other OEM has legacy gas and more importantly, hybrid vehicles that can help offset losses in the EV segment of their business. Rivian and Tesla don't have that luxury. Hybrid sales are up significantly.

Rivian is in for a world of hurt over the next two years. One bright spot is the growth of their EDV sales and continued expansion in partnerships. EDV volume might make up for some of the lost demand in R1T/R1S.

It's going to be painful though for the next few years. Rivian MUST reduce cost and increase efficiency to reduce cash burn because they will run out of money before they get the first R2 vehicles off the assembly if they don't. They likely are going to have to issue additional shares and pay sky-high rates on whatever they borrow.

 

[Redline]

Unfortunately (as I imagine you know), the recent CPI and PPI prints were higher than anticipated. Inflation can be crazy difficult to kill, and I don't think the Fed is going to aggressively cut rates until it's confident that its 2% target is close.

Well aware…the issue is two part. 1 an election year, 2, the path we’re on with debt isn’t sustainable at these rates. Their hand is forced. I’m confident rates will be cute by the June meeting.

Sponsored