Rivian Layoff 10% Staff and Lowers Production Forecast for 2024

[VSG]

Up until now I’d figured the refresh would bring benefits to the consumer but it’s hard to imagine them cutting and saving so much while improving the quality.

The assembly line shutdown was never intended to add customer-facing features. It is meant to change the internals in a way that greatly improves cost, reliability, and manufacturing efficiency. This is something that will benefit Rivian's margin. It is NOT decontenting - they are not removing features either. One of the main targets is wiring harnesses, which are labor intensive to build and install, and which, because of their complexity and length, can be prone to installation errors or long-term reliability (pinching of wires, bad connections, etc.). Labor is a huge cost, and they can save much more by cutting the number of man-hours it takes to assemble a vehicle than they can by cutting the number of, e.g., screws.

Warranty repair expenditures should drop too. But Rivian has not announced any added or removed features related to the shutdown. They do not need to shut down the line to do things like drop the camp speaker, for instance - they didn't shut down the line for removing the 12V or any other small change - they just did it.

Customers will benefit in terms of reliability, but there is no reason to believe or suggest that overall quality will suffer just because they have simplified the manufacturing.

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[VSG]

The R2 reveal timeline is no accident.

Of course it's no accident. They have been planning this for at least year - it was announced long ago as something that would happen in early 2024. If you're suggesting that they threw something together at the last minute, before they were ready, in order to deflect attention from the Q4 numbers, then you're way off base.

 

[emoore]

(My correction, for clarity. Speaking about the IRA legislation here ...). No, the old EV tax credit didn't expire. Part of the compromise for the new legislation was to add battery sourcing and assembly requirements intended to be protectionist against countries, especially China, which pose a threat to domestic car makers. But unfortunately materials sourcing and battery manufacturing are not things that can be drastically changed overnight - it will take a couple of years for domestic car makers to catch up. Ironically, companies like Hyundai and Kia are going to continue to benefit from the full tax credit while pure-US manufacturers like Rivian are getting hurt.

So no, the change to the EV tax credit wasn't necessary, and was in part designed to do things other than increase EV sales. Over the short term, it is actually hurting EV sales.

It was going to expire that year.

 

[VSG]

Why would Rivian not come up with and offer an accessory battery pack that could slide in the gear tunnel and add another 150 miles of range give or take to help sale those on the fence that need towing and have range anxiety ? This could be a high profit accessory that customers would be willing to pay to have peace of mind.

Do the math then you will have your answer. How much battery would be needed to "add another 150 miles of range"? How much would that battery weigh, and how easily would that "slide in". How would that battery be cooled/heated without major engineering to hook it up to the existing systems? Where do the HV lines come from, and how can that battery be charged/managed? Last of all, what do you think that would cost to build, and how much would it sell for?

Bottom line, this is a pretty much No-profit item which would have few takers and require some major engineering and manufacturing work.

It would be easier to just offer a bigger battery as a swap/upgrade in the future, once there are better chemistries or solid state batteries ever come to market. But at that point I think Rivian will just go with a new model rather than work on a major upgrade for the R1.

 

[VSG]

It appears that Rivian is circling the drain. If the R2 is not a bonafide home run it may be the end of Rivian.

And you have been predicting Rivian's demise for two years ever since you joined this forum. I guess as a known Tesla fanboi you feel a need to attack the "competition", but seriously it's getting a little tiresome to see you bashing Rivian at every opportunity.

Specifically, the R2 is part of Rivian's growth strategy, but it is not needed for profitability. Spending $5 billion right now, which is what is needed for the R2 plant, is a step AWAY from short term profitability. If all Rivian wanted to do was to reach profitability as soon as possible they would NOT be building the R2 right now, they would focus on continuing to reduce costs and increase margins in order to be profitable with just the R1, and then use any profit to bootstrap future platforms. But they're not doing things that way because they want to grow, not remain static, and growing means continuing to make big investments in the future.

I think Rivian is further away from going out of business entirely than it was two years ago, yet you're still saying this at every opportunity.

 

[ksurfier]

Unfortunately looking like a long road back to $20 per share, maybe by 2027...
It's good they are reducing production until they can get a handle on this, losing $45k per vehicle is insane. Losing 5-6 billion per year is also nuts. Teslas 2 worst years they only lost 3.3 billion combined as they stood up Model 3...

 

[VSG]

I suspect FSD Elon is worried about Model Y sales taking a big hit when the R2 comes out; he wants to scare buyers away from Rivian.

Just like he did back in 2019. Back then he saw Rivian as a threat to Tesla so went out of his way to bash what Rivian was doing and to say that his superior experience with manufacturing hell gave him the knowledge to say that Rivian was going to fail.

Then he announced the Cybertruck as something that would start shipping in months, cost half the price of the R1T, and have twice the range of the R1T.

I don't see how anyone can claim that the CT announcement at that time was anything other than Elon trying to scare people away from Rivian.

 

[evhelphub]

Of course it's no accident. They have been planning this for at least year - it was announced long ago as something that would happen in early 2024. If you're suggesting that they threw something together at the last minute, before they were ready, in order to deflect attention from the Q4 numbers, then you're way off base.

No, it isn't thrown together. That's not the suggestion. Rivian needs a lot more funding, exposure, reservations, brand recognition, larger customer base. R2 gives them that.

Perhaps they didn't know 12 months ago EDv and R1 sales would slow so rapidly, maybe they did, but the above has to be the primary reason.

 

[bdwalters]

Rivian quality is way better than Tesla’s in my experience. Not perfect, but better by degrees.

My R1S build was nearly flawless. My Y and 3 builds were also very good, though.

 

[Zoidz]

Come on....GM has been doing OTA updates for at least a few years now. I know they do it on Cadillac vehicles for sure.

lol, it was a tongue in cheek comment poking fun at GM.

 

[VSG]

No, it isn't thrown together. That's not the suggestion. Rivian needs a lot more funding, exposure, reservations, brand recognition, larger customer base. R2 gives them that.

Perhaps they didn't know 12 months ago EDv and R1 sales would slow so rapidly, maybe they did, but the above has to be the primary reason.

OK, I misunderstood what you were saying. Yes, I agree that the R2 reveal is an important step forward, and that it should be seen as a positive milestone. I think what will be evident at the reveal is how far along the R2 is - it's not just a concept car, it's a full-blown vehicle using a lot of parts that are already being produced for the R1 and using other parts that are production-ready. This is not a slapped-together prototype. The software is written and debugged and still getting new features, because it is the same as they're running in the R1. Many of the suppliers are already in place and locked in, the factory is already designed and ready to go up, a lot of the factory equipment has been ordered, the lawsuits in GA have been thrown out and the appeals exhausted. Etc. It's good to reveal now to demonstrate this, and it will be good to take reservations because that will demonstrate demand, which will be an asset when they need to borrow to fund the plant.

 

[evhelphub]

OK, I misunderstood what you were saying. Yes, I agree that the R2 reveal is an important step forward, and that it should be seen as a positive milestone. I think what will be evident at the reveal is how far along the R2 is - it's not just a concept car, it's a full-blown vehicle using a lot of parts that are already being produced for the R1 and using other parts that are production-ready. This is not a slapped-together prototype. The software is written and debugged and still getting new features, because it is the same as they're running in the R1. Many of the suppliers are already in place and locked in, the factory is already designed and ready to go up, a lot of the factory equipment has been ordered, the lawsuits in GA have been thrown out and the appeals exhausted. Etc. It's good to reveal now to demonstrate this, and it will be good to take reservations because that will demonstrate demand, which will be an asset when they need to borrow to fund the plant.

Sorry - I wrote the post awkwardly. I'm not feeling down on Rivian, to be clear.

Yep, we agree. R2 reveal and media buzz is sort of planned as the next "bump" if you will, primarily, imo, to get brand exposure with customers and to get more funding by showing interest to investors.

My opinion on the current state of Rivian is that I don't really feel what happens in the short term - outside of the R2 reveal being "successful" - means a whole lot. I wouldn't predict their success or failure based on anything I've seen so far. It's a complicated business and they will have some learning curves, as well as an unfavorable economic environment to deal with for a bit longer.

But the fun and easy headline for the media is that they will die, just like we had to hear about Tesla forever.

 

[VSG]

I’m puzzled by the EDV. Amazon wasn’t buying a lot of them. Then Rivian negotiated an end to the exclusivity agreement and Amazon bought even fewer. Meanwhile, nobody has stepped up to fill the gap. It seems the economics of it are poor, or something. Do we know if it can last for a full eight hours of city stop and go, like a real UPS truck? I would expect UPS, FedEx, or DHL to snap these up. I wonder if the same quality issues I see in the R1s manifest in the EDVs, and fleets are having none of it. At this point the product looks like a failure.

Amazon has a contract for 100k EDV, and they have reiterated as recently as a few months ago that this number is still what they will buy. But Amazon has always said by 2030, while Rivian has always wanted to deliver them earlier. The IPO prospectus (https://www.sec.gov/Archives/edgar/data/1874178/000119312521328239/d157488d424b4.htm) said that Rivian wanted to deliver all of them by 2025, but we know now that Amazon doesn't want them that fast.

The end of the exclusivity agreement (just a few months ago, in the fall) means that Rivian is now free to sell these vans to other companies. This was a huge win for Rivian, because originally they were to be locked into Amazon for many more years.

Why a lock-in? Because Amazon as a company put a lot of their experience and corporate knowledge into the co-development of these vans. Amazon arguably is better than anyone on the planet these days at delivering packages in a cost-effective manner. They have incredibly valuable insight and requirements that they shared with Rivian in order to develop and build vans that were highly suited and optimized for Amazon's package delivery needs. This process of designing and building the vans was iterative - Rivian would produce some, Amazon would test them, provide feedback, then that feedback would get incorporated into a new version. A lock-in is only fair; because Amazon contributed so much to this project, they should have exclusive access to the product for some period of time.

Rivian was able to terminate the exclusivity much earlier than anticipated. But I am sure there are some conditions still - it wouldn't surprise me to learn that Rivian probably can't sell to Amazon's direct competitors immediately, but that's part of the private contract between Rivian and Amazon and I don't think we will ever know the exact details.

What we do know is that the range, for example, was chosen by Amazon, to suit Amazon's needs, and those needs were based on Amazon's data-driven metrics and experience delivering billions of packages. There's no need to speculate here - the range is ABSOLUTELY suited to Amazon's use, meaning it DOES cover full day usage on most last mile routes, and does it in a far more cost-effective way than ICE step vans. How much this saves is certainly something that Amazon is collecting data on every day.

What's more, because the EDV contract covers the cost of manufacturing plus some amount of profit, the EDVs have been sold at a profit since day 1.

At this point the product looks like a failure.

Just the opposite, it's a success, and now that exclusivity is terminated Rivian has the ability to make use of that half of the Normal plant that is currently being underutilized. This gives Rivian a way to grow much faster than it would with just the R1 line.

Exclusivity just ended a few months ago. It would be unreasonable to expect that they already have an order for 10k or more of these from other companies. As we know, Rivian is focusing on customized vans for fleets, which is not an overnight thing. Any company wanting to buy hundreds or thousands of vehicles does this on a long-range plan after studying capital cost, operating costs, depreciation, etc. and after soliciting bids from multiple vendors. Customizatoins take time to develop and manufacture. And part of Rivian's strategy is to sell turnkey charging, route planning, and fleet management solutions with these vans, which is another profit center but that also takes time to roll out to new customers because most customers will probably already have some of their own systems in place.

EDV is a long-term play. It is already profitable for Rivian, and will continue to be profitable with guaranteed business every year for the next 5 years at least while Amazon keeps buying according to their agreement. And the manufacturing capacity is already there and ramped up at the Normal factory, so this sector of the business is ripe for some pretty rapid expansion over the next year when the new customers start to sign on.

Additionally, Rivian is using the EDV to gain inroads into Europe. They are already on the road in Europe as a test with some customers. Rivian is using the EDV experience to learn how to meet European regulatory requirements, how to export cost-effectively, and how to sell in Europe. Additionally, they are exploring European manufacturers and even a European factory. They are figuing out all this stuff in Europe IN PART because they are planning to sell the R2 in Europe, so they NEED to figure this all out in the next two years.

It amazes me that people continue to see and consider only the R1 consumer vehicle when they look at Rivian. Rivian has multiple business divisions, all leveraging each other, and all planned from the beginning to contribute to the company as a whole. Although the R1 gets the vast majority of the press, the EDV is at least important as the R1 when it comes to the whole of the company.

 

[VSG]

It was going to expire that year.

Not that I recall. I can't seem to easily find information about that, perhaps you have a link I could read?

My recollection is that with the old EV tax credit, manufacturers were only able to offer the credit for the first 200k vehicles produced by the manufactuer. The rationale was that Congress didn't want to subsidize the industry at the expense of ICE manufacturers (didn't want to pick "winners" and "losers") but instead wanted to just kick-start EVs by providing a limited amount of start-up credits which would enable manufacturers to reach profitability and reduce costs and get to the point of being competetive. If they couldn't do that in the first 200k, then they probably shouldn't still be getting an incentive.

So while some manufactures in 2022 had already reached 200k units shipped and were thus going to lose the tax credit for their vehicles, the old tax credit law was still in effect and still applied and was not going to expire. Any manufacturer that hadn't shipped 200k yet would continue to get the credit. Specifically all Rivians would still be eligible for the "old" credit of $7500 today and for a few more years still if the new IRA hadn't been enacted. The IRA replaced the old tax credit, but I don't think the old tax credit was set to expire.

 

[R1TS]

No, leasing isn't a benefit brought on by the IRA, it's a way to get around the IRA by using the commercial sales loophole. Rivian added leasing to make the R1 more affordable to customers after the IRA trashed the $7500 consumer tax credit, and to make the R1 more affordable in the way that doesn't reduce Rivian's revenue per vehicle. A nice business move, but NOT something that was intended by the IRA.

You don’t think someone somewhere deliberately put that loophole in? If not, I can’t help you.

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