Conspiracy to sink Rivian? Wall Street Journal article

[SANZC02]

I believe they take all dollars spent in the quarter (payroll, materials, utilities, factory maintenance, cost of sales and marketing etc.)/number of vehicles produced to estimate cost per vehicle. Obviously costs per vehicle go down as as production increases. Actual sales are on the income/revenue side of the balance sheet.

True this is how they do it but to write an article worded as they have it insinuates that the actual cost to build the R1 is more than what they are selling it for.

I would love to think people have enough common sense to understand the difference but realistically just listening to people talking I realize people with (or who choose to use) critical thinking are in the minority.

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[Craigins]

I believe they take all dollars spent in the quarter (payroll, materials, utilities, factory maintenance, cost of sales and marketing etc.)/number of vehicles produced to estimate cost per vehicle. Obviously costs per vehicle go down as as production increases. Actual sales are on the income/revenue side of the balance sheet.

Right and that number would be correct if the only thing Rivian spent money on was making the vehicles.

It is a semantics issue, that is not the "cost" of making the vehicle.

It is an important distinction for the laymen. Otherwise you see people taking that number and thinking Rivian loses 33k on parts and labor for each vehicle sold. Meaning increasing production would just increase losses.

 

[Buckets0fun]

Exactly. And this was their plan from the beginning. the R1 is a flagship platform that was designed to be really awesome and get the name out there and to draw interest. It was intentionally over-engineered.

The WSJ writer seems to think the losses were unexpected or that things aren't going as planned. They also failed to mention that Amazon has always been there as a backstop to any real unforeseen financial troubles--which should make buyers of R1 vehicles feel confident in the long term viability of their vehicle.

The Rivian short-term success/failure story will be written by what happens with the R2 and the plant outside of Atlanta.

Speaking of Amazon.

Why are all the wrecked EDVs placed in lot, never to be recycled?
Reallllly makes you wonder how sustainable and forward thinking rivian is as a company, when they actively prevent vehicles with VERY little damage from being put back on the road.

Source: I own one they attempted to prevent from being registered/used on road. 3,000$ worth of parts later and learning how to repressurize the suspension system got it back

 

[Zorg]

Fixed costs: labor, overhead, depreciation, are too high since the plant is running at a third of its capacity. Couple that with locked in lower selling price. Should get better as they ramp up.

Still, they also need to work on lowering their marginal production costs.

 

[NY_Rob]

Fixed costs: labor, overhead, depreciation, are too high since the plant is running at a third of its capacity. Couple that with locked in lower selling price. Should get better as they ramp up.

Still, they also need to work on lowering their marginal production costs.

Like Sandy said.. "120 screws in each door panel!!!".. "I've never seen anything like it!!"

 

[TexasBob]

Not to make to the obvious point, but Ford is losing as much or more $ per vehicle than Rivian on its EVs. (Ford estimates a $3 billion loss this year at 90k units = $33k per vehicle. Last year with 90k vehicles sold it rand a 40% operating loss.) Same with GM, which is not expecting to start making money on EVs until 2025 (Ford 2026).

 

[Donald Stanfield]

Here's two for starters. It's clear the author(s) are absolutely clueless about designing, building and starting up a manufacturing facility, which I have been doing for 30+ years.

WSJ - "To limit losses, carmakers try to run their factories at full speed as quickly as possible. Companies take several years to design, engineer and practice manufacturing new vehicles so they can ramp up production in a matter of weeks or months."

Several years in the auto industry??? It's several years just to DESIGN the facility, let alone build and startup and ramp up. This is such a %$&#@ ridiculous statement, anyone in manufacuring of this scale knows it.


WSJ : “You should be able to start to make money after three to six months,” said Mark Wakefield, managing director at advisory firm AlixPartners. “By the time you’re ramped up and running at rate, you’re making pretty good money.”

Bahaahhhahhhaaaaa!!!!!!!!! My primary comment here is DON'T use Mark Wakefield at AlixPartners as an advisory firm. He is naive and/or beyond clueless. It's routine and common for new, large manufacturing facilities to take 1 to 3 years to make money, especially when they have a phased start up like Rivian, with the EDV, then the R1 and then the Enduro motor startup phases.

Also notice how there is ZERO in this article that Rivian achieved this startup during the most constrained supply chain crisis in the history of the world? What you DON'T say is as important as what you DO say.

Typically WSJ fodder.

I'm in business but not manufacturing and even I know your analysis is correct here. This Mark guy should be embarrassed to have said that rivian should have been cash flow positive in 6 months. That almost never happens in complex manufacturing.

Its usually very linear of a ramp up to profitability lasting several years which is why a good IPO is so critical so the company has enough capital to weather a production ramp.

 

[Golfer04]

Here's two for starters. It's clear the author(s) are absolutely clueless about designing, building and starting up a manufacturing facility, which I have been doing for 30+ years.

WSJ - "To limit losses, carmakers try to run their factories at full speed as quickly as possible. Companies take several years to design, engineer and practice manufacturing new vehicles so they can ramp up production in a matter of weeks or months."

Several years in the auto industry??? It's several years just to DESIGN the facility, let alone build and startup and ramp up. This is such a %$&#@ ridiculous statement, anyone in manufacuring of this scale knows it.


WSJ : “You should be able to start to make money after three to six months,” said Mark Wakefield, managing director at advisory firm AlixPartners. “By the time you’re ramped up and running at rate, you’re making pretty good money.”

Bahaahhhahhhaaaaa!!!!!!!!! My primary comment here is DON'T use Mark Wakefield at AlixPartners as an advisory firm. He is naive and/or beyond clueless. It's routine and common for new, large manufacturing facilities to take 1 to 3 years to make money, especially when they have a phased start up like Rivian, with the EDV, then the R1 and then the Enduro motor startup phases.

Also notice how there is ZERO in this article that Rivian achieved this startup during the most constrained supply chain crisis in the history of the world? What you DON'T say is as important as what you DO say.

Typically WSJ fodder.

IMO, excellent post. I spent over 30 years financing startups and publicly traded companies. The only thing as bad as the quotes in this article are (sometimes) comments from naive Rivian owners/investors thinking Rivian will be GAAP profitable next year. Start paying dividends, etc. These undertakings take YEARS to pay off. And don't think Amazon is going to bail out Rivian. It isn't going too. I've been there done that several times. Riv needs to work to become cash flow positive prior to CAPEX asap and that is their goal. So far so good, but future is far from secure as an independent company.

 

[tiltedandsaltyaf]

I'm in business but not manufacturing and even I know your analysis is correct here. This Mark guy should be embarrassed to have said that rivian should have been cash flow positive in 6 months. That almost never happens in complex manufacturing.

Its usually very linear of a ramp up to profitability lasting several years which is why a good IPO is so critical so the company has enough capital to weather a production ramp.

here's my biggest concern with RIVN stock as of today, they have the capital to sustain to get to R2, but that means depleting the entire war chest from their IPO

no leadership team will wait to raise capital when at $0 or close to $0.

They'll have to dilute/do another share offering in 2024/2025 to ensure they have $ in the bank to fund R2 line expansion, timing of that news will likely send shares plummeting even though everyone is expecting it

 

[Technowizzard]

I was surprised the stock went down the same day as Rivian published strong Q3 production and delivery numbers.

Until I saw this article that went out yesterday:

https://www.wsj.com/business/autos/rivian-ev-truck-electric-vehicle-8e8dc124

Any thoughts?

Consider the source;
“estimates from Wells Fargo analyst Colin Langan” who knows nothing about the EV business.

 

[Donald Stanfield]

here's my biggest concern with RIVN stock as of today, they have the capital to sustain to get to R2, but that means depleting the entire war chest from their IPO

no leadership team will wait to raise capital when at $0 or close to $0.

They'll have to dilute/do another share offering in 2024/2025 to ensure they have $ in the bank to fund R2 line expansion, timing of that news will likely send shares plummeting even though everyone is expecting it

You are right. I will probably sell before their fundraising then buy the dip. Your timeline looks about accurate from my view. I think their goal this year is to shore up the price so the bottom doesn't fall out when it dips from fundraising.

 

[Den303]

Here's two for starters. It's clear the author(s) are absolutely clueless about designing, building and starting up a manufacturing facility, which I have been doing for 30+ years.

WSJ - "To limit losses, carmakers try to run their factories at full speed as quickly as possible. Companies take several years to design, engineer and practice manufacturing new vehicles so they can ramp up production in a matter of weeks or months."

Several years in the auto industry??? It's several years just to DESIGN the facility, let alone build and startup and ramp up. This is such a %$&#@ ridiculous statement, anyone in manufacuring of this scale knows it.


WSJ : “You should be able to start to make money after three to six months,” said Mark Wakefield, managing director at advisory firm AlixPartners. “By the time you’re ramped up and running at rate, you’re making pretty good money.”

Bahaahhhahhhaaaaa!!!!!!!!! My primary comment here is DON'T use Mark Wakefield at AlixPartners as an advisory firm. He is naive and/or beyond clueless. It's routine and common for new, large manufacturing facilities to take 1 to 3 years to make money, especially when they have a phased start up like Rivian, with the EDV, then the R1 and then the Enduro motor startup phases.

Also notice how there is ZERO in this article that Rivian achieved this startup during the most constrained supply chain crisis in the history of the world? What you DON'T say is as important as what you DO say.

Typically WSJ fodder.

I’ve also worked in manufacturing, primarily in commercial automotive, for several years - and I had the same thoughts reading the WSJ piece.

Never, in all my years, have I seen a production ramp talked about in terms of “weeks” or “months.” That’s just dumb - shows complete ignorance on the subject matter. You’re manufacturing an EV, not some an injection-molded phone accessory.

 

[s4wrxttcs]

I can't speak for anyone else, but I prefer my hit pieces not to be hidden under a paywall.

 

[Singletracker]

It was definitely a hit piece. The writer misleads the reader into the view that the losses were unplanned or unexpected.

Imagine that It’s the Wall Street frickin’ Journal. What can one expect?

 

[Craigins]

here's my biggest concern with RIVN stock as of today, they have the capital to sustain to get to R2, but that means depleting the entire war chest from their IPO

no leadership team will wait to raise capital when at $0 or close to $0.

You mean this:

https://www.businesswire.com/news/h...posed-Green-Convertible-Senior-Notes-Offering

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