Does the R2 actually kill Rivian?

[Dark-Fx]

Even on this forum, I am continuously surprised at the number of people that cross shop vehicles that have zero in common....hmm R1T or Taycan? R1S or mini Cooper countryman? (do they still make these).

So, I've come to the conclusion that I don't have a clue. (Seems like the older I get the more things I realize I don't have a clue about....cars, stocks, kids, etc.)

Is EV? check!

Goes Fast? check!

Has enough range for what I want to do? check!

Isn't a Tesla? check!

Where do I sign??

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[Tim-in-CA]

The biggest impact the R2 platform will have to Rivian will be service. Currently, in many areas, Service Centers are overwhelmed and have multiple months wait for an appointment - I just dropped my R1S off after waiting over 3 months for an appointment. The R2 is expected to be even higher volume and will swamp SCs. If the SC infrastructure isn't beefed up SIGNFICANTLY this will be the same debacle that Tesla experienced at the launch of the Model 3. Tesla SCs (at least in So Cal and in many other areas) became a nightmare. I'd argue that Rivian Service is already very slow, I really hope they 2-3x SC availability once the R2 comes out.

 

[moonjeong]

The game is to reduce loss per vehicle. And that’s a volume game, not a margin game right now. Get it to a place where you lose enough per car to focus on the margin to take it to the last mile. I would make the r2 exactly the same as the r1, but shorter and cheaper materials, and lower options. That will keep the assembly lines - all you have to do is swap out a few pieces. R1T already at 69k. Make this the top of the line r2 from a battery/motor/etc and you have your 3 second car already. Remove 1 motor, lower battery capacity, no cooled seats, 48v architecture and voila! You have your 47k suv. They will stop production to update tooling later this year. To me, that’s to stop r1 production since they will have enough inventory, and this will allow for a R2 swap.

 

[olsonnet]

They could always take a page out of Tesla's playbook. Tesla recently offered a $1,000 discount on an S, X or Y for those with a Cybertruck reservation who didn't want to wait until their spot in the line came up.

Rivian will gather a bunch of valuable leads from the $100 reservations and can market discounts or promotions to those potential buyers to get them into an R1 in the meantime.

 

[ndmiller]

OMG another open ended question thread of doom and gloom. It's like one every day.

 

[itselectric]

It’s a valid question, but I think it’s pretty simple actually: If the R2 is popular Rivian will have no problem raising money to get it built.

Tesla models 3, Y coming into existence did not kill Tesla. They still sold the S, X even though numbers were less, but that has been the plan all along for Rivian. Most manufacturers start with their “halo” model(s) and then offer more affordable options later.

This. If Rivian gets a solid amount of reservations, they will get all the cash they need to get it done.

I still believe in the meantime that they will de content the R1 and lower prices further.

I'm looking forward to getting my reservation in for the R2 tomorrow and taking delivery of another R1T this year.

 

[R1 EVY]

Wait, what? The leaked specs on R2 are awesome (I agree).

Here's the rub.

I suspect many prospective buyers in the R1 pipeline really don't want to pay $75-100K for either a tiny truck bed or a third-row that they will never use. Others may be urban dwellers and as facile as the R1 is, it's still a handful on tight city streets and in parking lots with ultra-narrow spaces. Let's face it, if you've waited 3-4 years for a R1 that doesn't quite fit your needs, or budget parameters, the R2 looks very, very compelling at roughly half the price.

Let's say other folks agree with this take. Potentially a lot of them.

Then, somewhat counter-intuitively, the R2 never comes into existence.

The new plant is Georgia is far from done. Tooling is far from ordered (and paid for) and lines still have to built, configured, tested and dialed-in for production volumes. Then there are testing and certifications to be had, yada yada yada, it's two+ years before R2 hits the road (I'm guessing end of 2026 with the current trajectory, IF Rivian finds the cash to get there).

Ah, cash. R1 demand has already hit a wall and is likely falling. Don't blame Rivian, they are pulling every trick out of the bag - early release of dual-motor, lower capacity (and lower priced) battery variants, introduction of leasing in certain markets, still covering connectivity costs for all vehicles and the impending line updates should take more cost out of the R1 platform creating an opportunity for either additional gross margin, reducing price points, or perhaps a bit of both.

But back to cash.

By my reckoning they have about four quarters of cash on hand once you adjust for working capital needs - as they grow they will have more raw goods on hand, work-in-process inventory and finished goods inventory (in transit and at delivery centers). That does NOT include a build-out of a new facility in Georgia with its own capex and staffing needs years in advance of first revenue.

Back to the premise. If R2 demand is strong, and we'll know more in 2 days or so, then R1 demand may soften even more than Rivian has stated publicly and Rivian will not sell enough R1 vehicles this year (or next) and run out of cash sometime in Q1 or Q2 of 2025. That's at least a year before the R2 launch so it's quite possible that R2 anticipation ends up killing the company absent a large influx (or two) of highly dilutive external cash.

The main assumption in these arguments is a homogenous target market.

I think the buyer segments are differentiated enough so that R1 and R2 won't cannibalize each other. 5 seater and 7 seater are totally different markets.

Therefore I think the R2 will only help them expand market share, not diminish it.

 

[carsly]

The main assumption in these arguments is a homogenous target market.

I think the buyer segments are differentiated enough so that R1 and R2 won't cannibalize each other. 5 seater and 7 seater are totally different markets.

Therefore I think the R2 will only help them expand market share, not diminish it.

There is a very sound case to be made that it's like a BMW X5 and X7 - similar use cases but different audiences due to different sizes. They probably nip at each other on the edges, but if you drive them they are very different vehicles. Or if you're a Porsche aficionado then it's the Macan (though that's really more an X3) and Cayenne (more X5). Though we're not waiting two years and it's reasonable to think that some R2 intent buyers may pick up a new (or lightly used) R1 in the interim and then trade in for maybe even money when the R2 launches.

It's a fine line to walk through with just 50,000 units of annual R1 sales. Even a 5-10% demand displacement could upend Rivian given their precarious financial position and even if there is no substitution of R1 demand Rivian still lacks the cash to run the business for the two+ years necessary to get the R2 launched.

 

[R1 EVY]

There is a very sound case to be made that it's like a BMW X5 and X7 - similar use cases but different audiences due to different sizes. They probably nip at each other on the edges, but if you drive them they are very different vehicles. Or if you're a Porsche aficionado then it's the Macan (though that's really more an X3) and Cayenne (more X5). Though we're not waiting two years and it's reasonable to think that some R2 intent buyers may pick up a new (or lightly used) R1 in the interim and then trade in for maybe even money when the R2 launches.

It's a fine line to walk through with just 50,000 units of annual R1 sales. Even a 5-10% demand displacement could upend Rivian given their precarious financial position and even if there is no substitution of R1 demand Rivian still lacks the cash to run the business for the two+ years necessary to get the R2 launched.

I totally agree. I think the $100 reservation numbers are going to be key for the next capital raise. It will give some investor confidence or at a minimum make them an ideal acquisition target.

 

[RedCanyon]

No question there are challenges ahead, especially given what appears to be slowing demand for EV's in general. But I expect the opposite question is true... If they don't innovate and rollout new vehicles they are dead. So they have to move forward and move down market in order to tap a broader market. I think all of the talk about will they survive or not is mis guided. The more poignant question is can they navigate the next 24 months without going back to the capital markets, and when they do on what position will they be in.

Carscott mentioned here that he expect to see them produce R2s in their current factory... which would be a play out of Musk playbook (if you have read the latest biography it describes how the set up massive tents in the parking line to enable them to create another production line so they could hit their targets). Not sure they will follow that path, but they probably should be looking at it.

If they can demonstrate solid demand for the R2, and continue to grow R1 sales then they stand a good chance. That is not to suggest the company is a solid investment. They will have to raise more capital, the only question is can they raise it from a position of strength or desperation!

 

[carsly]

I totally agree. I think the $100 reservation numbers are going to be key for the next capital raise. It will give some investor confidence or at a minimum make them an ideal acquisition target.

THIS

It acknowledges two truths:
1. Rivian is not in a position today to bring the R2 to production (not enough money)
2. An external catalyst (like an order book likely exceeding 250+K) is needed to raise additional funds

Make no mistake, the best case is they need another $4-5B of cash to get from mid-2025 (current cash-out) to mid-2026 when they can get R2 launch if they continue their dalliance and reckless spending on a second factory in Georgia. Let's say they cut the current burn of $1.5B/quarter down to $1B/quarter from mid-2025 to mid-2026 that's the bottom end of my cash needed. And mind you that doesn't really fully account for extra capex in Georgia, raw goods, upfront payments on R2 supplier agreements (of which there will be many since they lack cash) and accelerating the service center buildout - also necessary for R2.

As I write this, Rivian has a market cap of $10.5B, enterprise value is higher due to the existing debt obligations. A $5B raise, if entirely equity, would drop today's $10 share price to comfortably under $7. Ouch.

I suspect they try to do this in two tranches - a $1.5-2.5B equity offering this summer AND then a $2.5-3.5B convertible this fall or spring 2025. Some time to wait on interest rates to fall, but not too much.

 

[R1 EVY]

THIS

It acknowledges two truths:
1. Rivian is not in a position today to bring the R2 to production (not enough money)
2. An external catalyst (like an order book likely exceeding 250+K) is needed to raise additional funds

Make no mistake, the best case is they need another $4-5B of cash to get from mid-2025 (current cash-out) to mid-2026 when they can get R2 launch if they continue their dalliance and reckless spending on a second factory in Georgia. Let's say they cut the current burn of $1.5B/quarter down to $1B/quarter from mid-2025 to mid-2026 that's the bottom end of my cash needed. And mind you that doesn't really fully account for extra capex in Georgia, raw goods, upfront payments on R2 supplier agreements (of which there will be many since they lack cash) and accelerating the service center buildout - also necessary for R2.

As I write this, Rivian has a market cap of $10.5B, enterprise value is higher due to the existing debt obligations. A $5B raise, if entirely equity, would drop today's $10 share price to comfortably under $7. Ouch.

I suspect they try to do this in two tranches - a $1.5-2.5B equity offering this summer AND then a $2.5-3.5B convertible this fall or spring 2025. Some time to wait on interest rates to fall, but not too much.

Interesting. Your prediction seems precarious at best. How does the EDV factor into your equation? I would think that interest in that vehicle could do wonders for a capital raise especially if there's a large governmental or corporate order.

 

[R1Sky Business]

Wow, titles are getting more dramatic

 

[zajak1]

I have a strange feeling that R2 may come off the R1 line as I bet the cars will be similar. Just a guess due to the R2 factory nimby delays.

One thing is for sure..RJ has a LONG history of surprising the markets...That was evident when they first introduced the R1T by total surprise....Back then, private markets didn't care that much but once you're in the public domain, surprises , sometimes aren't well received...Would be great for RJ to say R2, even in small quantities will come out of Normal in 2025 when they reveal tomorrow......We can only hope, but there is a long history of surprises with this management!

 

[carsly]

Interesting. Your prediction seems precarious at best. How does the EDV factor into your equation? I would think that interest in that vehicle could do wonders for a capital raise especially if there's a large governmental or corporate order.

That's great for Rivian, but keep in mind they are already selling EDV's and still losing $1.5B/quarter in cash.

So they need to sell A LOT MORE EDV's. I hope they sell 100-200K EDV's a year, short haul movement of goods generates a heck of a lot of local pollution. But at the moment they haven't indicated they are on a run rate to produce or sell this many EDV's. That's the sticky wicket.

BTW, global sales of R1 would help too, but it comes with additional service center costs, perhaps software costs for GDPR compliance, in-country infrastructure for data storage/privacy and even right-hand drive. That all assumes the R1 platform was designed to comply with Euro crash test standards, etc. It would be awesome to see 10-20K R1's get sent to Europe every year, but I suspect that leaves them subscale and managing an increasingly complex, and expensive, global operation with no margin for error. These volumes are unlikely to generate the margin they need to put cash back in the bank.

Heck, they could outfit the EDV with dual motors, max pack and fit it out for #vanlife. But how many units could they sell and at what prices?

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