$$$$ Georgia Plant Alternative!

[Zoidz]

Dont know if you noticed that the "foreign" brands are building battery and BEV assy plants in NA.
BMW -SC - batteries
VW - worlds largest LI battery plant St Thomas, Ont, Canada
Toyota - NC batterise
KY - Assy
Honda - batteries
So there goes the price advantage!

If those brands qualify, Rivian still needs to be agressive to be price competitive, for the same reason. So either way, your statement "Someone doesnt chose a 100K vehicle for the 3750 incentive so thats not a mitigating factor." is not accurate.

Sponsored

 

[Craigins]

So if Rivian currently loses 300K/vehicle and if Magna charges 300k/vehicle to build it Rivian breaks even at current state.

This is not the way to look at the number. They are spending money at a rate of 300k per vehicle.

The act of building the R1S is not a -300k task.

If magna charged 300k per vehicle then Rivian would have to sell all assets and fire all staff to "break even."

 

[Arnie1]

This is not the way to look at the number. They are spending money at a rate of 300k per vehicle.

The act of building the R1S is not a -300k task.

If magna charged 300k per vehicle then Rivian would have to sell all assets and fire all staff to "break even."

Funny math...

 

[zymolysis]

Ga would take 2 years to be on line and 3-5 Bln if done right.
Rivian can't continue with a F22 burn rate of 6.8 Bln.
The better alternative would be to have the Ss contract built by Magna in one of their 3 plants.
Magna has the experience building 3.8 mln vehicles over 32 models for 11 companies and a sterling reputation for quality execution.
Magna is currently scoping a NA site to build BEVs also.
This way Rivian would save the huge capital investment, allow Normal to dial in production, bring new models to market quicker, gain access to offshore markets, access state of the art design and assembly technology, and potentially build vehicles at a profit versus 150 - 300k per unit losses.
Besides Rivian now has former Magna Steyr President Frank klein as COO and that could help.

Rivian doesn't have to pay for the plant with 100% cash upfront - they can finance part of it, like any other entity would.
Starting over to find a spot, design it, get it permitted, and then get it built and operational, would take several additional years. They need to start making R2s as soon as they can.
How do you figure they are losing $150,00 to $300,000 per vehicle? That is crazy talk. RJ has said that Rivian will have a positive cash flow by 2024 (they can't do that if they are losing $150,000 on each vehicle sold).

P.S. If, in fact, Rivian was losing $150,000 on each vehicle, the answer (and the path to profitability) would be simple - sell fewer vehicles. See how crazy that is?
There are fixed costs in running the company, and there are inherent costs associated with researching new technologies, designing future models, and designing/building future factories; these are not related to the cost of building R1s or EDVs. To ascribe these costs as such, by saying that each vehicle built/sold is a loss of $150,000 to $300,000, is to admit to fundamentally misunderstanding how all of this works.

 

[Craigins]

Rivian doesn't have to pay for the plant with 100% cash upfront - they can finance part of it, like any other entity would.
Starting over to find a spot, design it, get it permitted, and then get it built and operational, would take several additional years. They need to start making R2s as soon as they can.
How do you figure they are losing $150,00 to $300,000 per vehicle? That is crazy talk. RJ has said that Rivian will have a positive cash flow by 2024 (they can't do that if they are losing $150,000 on each vehicle sold).

People ignorantly take

$ spent / vehicle delivered per quarter.

and state that is how much it cost to make the vehicle.

 

[Donald Stanfield]

Funny math...

It's not funny math it's a misunderstanding of money spent per vehicle vs cost to build a vehicle. Lots of the money spent is in initial costing that will not be recurring expenses. Building a production line for example is a cost that is in the money spent per vehicle but it isn't actually a per unit cost.

It's the difference between fixed and dynamic overhead. Fixed overhead is the cost of the machine's upkeep, the cost of the labor and the cost of materials. That is what it ACTUALLY costs to build a vehicle. The dynamic overhead are one time costs. So this would be expanding a factory, buying additional equipment or machines and stuff like this. Large, one time costs that are necessary in order to produce the vehicles but aren't accurate to put into cost per vehicle because once they are purchased you do not need to buy them again or don't need to spend money on them until they break which is over hundreds of thousands or millions of vehicles.

The fixed overhead will never get cheaper and the price of the vehicle needs to be more than the direct cost in making said vehicle. Rivian is already at this point. The thing is the profit per vehicle isn't enough to cover all the fixed, recurring expenses like labor and electricity to run the plant and machines AND cover the one time costs like expansions and new equipment. So the goal of a production ramp is multi faceted.

The first goal is that you need to get enough production because every vehicle you sell makes X amount of money. Rivian is NOT losing money on vehicles on a fixed cost basis, the R1 series and EDVs DO make a profit for Rivian. So you need to produce enough vehicles so your per unit profit can start paying all the bills. The proof that Rivian is not losing money on a per vehicle basis is the entire subject of this post, that Rivian is losing less money each and every quarter. That means they are making more vehicles and making them more efficiently so that their outgoing dollars are getting closer in parity with the incoming dollars from vehicle sales.

If it was true what people are thinking that Rivian loses hundreds of thousands of dollars making each vehicle then Rivian would be spending MORE money each quarter as they make more vehicles NOT less money per quarter. So opening a production line is a balancing act, especially on something fairly low margin like vehicles. You need to make enough vehicles because although your profit per vehicle is small if you sell enough of them you still make money. If you sell 10 vehicles at a thousand dollars profit for each vehicle you don't have enough money to run a factory and keep all the people employed that Rivian does. But if instead of 10 vehicles you sell 50K at a thousand dollars profit you now have 50MM dollars. That's still probably not enough but closer.

I'm sure Rivian makes more per vehicle than that considering they are projecting to be cash flow positive in 2024. That means that will the number of vehicles they are projecting to sell and the profit per vehicle, numbers that they already know, they will have enough to pay all their expenses and have some money left over.

 

[zymolysis]

People ignorantly take

$ spent / vehicle delivered per quarter.

and state that is how much it cost to make the vehicle.

Exactly. Some of the money spent will increase physical and/or intellectual assets (e.g. buy a piece of land and/or build a factory for a future model). These costs are amortized against the future production. Wall Street may increase or decrease the value that they ascribe to your company, based on whether investors think you can deliver on those future promises, or whether that asset will appreciate or depreciate.

 

[Donald Stanfield]

It's not funny math it's a misunderstanding of money spent per vehicle vs cost to build a vehicle. Lots of the money spent is in initial costing that will not be recurring expenses. Building a production line for example is a cost that is in the money spent per vehicle but it isn't actually a per unit cost.

It's the difference between fixed and dynamic overhead. Fixed overhead is the cost of the machine's upkeep, the cost of the labor and the cost of materials. That is what it ACTUALLY costs to build a vehicle. The dynamic overhead are one time costs. So this would be expanding a factory, buying additional equipment or machines and stuff like this. Large, one time costs that are necessary in order to produce the vehicles but aren't accurate to put into cost per vehicle because once they are purchased you do not need to buy them again or don't need to spend money on them until they break which is over hundreds of thousands or millions of vehicles.

The fixed overhead will never get cheaper and the price of the vehicle needs to be more than the direct cost in making said vehicle. Rivian is already at this point. The thing is the profit per vehicle isn't enough to cover all the fixed, recurring expenses like labor and electricity to run the plant and machines AND cover the one time costs like expansions and new equipment. So the goal of a production ramp is multi faceted.

The first goal is that you need to get enough production because every vehicle you sell makes X amount of money. Rivian is NOT losing money on vehicles on a fixed cost basis, the R1 series and EDVs DO make a profit for Rivian. So you need to produce enough vehicles so your per unit profit can start paying all the bills. The proof that Rivian is not losing money on a per vehicle basis is the entire subject of this post, that Rivian is losing less money each and every quarter. That means they are making more vehicles and making them more efficiently so that their outgoing dollars are getting closer in parity with the incoming dollars from vehicle sales.

If it was true what people are thinking that Rivian loses hundreds of thousands of dollars making each vehicle then Rivian would be spending MORE money each quarter as they make more vehicles NOT less money per quarter. So opening a production line is a balancing act, especially on something fairly low margin like vehicles. You need to make enough vehicles because although your profit per vehicle is small if you sell enough of them you still make money. If you sell 10 vehicles at a thousand dollars profit for each vehicle you don't have enough money to run a factory and keep all the people employed that Rivian does. But if instead of 10 vehicles you sell 50K at a thousand dollars profit you now have 50MM dollars. That's still probably not enough but closer.

I'm sure Rivian makes more per vehicle than that considering they are projecting to be cash flow positive in 2024. That means that will the number of vehicles they are projecting to sell and the profit per vehicle, numbers that they already know, they will have enough to pay all their expenses and have some money left over.

Plus we could get even more in the weeds here by separating production staff and support staff and classifying salaries as pure overhead or directly related to producing vehicles. For example building maintenance and janitorial staff don't actually make cars so you can't really include them as a cost to make the vehicle for the purpose of determining profit margin per unit but they still need to be paid out of that profit per vehicle.

That's why if you noticed why when Rivian laid off a bunch of staff this past winter when they did they stressed the people laid off were support staff not production staff. So basically they cut overhead cost without impacting production numbers. Getting staffing figured out is an ongoing process, one I struggle with even though I have a much smaller company. It takes a long time to figure out which positions are critical and which support staff can be eliminated and have their jobs consolidated without impacting production rates.

Sorry for all the rambling, business and staffing and numbers like this are really interesting and exciting to me which is why I love doing what I do but I realize that most people do not understand or actively dislike stuff like this. If that's you feel free to pass on my posts on the subject.

 

[ER1T]

Ga would take 2 years to be on line and 3-5 Bln if done right.
Rivian can't continue with a F22 burn rate of 6.8 Bln.
The better alternative would be to have the Ss contract built by Magna in one of their 3 plants.
Magna has the experience building 3.8 mln vehicles over 32 models for 11 companies and a sterling reputation for quality execution.
Magna is currently scoping a NA site to build BEVs also.
This way Rivian would save the huge capital investment, allow Normal to dial in production, bring new models to market quicker, gain access to offshore markets, access state of the art design and assembly technology, and potentially build vehicles at a profit versus 150 - 300k per unit losses.
Besides Rivian now has former Magna Steyr President Frank klein as COO and that could help.

That sounds like legacy auto makers mentality to me. The point of being vertically integrated, is to build as much of your own product as possible. That’s why Tesla is beating everyone else. Eliminate the middleman, and get more $ for yourself. Also, by building your own product, you can change/update any future components whenever you want to. No negotiations to change 3rd party contracts.

 

[Craigins]

It's not funny math it's a misunderstanding of money spent per vehicle vs cost to build a vehicle. Lots of the money spent is in initial costing that will not be recurring expenses. Building a production line for example is a cost that is in the money spent per vehicle but it isn't actually a per unit cost.

It's the difference between fixed and dynamic overhead. Fixed overhead is the cost of the machine's upkeep, the cost of the labor and the cost of materials. That is what it ACTUALLY costs to build a vehicle. The dynamic overhead are one time costs. So this would be expanding a factory, buying additional equipment or machines and stuff like this. Large, one time costs that are necessary in order to produce the vehicles but aren't accurate to put into cost per vehicle because once they are purchased you do not need to buy them again or don't need to spend money on them until they break which is over hundreds of thousands or millions of vehicles.

The fixed overhead will never get cheaper and the price of the vehicle needs to be more than the direct cost in making said vehicle. Rivian is already at this point. The thing is the profit per vehicle isn't enough to cover all the fixed, recurring expenses like labor and electricity to run the plant and machines AND cover the one time costs like expansions and new equipment. So the goal of a production ramp is multi faceted.

The first goal is that you need to get enough production because every vehicle you sell makes X amount of money. Rivian is NOT losing money on vehicles on a fixed cost basis, the R1 series and EDVs DO make a profit for Rivian. So you need to produce enough vehicles so your per unit profit can start paying all the bills. The proof that Rivian is not losing money on a per vehicle basis is the entire subject of this post, that Rivian is losing less money each and every quarter. That means they are making more vehicles and making them more efficiently so that their outgoing dollars are getting closer in parity with the incoming dollars from vehicle sales.

If it was true what people are thinking that Rivian loses hundreds of thousands of dollars making each vehicle then Rivian would be spending MORE money each quarter as they make more vehicles NOT less money per quarter. So opening a production line is a balancing act, especially on something fairly low margin like vehicles. You need to make enough vehicles because although your profit per vehicle is small if you sell enough of them you still make money. If you sell 10 vehicles at a thousand dollars profit for each vehicle you don't have enough money to run a factory and keep all the people employed that Rivian does. But if instead of 10 vehicles you sell 50K at a thousand dollars profit you now have 50MM dollars. That's still probably not enough but closer.

I'm sure Rivian makes more per vehicle than that considering they are projecting to be cash flow positive in 2024. That means that will the number of vehicles they are projecting to sell and the profit per vehicle, numbers that they already know, they will have enough to pay all their expenses and have some money left over.

and to add on to all of that is R&D. They are designing the R2 line of vehicles. They are designing the factory lines to build the R2 vehicles. They are designing the factory/site layout for the GA plant. They probably have many lawyers working out permits and everything for the GA plant.

They are building their windmill, they are investing in the solar farm in KY.

This is why i ignored someone on another thread who complained that Rivian is spending so much money already and they haven't even broke ground in GA. Physical construction is only a part of the actual cost to build the plant.

 

[Donald Stanfield]

and to add on to all of that is R&D. They are designing the R2 line of vehicles. They are designing the factory lines to build the R2 vehicles. They are designing the factory/site layout for the GA plant. They probably have many lawyers working out permits and everything for the GA plant.

They are building their windmill, they are investing in the solar farm in KY.

This is why i ignored someone on another thread who complained that Rivian is spending so much money already and they haven't even broke ground in GA. Physical construction is only a part of the actual cost to build the plant.

Oh yeah. Millions were spent already before a machine ever pulled up to the GA SITE. Lots of times projects are being worked on for a year or more before any construction company ever sees a print. I guarantee that entire factory is built in 3d on a computer already and is a coordinated job. Every board and pipe and screw has an exact location in 3d space and takeoffs are as easy as a few clicks at this point.

Almost all big jobs are coordinated these days and I'm sure something as big as this job is coordinated. All that work had to be paid for already.

 

[COdogman]

 

[zymolysis]

It's not funny math it's a misunderstanding of money spent per vehicle vs cost to build a vehicle. Lots of the money spent is in initial costing that will not be recurring expenses. Building a production line for example is a cost that is in the money spent per vehicle but it isn't actually a per unit cost.

It's the difference between fixed and dynamic overhead. Fixed overhead is the cost of the machine's upkeep, the cost of the labor and the cost of materials. That is what it ACTUALLY costs to build a vehicle. The dynamic overhead are one time costs. So this would be expanding a factory, buying additional equipment or machines and stuff like this. Large, one time costs that are necessary in order to produce the vehicles but aren't accurate to put into cost per vehicle because once they are purchased you do not need to buy them again or don't need to spend money on them until they break which is over hundreds of thousands or millions of vehicles.

The fixed overhead will never get cheaper and the price of the vehicle needs to be more than the direct cost in making said vehicle. Rivian is already at this point. The thing is the profit per vehicle isn't enough to cover all the fixed, recurring expenses like labor and electricity to run the plant and machines AND cover the one time costs like expansions and new equipment. So the goal of a production ramp is multi faceted.

The first goal is that you need to get enough production because every vehicle you sell makes X amount of money. Rivian is NOT losing money on vehicles on a fixed cost basis, the R1 series and EDVs DO make a profit for Rivian. So you need to produce enough vehicles so your per unit profit can start paying all the bills. The proof that Rivian is not losing money on a per vehicle basis is the entire subject of this post, that Rivian is losing less money each and every quarter. That means they are making more vehicles and making them more efficiently so that their outgoing dollars are getting closer in parity with the incoming dollars from vehicle sales.

If it was true what people are thinking that Rivian loses hundreds of thousands of dollars making each vehicle then Rivian would be spending MORE money each quarter as they make more vehicles NOT less money per quarter. So opening a production line is a balancing act, especially on something fairly low margin like vehicles. You need to make enough vehicles because although your profit per vehicle is small if you sell enough of them you still make money. If you sell 10 vehicles at a thousand dollars profit for each vehicle you don't have enough money to run a factory and keep all the people employed that Rivian does. But if instead of 10 vehicles you sell 50K at a thousand dollars profit you now have 50MM dollars. That's still probably not enough but closer.

I'm sure Rivian makes more per vehicle than that considering they are projecting to be cash flow positive in 2024. That means that will the number of vehicles they are projecting to sell and the profit per vehicle, numbers that they already know, they will have enough to pay all their expenses and have some money left over.

Well said.

 

[crashmtb]

So if Rivian currently loses 300K/vehicle and if Magna charges 300k/vehicle to build it Rivian breaks even at current state.
Id bet Magna can produce a Rivian at a profit for less than 300k/unit..

That’s not how that works.
that’s like saying if you spend the same amount of money on a mortgage as renting, you’re stuck with a paid off property at the end of the mortgage...why have that when you can rent forever?

The cost of building out manufacturing capacity and all of the rest of rivian’s operations might amortize to $300k/vehicle, at…whatever time that was calculated, but as qty goes up that amount will decrease.
it is not the same as each vehicle costing $300k to actually produce.

food and beverage licensed manufacturing is not the same as carmaking, shall defer to f&b MFG SME @Zoidz there

 

[Zoidz]

So if Rivian currently loses 300K/vehicle and if Magna charges 300k/vehicle to build it Rivian breaks even at current state.
Id bet Magna can produce a Rivian at a profit for less than 300k/unit..

That’s not how that works.
that’s like saying if you spend the same amount of money on a mortgage as renting, you’re stuck with a paid off property at the end of the mortgage...why have that when you can rent forever?

The cost of building out manufacturing capacity and all of the rest of rivian’s operations might amortize to $300k/vehicle, at…whatever time that was calculated, but as qty goes up that amount will decrease.
it is not the same as each vehicle costing $300k to actually produce.

food and beverage licensed manufacturing is not the same as carmaking, shall defer to f&b MFG SME @Zoidz there

Yeah, there are many fundamental fallacies with @Arnie1 ’s comment. The cost of building a facility is allocated per vehicle based on the total planned production of that vehicle, the
useful life of the facility, etc. it is meaningless but yet a common mistake to take the cost of a startup factory and divide it by current units produced. If banks used that in a lending decision, new factories would never get built.

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