MSNBC Article: Rivian Falls Apart

[SANZC02]

Here is a dose of cold reality folks. The next 24 months are going to make or break Rivian and the path ahead is incredibly difficult.

We can all wear our rose colored glasses and laugh off the MSNBC article, but there is plenty of truth in what they are reporting, even if there is bias.

The Ford Lightning just won 2023 Motor Trend Truck of the year. What does that mean for Rivian? It means that Ford has a very compelling product and they have the manufacturing chops, efficiencies of scale, and capital to make a ton of these. For as much excitement as there is for the R1T/R1S - Ford and all manufacturers sell a ridiculous amount of trucks that are more in the mold of a work truck every year - the market is massive.

Rivian is spending money at an alarming rate. They are trying to burn through all of us pre-order holders who are dragging down their margins, ramping production across three lines, building out service centers and a charging network. All of that is incredibly expensive.

Do you know how much of that Ford is doing? Almost none of it because they don't need to - with the exception of increasing production on the Lightening.

We are headed for an economic downturn when people are much more likely to hold off on big ticket items. Car loan interest rates are through the roof and unlikely to come down until sometime middle to late next year. Rivian needs to produce and sell as many trucks as they can and keep the reservation numbers through the roof and as more competition comes on line (including the Cyber Truck) it is going to become a lot more difficult.

I'm all in on Rivian. I have a lot invested as a shareholder, and as a reservation holder. I want them to succeed, but I think they have a very difficult road ahead.

Not sure how my reply would make anyone think I am looking at this with rose tinted glasses.

If I did not think the chances for success were not at least slightly better than failure pretty sure I’d pocket my 80k and look elsewhere. I just think if people are going to write an article they should at least try to hide their bias.

The reason I stated them putting the Mercedes talks on pause as being a good thing is to focus on the important things that will be needed in the next 24 months to lay a solid foundation. Right now they are burning around 1.7 billion a quarter, if they can double thier output to 50k vehicles next year they can generate 1 billion a qtr bringing the burn rate under 1 billion a quarter. If they then double in 2024 to 100k vehicles they can generate 2 billion a qtr. Those are with ASP at 80k, we know the Amazon vans were reported to be an ASP of 77k. With a mix of the EDV, R1S and R1T getting close to 80k with the mix is not far off from 80k, even at pre-March prices. Even at 72k ASP for 50k in 2023 and 100k in 2024 it would be .9 billion and 1.8 billion per qtr.

We can see they are working on cost, higher volume will help with cost as well. As I stated earlier, they need to focus and get the build rate ramped up. The Georgia plant (or an R2 plant somewhere) will be critical for long term, they have resistance there but things seem to be progressing although probably be more than the year delay they reported last qtr. With the EDV, R1S, and R1T they can cover a little delay as long as they can keep the supply chain moving. I’m sure that 5 billion estimate is probably going to be closer to 8 billion by the time they are building vehicles but that is still within reach.

They have a couple of critical years ahead but there is a reasonable path to success, we will have a much clearer picture come fall 2023.

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[SASSquatch]

Not sure how my reply would make anyone think I am looking at this with rose tinted glasses.

If I did not think the chances for success were not at least slightly better than failure pretty sure I’d pocket my 80k and look elsewhere. I just think if people are going to write an article they should at least try to hide their bias.

The reason I stated them putting the Mercedes talks on pause as being a good thing is to focus on the important things that will be needed in the next 24 months to lay a solid foundation. Right now they are burning around 1.7 billion a quarter, if they can double thier output to 50k vehicles next year they can generate 1 billion a qtr bringing the burn rate under 1 billion a quarter. If they then double in 2024 to 100k vehicles they can generate 2 billion a qtr. Those are with ASP at 80k, we know the Amazon vans were reported to be an ASP of 77k. With a mix of the EDV, R1S and R1T getting close to 80k with the mix is not far off from 80k, even at pre-March prices. Even at 72k ASP for 50k in 2023 and 100k in 2024 it would be .9 billion and 1.8 billion per qtr.

We can see they are working on cost, higher volume will help with cost as well. As I stated earlier, they need to focus and get the build rate ramped up. The Georgia plant (or an R2 plant somewhere) will be critical for long term, they have resistance there but things seem to be progressing although probably be more than the year delay they reported last qtr. With the EDV, R1S, and R1T they can cover a little delay as long as they can keep the supply chain moving. I’m sure that 5 billion estimate is probably going to be closer to 8 billion by the time they are building vehicles but that is still within reach.

They have a couple of critical years ahead but there is a reasonable path to success, we will have a much clearer picture come fall 2023.

I don't see a quote in my post so not sure why you are singling yourself out. I meant this for the whole thread - not your reply or anyone else's.

Also - we are largely in agreement. There is a path to success, but it is going to be challenging and the next few years are going to be absolutely critical.

 

[kurtlikevonnegut]

Rivian is currently fighting to survive.

Yes, they raised a lot of money last Fall, but with their current burn rate and their unit costs >> sale prices for all of the pre-March 2022 reservations, there will be massive financial pain for the foreseeable future.

Additional headwinds:

• Charging network reliability, cost, and availability
• Service backlog
• Thousands of disappointed customers waiting in the queue with a suboptimal communication strategy/execution
• EV tax credit unavailable for R1S
• EV tax credit unavailable for a large fraction of buyer pool due to income limits
• Ford F150 at scale (bi-directional current)
• Cyber truck at scale
• Snow/ice performance
• Recession
• Chip shortages

Amazon will not wait, they will always optimize for speed and efficiency. If Rivian cannot deliver the vans on schedule, I don't see how the company survives independently.

Maybe Rivian would be a good acquisition if they can show there's a path to unit profitability.

There is a fair probability Rivian fails, 1/4 chance it occurs in 2023 and 1/3 chance it occurs in 2024. If you think there's zero probability Rivian fails, I've got a $72,000 truck I'd like to sell you in 2027, please send me $1000 today.

You think there's a 25% chance that Rivian blows $15b next year?

 

[scottie]

You think there's a 25% chance that Rivian blows $15b next year?

I think they had $13.3b in Q3.
-$1.7b Q4 '22
-$5b Georgia factory
-$1.7b/quarter x 4
-----------------
-$200 million at the end of 2023

Maybe they survive through 2023 if they delay Georgia.

 

[VSG]

@scottie: Your opinion immediately loses credibility when you show them paying for the entire Georgia plant up front and out of their 2023 cash reserves, and when you only count spending and not income in projecting their cash on hand.

 

[scottie]

@scottie: Your opinion immediately loses credibility when you show them paying for the entire Georgia plant up front and out of their 2023 cash reserves, and when you only count spending and not income in projecting their cash on hand.

Because large infrastructure projects always come in under budget and everyone in Georgia is super excited to subsidize building that plant.

Apparently, I also forgot to factor in selling cars for a per unit loss in 2023 will somehow make money at scale. Sounds like Softbank/WeWork logic to me.

Can you please enlighten the thread with any empirical numbers?

 

[SeaGeo]

Seems like he doesn’t like anything. How researched can a post be when he has 2-4 to knock out every day.

https://247wallst.com/author/douglas-mcintyre/

And then there is this

”Rivian faces several buzz saws. The most powerful of these is the Ford F-150 Lightning. It is the electric version … base to which to market the Lightening.”

Seems the editor-in-chief needs an editor or should proofread his work. Just pointless click bait, plenty of more useful Rivian content out there to read.

It's funny because afterwards, I looked to see who had written the article, and low and behold, the guys the editor in chief for his little news agency. Wow. And How?!?

Somehow the guy that wrote this was magna cum laude at Harvard?

This may have been my favorite string of phrases disguised as sentences.

McIntyre needs to hire @DuckTruck for some writing lessons.

 

[Guy]

They certainly have money to get through 2023 and 2024. They need ambitious production targets for next year- more like 75k not 50k since their run rate in December is likely to be close to 4k (if they make 10K in the quarter). If that is the case then 50k is easily achievable especially with a third shift coming on board and the second shift becoming more efficient. The only issue would be any supply shortages but their relationship with suppliers and other mitigation strategies should help. They have the people and factory capacity. To reduce unit cost and get through pre March pricing (especially in the S) they need >50K production next year.

If they did need a little extra money in say 2025 - let’s assume a couple of billion then would it really be that hard for them to raise additional capital? Other companies do it. Moving back Georgia one year has an impact for sure.

 

[Thud]

I like how the article presents the Cybertruck as a threat, given how many times Tesla “fell apart” in the past 15 years. If anything, Tesla’s biggest threat is Elon Musk who is driving more customers toward alternatives like Rivian.

 

[Gator42]

I like how the article presents the Cybertruck as a threat, given how many times Tesla “fell apart” in the past 15 years. If anything, Tesla’s biggest threat is Elon Musk who is driving more customers toward alternatives like Rivian.

Yah I’m sure Musk has gone from hero to zero for many of you since he’s no longer on your team politically…however he has said Tesla was once within hours of running out of capital.

I’ve no crystal ball but work in FS and there’s good reason to believe there’s recession by Q2- a deep one where even some healthy companies won’t survive. Very bad timing for any company with a huge burn rate…

 

[Zoidz]

Not defending Rivian, I'm specifically commenting on the article. To me it reads of a hastily slapped together assignment, like the guy had a deadline to meet and wasn't into it, or worse yet, someone with an agenda assigned it to him because they needed some fodder.

When I read articles like this about any business in any industry, a few things come to mind: Does the company have valuable IP and or physical assets? Has the company's product or service reached critical mass in its market? Do they have untapped market opportunities, in this case the REV (Recreational EV). If so, in the event of a teminal financial crisis, the odds are high that someone will invest in, or buy part or all of the company. I personally believe that Rivian is close to or has met that critical mass.

There's the traditional possible partners/buyers, such as Magna and the big auto makers. There are new entries in the game such as Foxconn. And then there is Amazon and Apple, who have proven they understand Rivian's biggest challenge - supply chain - and would benefit in their own ways by investing in or aquiring Rivian.

Then there is this chatter about all the other EV trucks coming to market and killing Rivian. This is where I question the fundamental thinking of these ANALysts. Every major car AND niche manufacturer has at least one and usually multiple SUVs in their portfolio - even Lamborghini is in the game. I think there is room for Rivian to exist as a niche product even in an increasingly crowded market. For example, Range Rover currently has over 200k orders booked. Yes, the brand has had a storied ownership history, but it marches on.

So at this point, I see Rivian most likely surviving, one way or another.

 

[MountainBikeDude]

This may have been my favorite string of phrases disguised as sentences.

That portion made my little brain blue screen multiple times. "Rivian delivered 6,584 vehicles but also might have yet to deliver any...."

 

[swhme]

Rivian faces several buzz saws. The most powerful of these is the Ford F-150 Lightning. It is the electric version of the top-selling vehicle in the United States. This is a distinction the F-150 has held for decades. Ford likely has at least 6 million of these on the road, giving it a massive customer base to which to market the Lightening.

First off-- they couldn't even spell Lightning right. Secondly, this point is unbelievably dumb. Rivian isn't trying to be the highest volume vehicle manufacturer in the country. They're not expecting the R1T to be the best selling truck. They're building an adventure vehicle for weekend warrior granola munchers, most of whom would never even consider buying an F150, and are cross shopping Rivians, Range Rovers, Tacomas/4runners, Subarus and G-Wagens. We're a weird group over here ?

 

[Donald Stanfield]

I am old enough to miss the days when a reporter would be fired for writing an article like this to a mainstream outlet. Am I alone in wishing news articles stopped being so personally biased and instead just reported facts?

This whole article is so slanted it’s frightening that this passes for news. The author might as well have predicted that R.J. Would get eaten by an evil dragon and that would be the end of Rivian as that claim would have just as much of a factual basis as many of the stated conclusions in this article.

I don’t know any other profession where you can just put together random facts and claim that they lead to some completely unsubstantiated conclusions. It’s really bad when you can see by the title without clicking on the article that it would be rage bait and heavily biased. I really hope people start wising up to the fact that they are being emotionally manipulated by the news for clicks and views.

Honestly imagine what this level of supposition would look like for a doctor. “Well I’m sorry mam but you’ve lost 2 lbs from your last visit and you’re currently chewing gum so that means you must have a brain tumor” or a judge “Well your name is Don and you’re wearing a blue shirt. The last guy who was in here wore a blue shirt so that means you must be guilty”. This “journalist” should be ashamed of themselves.

 

[Mjl]

I think there are lots of ways rivian can optimize their processes to reduce overhead, similar to what tesla has done over the years. Guides won't be necessary, and delivery to home is a huge cost... among a lot of other positions that can be reduced once the product is more fleshed out.

But even with that, there are a LOT of tooling and startup costs (initial engineering R&D) that will even out over time increasing profit per vehicle. I have to think Rivian's executive team is aware of the money loss and has reasons to remain optimistic.

Tesla had these exact same puff piece articles come out when they started.

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