My unsolicited five step plan for saving Rivian

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Not if they re-diversify the current staffings...

Do you realistically expect people to move all over the country to staff service centers?

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[Dirtman16]

Build the R2 in tents in Normal in 2025: A la Tesla at Fremont, do NOT spend the capex now on the R2 facility. Basically slow roll the new factory and in the interim launch a R2 pilot production line in a sprung structure in spring 2025. Is that a rush job?

This is an excellent point and should be #1 in my opinion. They've to to divert capex money into building a product a much larger group of people can afford, and NOW. Unless they're hiding some unknown source of private equity that's going to keep them afloat 18 months from now, I don't see another option. 2026 or even 2027 is just too long.

 

[Nsblifer]

As a long time Rez holder that went from Quad Max pack to the residual offering available in my config a deadline like that would have me walk away and never look at Rivian even if they survive and were the best truck maker in perpetuity.

Same. Although it would suck, I would have to respectfully walk away from a forced purchase right now.

 

[carsly]

Some quick math for people who think the current trajectory is sustainable:

- Let's say at the end of a quarter Rivian is sitting on 12,000 units of finished R1 inventory
- at ~$80K retail, that's $960,000,000 not in their bank, it's sitting on the lot. Oh, but it costs more than $80K to make them
- So at a $30-40K loss per vehicle they are into that inventory for approx. $1.4B

But let's say demand softens more than they think and with virtually no more pre-orders to fill they end up the year with 20K units of finished goods R1 inventory, losses per vehicle will be higher (lower production numbers to amortize the factory investments that have already been made) so they will probably lose $50K/vehicle at $75K per vehicle retail (lower sold volumes probably means lower ASP). That's now $2.5 billion in cash tied up in vehicles sitting in a lot.

How much cash do they have on the books? Subtract the amount they need to fund the inventory above and then subtract their net loss per quarter. How many quarters of cash are you left with?

Like or hate Elon, he didn't factor this into his math. They have less than 6 quarters of cash. Perhaps as little as 4 and maybe even less than that if they keep investing in the R2 plant that generates no revenue for two+ years. Doesn't math.

That's why I said the cuts need to be deeper - and made now. Time is the enemy.

 

[TollKeeper]

Do you realistically expect people to move all over the country to staff service centers?

Actually, I do.. This is how employers get out of paying unemployment..

We offered them a transfer to a new location, and was willing to pay for the move, they declined.

And its actually in Rivians best interest to do this, as likely they will have been with Rivian for a time, and they may have a personal, or vested, interest in the move. And it potentially saves them money for not paying unemployment.

 

[LetsgoRIVN]

This is an excellent point and should be #1 in my opinion. They've to to divert capex money into building a product a much larger group of people can afford, and NOW. Unless they're hiding some unknown source of private equity that's going to keep them afloat 18 months from now, I don't see another option. 2026 or even 2027 is just too long.

Exactly! And who knows by 2026 maybe Tesla will come up with something new and take the buzz out of R2.

 

[LetsgoRIVN]

Some quick math for people who think the current trajectory is sustainable:

- Let's say at the end of a quarter Rivian is sitting on 12,000 units of finished R1 inventory
- at ~$80K retail, that's $960,000,000 not in their bank, it's sitting on the lot. Oh, but it costs more than $80K to make them
- So at a $30-40K loss per vehicle they are into that inventory for approx. $1.4B

But let's say demand softens more than they think and with virtually no more pre-orders to fill they end up the year with 20K units of finished goods R1 inventory, losses per vehicle will be higher (lower production numbers to amortize the factory investments that have already been made) so they will probably lose $50K/vehicle at $75K per vehicle retail (lower sold volumes probably means lower ASP). That's now $2.5 billion in cash tied up in vehicles sitting in a lot.

How much cash do they have on the books? Subtract the amount they need to fund the inventory above and then subtract their net loss per quarter. How many quarters of cash are you left with?

Like or hate Elon, he didn't factor this into his math. They have less than 6 quarters of cash. Perhaps as little as 4 and maybe even less than that if they keep investing in the R2 plant that generates no revenue for two+ years. Doesn't math.

That's why I said the cuts need to be deeper - and made now. Time is the enemy.

What 12k units of inventory are you talking about ?

 

[carsly]

Same here, been a strategy consultant before coming back to industry; as we say in consulting. Let me give my perspective, since I am on this thread.

Rivian is not going to be successful by cutting cost. I think this is to appease the analysts that Rivian is serious about containing the costs.

They are also not going to be successful by innovating around current offerings of R1. There is not enough demand and will not be until interest rates drop.

As in any strategy to be successful, you need to go all in or go home. They need to figure out the R2 platform. They accelerating R2 maybe to retool and incorporate R2 in retooling; just maybe.

I agree with you on that one thing, they need to accelerate R2 and out compete Tesla in mass market. Rivian has compelling offer and RJ seems to be a level headed guy, I sincerely hope, it stays as an independent company, innovates and becomes successful. Again, I am not in automotive business; but I love my R1S machine and need to head out for lunch to show off.

That's excellently put (said one former strategy consultant to another former strategy consultant). It's all in or nothing. And the execution plan needs to be dead simple so that everyone can recite it and see how it relates to their job functions.

The reason the stock collapsed is that what we've both articulated is completely knowable. And the Street, love them or hate them (it's really the big hedge funds, but I digress) can run the numbers out - and have - and don't see the words and music matching. Rivian's plan is not going to work without more drastic action, and that needs to include generating more revenue.

The more I think about it, maybe if they can't get Ultium sleds from GM due to that company's existing commitments I'd be hounding Elon & Co. to find a way to buy Model Y sleds. That would help Tesla with their demand issues AND give Rivian a proven, tested, platform from which they can make incremental, differentiated, investments. Mercedes can't move EQE SUV's worth a lick, that's another option. Maybe it's not perfect, but R2 could launch in 2025, even if it's just thousands to tens of thousands of units, and Rivian could use that glimmer and incoming cash to fund their long-term plans.

 

[carsly]

What 12k units of inventory are you talking about ?

"As for the first quarter of 2024, due to managing changes in our supply chain associated with the introduction of new materials, we expect to factory gate approximately 13,500 units for the quarter. We expect that there will be a few thousand more vehicles, which are built but not factory gated as they wait an updated part we expect to receive in April."

https://seekingalpha.com/article/4672203-rivian-automotive-inc-rivn-q4-2023-earnings-call-transcript

I rounded down to get me an even $1B in tied up capital. From their last earnings call. You can go back a quarter as well, they are producing more R1's than they can sell/deliver and the backlog is growing.

 

[COdogman]

Building cars in tents in Fremont, CA is not the same as trying to do it in Normal, IL (2 hours from Chicago).

I think it’s worth considering scrapping the GA plant idea for now and looking at other options, but I don’t think tents are practical. Maybe they can buy another shuttered factory like they did in Normal and get a quicker start on R2 production, but that will take time as well. And won’t be cheap. No easy answers for them. They have a long tightrope to walk before they can breathe again.

Also, Rivian has spoken in the past about the fact that Normal, IL is not like Detroit. It is not a place that has a built in population of trained factory workers. They end up having to train more of their employees from scratch due to their geographic location.

 

[evguy]

This is an excellent point and should be #1 in my opinion. They've to to divert capex money into building a product a much larger group of people can afford, and NOW. Unless they're hiding some unknown source of private equity that's going to keep them afloat 18 months from now, I don't see another option. 2026 or even 2027 is just too long.

Respectfully, I dissent. The price point they're aiming for with R2 is premised in part on efficiencies the dedicated GA plant will bring. Better to start producing at real volume in GA in 2026 than setup a tent city in Normal just to get it to market 6 months sooner. If anything, focus on getting the GA plant up and running by late 2025. If more cash is needed, they raise it (perhaps after hitting gross profit). Is Rivian really going to die because the Chevy Equinox EV hits the market before R2?

 

[Dirtman16]

Respectfully, I dissent. The price point they're aiming for with R2 is premised in part on efficiencies the dedicated GA plant will bring. Better to start producing at real volume in GA in 2026 than setup a tent city in Normal just to get it to market 6 months sooner. If anything, focus on getting the GA plant up and running by late 2025. If more cash is needed, they raise it (perhaps after hitting gross profit). Is Rivian really going to die because the Chevy Equinox EV hits the market before R2?

They might die if they run out of money before they can even get the R2 factory going, which is a real possibility without new cash.

Construction projects of that size don't get done in 12 months. They'll be lucky to have a complete factory by the end of 2025. And then they still have to tool and ramp.

 

[lefkonj]

I think the main thing they need to do is ignore all of us, we don't know what we are talking about and have less than a clue about building factories, supply chains, cars, chargers, etc etc etc at the scale a company making 100k vehicles a year requires.

 

[LetsgoRIVN]

"As for the first quarter of 2024, due to managing changes in our supply chain associated with the introduction of new materials, we expect to factory gate approximately 13,500 units for the quarter. We expect that there will be a few thousand more vehicles, which are built but not factory gated as they wait an updated part we expect to receive in April."
Does factory gate means inventory not sold or

https://seekingalpha.com/article/4672203-rivian-automotive-inc-rivn-q4-2023-earnings-call-transcript

I rounded down to get me an even $1B in tied up capital. From their last earnings call. You can go back a quarter as well, they are producing more R1's than they can sell/deliver and the backlog is growing.

Does factory gate means inventory not sold ? Also backlog in terms of demand and not supply I think

 

[SDH]

I think the main thing they need to do is ignore all of us, we don't know what we are talking about and have less than a clue about building factories, supply chains, cars, chargers, etc etc etc at the scale a company making 100k vehicles a year requires.

Kind of a good point, but in reality, we are all winging it! Most Rivian employees included.

Just because I made a kid, doesn't mean I know how to raise one!

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