My unsolicited five step plan for saving Rivian

[Golfer04]

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?

I also have been involved in this type of situation before financing companies that went public and then struggled when market dynamics changed. For me two things make sense. First Normal has excess production capacity now. If design of R1 is complete use the April shut down to establish that line in the existing facility. Shelve GA until cash drain is stopped. You don't need a tent covered production line. In hindsight LOTS of huge management spending mistakes. If they don't want to mark down existing inventory the way every other manufacturer does then methodically ship them to auctions. Get the cash.

Option two is to see if Tesla will buy the company. I know there is cross shopping some between the X & S, but the product offerings would complement each other.

Like I said I've been through this exact scenario (only in energy market) before. I didn't buy the IPO stock because the board looked handpicked by RJ. Only Cox Automotive rep had an auto background (I think that is correct). Patagonia background???? Give me a break. The guy who can design the widget rarely can manage the company. The CFO turnstyle speaks volumes to me.

I love my truck and am looking to buy another one. Will do what I can to help.

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[carsly]

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.

THIS.

Look at Rivian's cash burn rate. Now add declining ASP and less demand (not many pre-orders left). So cash burn is likely to increase this year. With working capital needs, they have 4-5 quarters of cash best I can figure which gets them through 2024.

Then what?

Unless RJ has a friendly sovereign wealth fund on speed dial *cough Lucid* R2 never reaches production. Current cash trajectory has Rivian falling short by over a year and half. That's one hell of a gap.

Maybe they can get some working capital financing. I haven't read the terms on any of their notes but I'd suspect the Normal plant has already been pledged so outside of finished good inventory they may be out of moves short of a crazy dilutive equity raise this summer.

 

[HyperionMark]

A brand this strong doesn't just go away overnight. Heck, even crappy brands can linger for years and years (ie Fisker, and eventually Lucid).
2 likeliest scenarios to me:
1. They struggle for a long time but eventually muddle through and make it, even if in a small niche company sort of way.
2. They get bought. I just don't buy anyone that says it will be a Chinese company. So many reasons, but no, just no. I don't see Apple doing it since they like to control their branding so much. Maybe Amazon is the likeliest buyer. Already own some, and Rivian would be a tiny portion of their cash on hand. But obviously no guarantees there either.

 

[ads75]

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.

So you are assuming the people getting laid off also have the skill set for doing maintenance? There is a cost to training people, which is especially high if they don’t plan on staying in that job long term.

 

[kurtlikevonnegut]

I wonder how many would cancel orders or sell if that happened. I know I would be selling if Rivian sold to BYD.

I would have to immediately sell my Rivian, and that would be a shame.

 

[Twitter Fingers]

THIS.

Look at Rivian's cash burn rate. Now add declining ASP and less demand (not many pre-orders left). So cash burn is likely to increase this year. With working capital needs, they have 4-5 quarters of cash best I can figure which gets them through 2024.

Then what?

Unless RJ has a friendly sovereign wealth fund on speed dial *cough Lucid* R2 never reaches production. Current cash trajectory has Rivian falling short by over a year and half. That's one hell of a gap.

Maybe they can get some working capital financing. I haven't read the terms on any of their notes but I'd suspect the Normal plant has already been pledged so outside of finished good inventory they may be out of moves short of a crazy dilutive equity raise this summer.

Cash burn is going to decrease this year. Did you read the earnings report?

 

[carsly]

There is an additional wrinkle we have not yet explored. Current, attractive, leases assume fairly high residual values.

If chatter picks up in a quarter or two regarding Rivian's solvency, what do you think happens to used vehicles when they hit auction lots? Residuals could decline quickly thereby substantially increasing leasing payments accelerating a death spiral.

RJ and team should have been crisper on their plan. Too many risks and question marks left open, none of which are favorable for vehicle buyers or equity investors. What we don't want is to see Rivian's stock heading to Polestar levels (about $1.40/share last I saw and getting close to falling below the $1/share they need to maintain their listing).

Hoping March 7th, while a product event, will provide some more clarity on the timeline to getting R2 to market. It can't be 2+ years from today.

 

[carsly]

Cash burn is going to decrease this year. Did you read the earnings report?

Friendly wager? I'd like to believe it. But just not seeing that happening with the company's actions.

 

[LetsgoRIVN]

Maybe by spring this EV winter will be over !

 

[JWreck]

Disappointed this hasn’t been posted yet.

 

[lefkonj]

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!

Rivian has hired executives from various manufacturers, as well as developers from Tesla and other large companies. Not everyone there is a newbie. I just think everyone needs to be patient this was never meant to be a quick hit and run.

 

[Zoidz]

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? Yes. May have to re-use the R1 front motor as the R2 rear motor in a single-motor config, go with a coil suspension and keep the Rivian looks. it's the Bronco Sport of the Rivian lineup. Re-using as many R1 parts as they can will hurt margins BUT it will accelerate time to launch - which is critical. Maybe the first vehicles are $60K models only with all the goodies and they build the cheaper configs once the second (real) plant is running. Putting a sprung structure in Normal, and re-using R1 parts, will make it easier for suppliers and much easier for Rivian's (now smaller) operations and logistics team to manage inflow/outlfow and quality at the single location. BTW, there is another hack here, and I shudder to mention it, but they can buy Ultium sleds from GM as are Honda/Acura and slap an R2 body on time simplifying the engineering dramatically.

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.

This is not realistic. Rivian needs a manufacturing line for the R2 from start to finish - battery pack assembly, drivetrain/suspension assembly, body panel assembly, paint shop, general assembly, inspection, etc. etc. etc. etc. etc. Tesla did not do all of that in tents, and if it would all be done in tents, the build quality would be worse than an 7 year old assembling their first plastic model car.

Telsa did some final/general assembly and shipping prep in tents. In California , not Illinois ?. None of the Tesla precision work was done in a tent built in 3 weeks. And with that said, the general build quality of Tesla has spoken for itself.

 

[Mikebike97]

Well, burning $1.5+B in cash a quarter won't work. I've worked with many distressed businesses, including high-growth startups, that begin to run into cash crunches - sometimes they miss estimates of demand at a price point, sometimes it's a lack of attention to detail on the cost side, other times it's trying to invest in anything, everything, all at once (self-driving, subscription services, suspension turning, adding configs, new facilities/factories, staff that aren't really needed for 12-24 months, securing best marginal price on parts which often means larger order volumes and higher working inventory levels). You name it, I've seen it. The one that just about every company struggles with is forecasting working capital needs. If Rivian is sitting on excess finished goods inventory, as they are, that inventory has carrying costs and tends to depreciate the longer it sits on lots. Meanwhile, that's cash that is not available to support other business needs. Some of this is expected, they can/should build up ~15-30 days of inventory as shipping via rail takes time and they want some cushion to keep generating revenue while the factories are down for retooling/refitting. But here we are, and the picture isn't the worst, but it's difficult to support as a prospective vehicle buyer and investor.

Feel free to pick it apart, I don't work at Rivian nor do I know anyone who does. It's just a layman's plan from the outside, but one that will probably work.

1. Cut deeper/faster: 10%? Should start at 20-25% and monitor daily. 10% is a "we're not serious". Most companies will start at 15% and then add another 10-15% in six months. Every day these decisions is delayed is cash you can never get back. And every dollar saved increases probability of success, even if it takes a little longer to get there.
2. Innovate around the current offering: I'll give them credit here, dual-motor coming out last Fall was a great start as are the new Standard and Standard+ packs ...BUT.... the vehicles are effectively identical outside of motors and batteries. Sure, this worked for Tesla but it won't work for everyone coming after, that was a poor assumption. See what's coming to market in the R1 price band and you'll find different interior materials, things like HUD, different trim options, etc. My low-cost hack? Come out with a true "mall crawler+" edition that has five seats (third row extra $5K), 20" all seasons, steel wheels and maybe a tough-wearing fabric interior a la Polestar. Drop the gimmicky camp speaker and maybe even remove the air compressor. I'd also offer new paint flat paint colors, no metallics, to make it clearer to passers-by that this is the mall-crawler edition. Starting at $59,900, available today.
3. 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? Yes. May have to re-use the R1 front motor as the R2 rear motor in a single-motor config, go with a coil suspension and keep the Rivian looks. it's the Bronco Sport of the Rivian lineup. Re-using as many R1 parts as they can will hurt margins BUT it will accelerate time to launch - which is critical. Maybe the first vehicles are $60K models only with all the goodies and they build the cheaper configs once the second (real) plant is running. Putting a sprung structure in Normal, and re-using R1 parts, will make it easier for suppliers and much easier for Rivian's (now smaller) operations and logistics team to manage inflow/outlfow and quality at the single location. BTW, there is another hack here, and I shudder to mention it, but they can buy Ultium sleds from GM as are Honda/Acura and slap an R2 body on time simplifying the engineering dramatically.
4. Immediate salary/bonus freeze - probably through the R2 production launch, it's sink or swim. Everyone remaining gets additional option grants setting up a true win-win.
5. On the engineering side, find 2-4 things that Rivian can be exceptional at which will cause customers to pay attention. At 50-60k annual units Rivian is moving as many R1's as Tesla sells S/X - that's a monumental achievement, but it's insufficient for survival. They won't beat Tesla at FSD or GM's Supercruise (not yet, anyway) so for now Driver+ remains as adaptive cruise control. Full stop. I'd also take a hard look at the Apple Carplay contract and API's, this alone can get Rivian a demand bump in 2024. So Rivian is the outdoorsy company, check. Take a swat team of engineers, 4-6, and optimize the heck out of dual-motor offroad capabilities. Virtual lockers, crawl control, you name it. Make it as good or better than what anyone else has on the market. And then market the heck out of it. Rebelle Rally was a start, but most people have never heard of it. How about beating "Trail Rated" Jeeps on their own trails? And do it with solar and external battery packs - completely green.

That's it. Most organizations, no matter the size, have a hard time pulling on more than 3-5 strings if they have to go "all in". Sure, have departmental goals, etc. And delayer - no more than five layers from RJ to someone on the line or a service tech. Is this hard? Oh yeah, but less management helps the rest happen faster. Pick apart my plan or methods, I'd love to see Rivian succeed. But as a first-time CEO RJ may be an incredible engineer but is struggling with running a business. Claire is helpful, but he needs more. Not sure the recent hires have enough turnaround experience, and make no mistake this is a turnaround - now or by year-end. Best to take the bitter pill now, swallow hard, and dig in.

 

[Mikebike97]

I totally agree with most of what you said. Multiple times I have seen the ups and downs of small companies and what is needed to succeed... But Sometimes it is simply being at the right place and the right time. Right now people are worried about their jobs and spending less.
Also, the major Govermental rebates (13k IN CLAIFORNIA IN 2022) are gone, so there is less incentive to join the EV bandwagon.
I have been on the fence for awhile and decided to pull the trigger on the R1T standard + .

But to me, for Rivian to really succeed is:
1. They need much better Quality Control out of the Manufacturing facility and their suppliers.
That may require more competent QC personnel and even RJ inspecting and testing the vehicles before they leave the plant.
2-10 Focus on quality. The SC cannot keep fixing stupid. Once the quality is up there then focus on things people would like to have.
I have met at least 10 people here in the Bay area who had to return their vehicles. Each person said the same thing, if Rivian simply provided them a new vehicle it would have saved the company thousands of dollars in expenses. Each person also said how much they liked the Vehicle, but became disenchanted with Rivian. That is a a million dollars in lost sales, just in those ten people.
I know people will say Rivian did not have replacement vehicles , well my answer to that is then don't emulate Tesla and don't ship it regardless of the quality. Quality saves money.

 

[iceman12578]

Great points here!

I would add reintroduce the “explore” pack without a camp speaker, one choice of rim, 3 colors, cloth interior, no cooled seats, third row optional, no air suspension or air compressor and nerf some software too - make driver plus optional for example and sell this with certain dual motor batteries only.

I have an early reservation and literally wanted a yellow quad 180kwh max pack with explore pack camp kitchen and power tonneau.

i kept paring back my expectations as explore pack, camp kitchen, power tonneau, yellow, 180max and max+quad all gradually went away.

I waffle back and forth on my config because nothings what i fell in love with to begin with… :/

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