New Information about supply chain (Jan/2022)

[SANZC02]

There are a couple of new articles talking about supply chain

This one talks about how bad the supply chain was last year.

This one is more concerning where China is locking down some key cities trying to contain Omnicro.

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[RideAlong]

Looks like the supply chain problem is slowing R1T and R1S to a mere trickle while scarce components go to delivery van production.

 

[Guy]

Remember Rivian is not looking to buy that much in the scheme of things. They are would be happy producing 20000 vehicles or so (rough estimate) when other companies are still making millions of vehicles a year. Therefore getting glass, tires, metal etc should not be completely debilitating to their production goals. Also at the q3 results call they said they were stockpiling materials so the issues should ease for them. Other countries are moving out of Omicron like the UK so the supply chain should improve this year compared to last year.

 

[Diddy123]

Looks like the supply chain problem is slowing R1T and R1S to a mere trickle while scarce components go to delivery van production.

Would love to see your support for this assertion.

 

[Attesan997]

Remember Rivian is not looking to buy that much in the scheme of things. They are would be happy producing 20000 vehicles or so (rough estimate) when other companies are still making millions of vehicles a year. Therefore getting glass, tires, metal etc should not be completely debilitating to their production goals. Also at the q3 results call they said they were stockpiling materials so the issues should ease for them. Other countries are moving out of Omicron like the UK so the supply chain should improve this year compared to last year.

I don’t disagree with you, in fact I hope you’re 100% correct because not getting a truck this year would be disappointing. But in fairness the Toyotas and GMs of the world can go in and buy 100M widgets and pay any premium to get them sooner than later whereas Rivian only ordering 200k is a lower priority.

 

[Guy]

I don’t disagree with you, in fact I hope you’re 100% correct because not getting a truck this year would be disappointing. But in fairness the Toyotas and GMs of the world can go in and buy 100M widgets and pay any premium to get them sooner than later whereas Rivian only ordering 200k is a lower priority.

I understand the point about scale and purchasing power but my thought is Rivian at this stage would pay a premium for any components that hold up manufacture. In addition suppliers should more easily make 20k of one items than an order for hundreds of thousands.

We will see what the update is in March.

 

[COdogman]

Isn't the main issue still getting chips? I just saw something this morning the chip shortage is getting worse before it gets better.

 

[AdamsFan1983]

I understand the point about scale and purchasing power but my thought is Rivian at this stage would pay a premium for any components that hold up manufacture. In addition suppliers should more easily make 20k of one items than an order for hundreds of thousands.

We will see what the update is in March.

I think many are operating under the mistaken assumption Rivian is only competing for components. Realistically they’re competing for suppliers’ labor and production time. A company like Hyundai (not the auto co) that produces Rivian’s seating for instance. It’s not like they are selling Rivian branded upholstery out from under Rivian to Chevy.

and frankly I wouldn’t be surprised if shipping bottlenecks were the bigger impediment at this point.

 

[RideAlong]

Would love to see your support for this assertion.

go stand at the end of the factory and see with your own eyes what's coming out the end , and in what quantity.

 

[Trandall]

Isn't the main issue still getting chips? I just saw something this morning the chip shortage is getting worse before it gets better.

I do not believe microchips are the limiting factor to Rivian producing <200 units/ week at this point. I believe it is manufacturing bottle necks. To be even more specific I believe it is a combination battery pack construction (assembly of cells into modules and modules into packs) and quality inconsistencies of final builds coming off the line. To be clear I think final quality is good, just that in final checks they are spending 4 man hours to make corrections when their target is .5 man hour. RJ mentioned this in the last earnings call (vaguely) but it's just my interpretation and I have no other proof. I think as production ramps shipping may be the next bottleneck (possible in receiving materials/ components or delivering R1's to customers) Then at some point they will realize supply constraints as the leading bottleneck, either chips or cells probably. But IMO supply constraints won't be the limiting factor until... WAG >1000 units/ week. Again only opinion.

 

[SANZC02]

I do not believe microchips are the limiting factor to Rivian producing <200 units/ week at this point. I believe it is manufacturing bottle necks. To be even more specific I believe it is a combination battery pack construction (assembly of cells into modules and modules into packs) and quality inconsistencies of final builds coming off the line. To be clear I think final quality is good, just that in final checks they are spending 4 man hours to make corrections when their target is .5 man hour. RJ mentioned this in the last earnings call (vaguely) but it's just my interpretation and I have no other proof. I think as production ramps shipping may be the next bottleneck (possible in receiving materials/ components or delivering R1's to customers) Then at some point they will realize supply constraints as the leading bottleneck, either chips or cells probably. But IMO supply constraints won't be the limiting factor until... WAG >1000 units/ week. Again only opinion.

I’m sure if they added a check box on the configuration page for people to click that are willing to travel to Normal to take delivery, there would be a pretty decent amount of people that would click that as an option. Especially if it could include a factory tour and or a few minutes on the test track….

That could relieve some pressure on at least the delivery portion of the equation.

 

[Craigins]

I’m sure if they added a check box on the configuration page for people to click that are willing to travel to Normal to take delivery, there would be a pretty decent amount of people that would click that as an option. Especially if it could include a factory tour and or a few minutes on the test track….

That could relieve some pressure on at least the delivery portion of the equation.

Until covid impacts are reduced, this isn't happening. No way they introduce random people to their factory staff and risk a breakout.

 

[Trandall]

I’m sure if they added a check box on the configuration page for people to click that are willing to travel to Normal to take delivery, there would be a pretty decent amount of people that would click that as an option. Especially if it could include a factory tour and or a few minutes on the test track….

That could relieve some pressure on at least the delivery portion of the equation.

I'm game! Yeah I doubt they are delivery restrained logistically now. My take is after production has scaled some and deliveries penetrate further from major metro areas it could become a bottleneck. As a now public company, or even towards their mission to transition everyone to EV's ASAP, I believe they will open up factory pickup (hopefully with perks) if it would accelerate deliveries.

 

[SANZC02]

Until covid impacts are reduced, this isn't happening. No way they introduce random people to their factory staff and risk a breakout.

I have time for my June/July delivery window…

 

[mwexler2]

Isn't the main issue still getting chips? I just saw something this morning the chip shortage is getting worse before it gets better.

That is an oversimplification. And this will probably be too. The problem is with specific chips and types of chips. One auto industry specific issue was that in early 2020, most big auto manufacturers read the Covid tea leaves wrong and drastically reduced orders to their suppliers. The legacy car manufacturers by and large consume a lot of special purpose, inexpensive microcontrollers. Think chips designed to control electric windows or engine throttling. These chips by and large were being made in factories using fab technology that was multiple generations old. They also tend to be low margin. The chip makers saw an opportunity to upgrade their fans to current gen technology and make higher margin more general purpose chips for computes and phones which were selling lot hot cakes.
Then people started buying lots of cars. The manufactures went to the chip companies and said, “make me a bunch of these low-margin microcontrollers.” The chip companies responded we can’t make those specific chips any more. We only make chips with latest gen. We have these new micro controllers, would you like them?” The legacy car companies, by and large take years to qualify new chips and rewrite their software.
Tesla (and probably other electric car companies) largely use more general purpose computer and can relatively easily switch between one x86 and another or one Arm chip and another. They are also used to frequently updating their software. So a bunch of these chip supply chain issues did not apply or were less of a problem for companies like Tesla (and I presume Rivian).
There are issues with some high margin chips such a graphics processors. These probably impacted companies like Tesla more, but it wasn’t necessarily all graphic chips and companies like Tesla can be more nimble about switching.
I’m sure in non-electronic components there are similar issues for auto makers and I suspect the Teslas of the industry are also more nimble for those.

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