Q3 2024 earnings released. Sales & positive gross profit reiterated for Q4 2024

[Mark_AZR1T]

All fair points. BYD may be at a disadvantage with the potential tariffs by the incoming administration.

Hopefully the R2 will be easier to assemble with less bells and whistles so ramp up will be more achievable versus R1s

I expect the new administration to play hardball right out of the gate, aiming to bring China to the negotiating table on favorable terms. China’s economy is ripe for immediate stimulus, so Xi might just be open to dealing. And honestly, I wouldn’t be surprised if, by 2027, we see BYD signing on to build a massive manufacturing facility right here in the U.S. Stranger things have happened!

Another poster hit it right, when they said, the American market is not sufficient for long term survival as an auto maker. Tesla figured that out.

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[bdwalters]

I expect it has to do more with the nuances of cost accounting than sales mix.

A requirement of cost accounting is that a vehicle is expensed when it’s sold, not when it’s produced.

Since Rivian carries a few months of inventory, most of the expense part of Q4 cost of sales will be based on the vehicles manufactured in Q3.

This means Q1 2025 will be not great on margins with the Q4 production cuts.

Rivian’s narrative on positive gross margins has always been about cost reduction on the bill of materials and factory utilization. While ASP is important, it doesn’t seem to be the driving factor here.

I just read the earnings transcript. They mentioned a number of times how the higher trims will help ASPs and drive margin improvement. It seems to be a major component of their narrative.

 

[FinancialCents]

I expect the new administration to play hardball right out of the gate, aiming to bring China to the negotiating table on favorable terms. China’s economy is ripe for immediate stimulus, so Xi might just be open to dealing. And honestly, I wouldn’t be surprised if, by 2027, we see BYD signing on to build a massive manufacturing facility right here in the U.S. Stranger things have happened!

Another poster hit it right, when they said, the American market is not sufficient for long term survival as an auto maker. Tesla figured that out.

Rivian has to expand into other markets for sure. From what I heard from a Rivian SC employee, the R1s exceed weight restrictions in Europe so they will have to wait until the R2 being produced to expand to that market.

That’s what I was told, but rumor mills could be at work with that statement.

 

[bdwalters]

After reading the earnings transcript, I have concluded that Rivian has a number of big problems.

1. They are only going to have positive gross margins in Q4 because of carbon credits. It sounds as if Q1 is going to flip back to negative. They are still targeting gross margin positive for next year, but I imagine that still requires credits, and they didn't sound really confident on that.
2. I think the new administration is going to kill the leasing loophole. 42% of Rivian's business is leases, which will now be $200/month more expensive. This will be an even bigger problem on the R2.
3. What happens if the administration kills the carbon credit scheme? Yikes!
4. I don't think Rivian has a path to positive gross margin on their base model. I suspect the Tris and Quads have decent margins, but can they find enough buyers at those price points? I just don't think there will be enough business there once the original rush is done. Tesla went through its Foundation Series Cybertruck waiting list fairly quickly, and then it went through the dual motor waiting list pretty fast.
5. Rivian has supply issues right now due to the parts shortages. That said, they have demand issues even at current supply levels. I don't think they would be advertising or running incentives if that wasn't true. How big is their market now that the discount pricing sales are all done?
6. If Rivian can't get gross margin positive on the R1, do we think they will figure out how to do that with the R2?
7. Gas prices are low and will probably stay that way. This probably doesn't hurt R1 sales, but it will hurt R2 adoption, as these customers are more cost sensitive.
8. There will be a lot of competition when the R2 comes out. The Model Y Juniper is going to be good and will still be fresh. The R2 looks awesome, but it might struggle to compete on price with the new Y. There will be plenty of other competition out there as well.
9. Tesla's FSD is getting really good. This won't appeal to everybody, but it will attract some business from Rivian, which doesn't have a comparable technology.

I'm just not seeing how Rivian survives as an independent company. My hope is that VW would buy them in a pinch, but VW is struggling as well and might not want to pour cash into another brand. I really want Rivian around as an alternative to Tesla, but this earnings report was grim.

 

[dleepnw]

Short term struggles continue, long term road to profitability remains. Still a tough day to be a shareholder even with the modest upswing yesterday

 

[kurtlikevonnegut]

What does scale really mean? Just take a look: CR-V sales hit 350,000 units a year, and the 4Runner holds steady around 110,000. For Rivian to approach that level, they need at least 100,000 units annually. Without the Georgia plant, they simply won’t get there—expanding Normal alone won’t bridge that gap.

And here’s the kicker: Georgia won’t be online before 2028. By 2027, Rivian’s looking at another delivery bottleneck. By then, the market will be fiercer than ever, with BYD likely making its North American debut. Rivian’s leadership surely sees this hurdle looming.

By early 2027, Rivian will need a white knight—whether it’s a powerful long-term investment or a full acquisition—to propel them forward and keep them in the race.

I could be wrong but I am pretty sure they announced an annual capacity of 155,000 R2 vehicles at Normal under the retooling while maintaining 85,000 R1 vehicle capacity.

 

[bdwalters]

Rivian has to expand into other markets for sure. From what I heard from a Rivian SC employee, the R1s exceed weight restrictions in Europe so they will have to wait until the R2 being produced to expand to that market.

That’s what I was told, but rumor mills could be at work with that statement.

That is easier said than done. To expand, they need service stations, showrooms, and delivery sites. That's a lot of work. It's not as if they can just start shipping cars wherever they want. There are also foreign rules and regulations that must be met. I actually think the US market is plenty big if they can get the price right.

 

[FinancialCents]

That is easier said than done. To expand, they need service stations, showrooms, and delivery sites. That's a lot of work. It's not as if they can just start shipping cars wherever they want. There are also foreign rules and regulations that must be met. I actually think the US market is plenty big if they can get the price right.

That’s very true. I personally believe they need to get more of the kinks worked out here in The States and then expand.

 

[Mark_AZR1T]

I could be wrong but I am pretty sure they announced an annual capacity of 155,000 R2 vehicles at Normal under the retooling while maintaining 85,000 R1 vehicle capacity.

You are right, I just can't see it happening. Hopefully, I'm dead wrong.

 

[SANZC02]

I could be wrong but I am pretty sure they announced an annual capacity of 155,000 R2 vehicles at Normal under the retooling while maintaining 85,000 R1 vehicle capacity.

Total capacity after after the renovation will be 215k units annually

They can flex the max per line but only up to a total of 215k

R2 155k

R1 85k

Commercial van 65k

 

[doozenberg]

After reading the earnings transcript, I have concluded that Rivian has a number of big problems.

1. They are only going to have positive gross margins in Q4 because of carbon credits. It sounds as if Q1 is going to flip back to negative. They are still targeting gross margin positive for next year, but I imagine that still requires credits, and they didn't sound really confident on that.
2. I think the new administration is going to kill the leasing loophole. 42% of Rivian's business is leases, which will now be $200/month more expensive. This will be an even bigger problem on the R2.
3. What happens if the administration kills the carbon credit scheme? Yikes!
4. I don't think Rivian has a path to positive gross margin on their base model. I suspect the Tris and Quads have decent margins, but can they find enough buyers at those price points? I just don't think there will be enough business there once the original rush is done. Tesla went through its Foundation Series Cybertruck waiting list fairly quickly, and then it went through the dual motor waiting list pretty fast.
5. Rivian has supply issues right now due to the parts shortages. That said, they have demand issues even at current supply levels. I don't think they would be advertising or running incentives if that wasn't true. How big is their market now that the discount pricing sales are all done?
6. If Rivian can't get gross margin positive on the R1, do we think they will figure out how to do that with the R2?
7. Gas prices are low and will probably stay that way. This probably doesn't hurt R1 sales, but it will hurt R2 adoption, as these customers are more cost sensitive.
8. There will be a lot of competition when the R2 comes out. The Model Y Juniper is going to be good and will still be fresh. The R2 looks awesome, but it might struggle to compete on price with the new Y. There will be plenty of other competition out there as well.
9. Tesla's FSD is getting really good. This won't appeal to everybody, but it will attract some business from Rivian, which doesn't have a comparable technology.

I'm just not seeing how Rivian survives as an independent company. My hope is that VW would buy them in a pinch, but VW is struggling as well and might not want to pour cash into another brand. I really want Rivian around as an alternative to Tesla, but this earnings report was grim.

Most sober and comprehensive analysis yet. Re: VW struggles- RJ also dodged one caller’s question about how VW’s drama will affect Rivian. Lots of pain ahead regardless of outcome

 

[Bullwinkle]

I expect the new administration to play hardball right out of the gate, aiming to bring China to the negotiating table on favorable terms. China’s economy is ripe for immediate stimulus, so Xi might just be open to dealing. And honestly, I wouldn’t be surprised if, by 2027, we see BYD signing on to build a massive manufacturing facility right here in the U.S. Stranger things have happened!

Another poster hit it right, when they said, the American market is not sufficient for long term survival as an auto maker. Tesla figured that out.

In 2024, EV sales in China are projected to represent 45 percent of all new car sales, a notable increase from 35 percent in 2023.
The Diplomat May 2024
The Geopolitics of Tesla’s China Breakthrough

I just read the earnings transcript. They mentioned a number of times how the higher trims will help ASPs and drive margin improvement. It seems to be a major component of their narrative.

This is true of all Western Auto Companies

 

[mkg3]

Now several days after the announcement, $RIVN is holding up okay.

I guess all the negatives were priced in when it fell from ~$15/share down to ~$10/share.

The good news is the R2 reservations appear to increase sequentially (150k+), albeit at $100/vehicle, and when the vehicle starts delivery next year (late), there should be some recovery on the equity price.

All the talk of the EV incentives going away, I believe, will not make much difference to the R2 initial sales. It appears to be a compelling vehicle and will sell well regardless of the incentives, I believe. Once they reach early adopters hands, then the incentives become more of swaying factor.

The only real known hurdle/risk left this year is if they miss making the positive gross margin, that they reaffirmed. As for unknown risks, well, none of us know.

 

[fbkr]

It does look like Rivian has overcome their production difficulties given that inventory is up close to +100% YoY per RivianRoamer. However, that could be a bad sign regarding demand.

 

[Rivian Roamer]

It does look like Rivian has overcome their production difficulties given that inventory is up close to +100% YoY per RivianRoamer. However, that could be a bad sign regarding demand.

A vehicle listing isn’t 1:1 with inventory. Could be one. Could be many. I wouldn’t put too much stock in that number.

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