The first quarter was brutal for Rivian (BANK) – Get the Class A report from Rivian Automotive, Inc..
The stock took a beating on Wall Street after the company failed to deliver on its vehicle delivery promises. Its difficulties in managing production ramp-ups due to parts shortages at its suppliers only made matters worse and cast doubt on its future.
To this was added a public relations problem arose of its decision to increase the prices of its R1T pickup trucks and its R1S SUVs without notice and then to reverse this decision in the face of the anger of its customers. The episode left traces both for its image and for its finances.
The billionaire had estimated that giving up raising prices when the cost of raw materials such as nickel, a key element in the development of the battery, had soared, was almost suicidal.
“Their negative gross margin will be staggering,” the tech mogul tweeted on March 1, referring to Rivian’s decision to reverse price increases.
Rivian is a growing company (says Rivian)
The young electric vehicle manufacturer hopes that the sequel to 2022 will be less abrupt. Rivian, which has Amazon (AMZN) – Get the report from Amazon.com, Inc.ford (F) – Get the Ford Motor Company reportbillionaire George Soros as shareholders, is on Time’s 100 Most Influential Companies list.
The company has just launched a plea to convince investors to arm themselves with patience because Rivian is a “growth company”.
“We are a growth-stage company with a history of losses and expect to incur significant expenses and continued losses for the foreseeable future,” the company wrote in a statement. recent filing with the Securities and Exchange Commission (SEC). “We do not expect to be profitable for the foreseeable future as we invest in our business, build our capabilities and scale up our operations, and we cannot assure you that we will achieve or ever be able to maintain profitability in the future. “
Rivian was founded in 2009 and went public in 2021. The company, which produces three vehicles – the R1T electric pickup truck, R1S electric SUV and RCV electric commercial van – in Normal, Ill., will soon begin building its second production site, east of Atlanta.
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This announcement a net loss of $2.46 billion in 2021, while its costs fell to $3.75 billion from $1.02 billion in 2020. Negative gross profit was $465 million, of which 383 million in the fourth quarter.
Rivian produced only 1,015 vehicles in 2021 when the car group had planned to make 1,200. In 2022, it produced 1,410 vehicles as of March 8. Rivian delivered 929 vehicles in 2021
“Even if we are able to successfully develop our vehicles and attract customers, there can be no assurance that we will be successful financially,” the company warned in its filing with the SEC. “For example, as we expand our product portfolio, including the introduction of low-cost vehicles, and expand internationally, we will need to manage costs effectively to sell these products at our expected margins. “
Rivian has many hurdles to overcome
In 2022, capital expenditure is expected to increase by $2.6 billion, up 45% from 2021, “driven by additional investments in our Normal plant to bring total capacity to 200,000 units per year” , the company said.
“Our initial deliveries for the R1T and R1S have been delayed, and our production ramp is taking longer than originally planned for a number of reasons,” Rivian explained. “The cascading impacts of the Covid-19 pandemic, and more recently the conflict in Ukraine, have impacted our business and operations, from constructing facilities to installing equipment to supplying of vehicle components.”
Rivian is continuing the exercise of transparency, the aim of which is to avoid any surprises for investors.
“We have no experience as an organization in high-volume manufacturing of electric vehicles, and we do not expect to achieve a vehicle production rate that, when run-rate, would require us to use 100% of the the facility’s current installed capacity of up to 150,000 vehicles through the end of 2023,” the company said.
Adding: “There have been very significant increases in recent months in the cost of key metals including lithium, nickel, aluminum and cobalt, with price volatility expected to persist for the foreseeable future.” Basically, operating margins are going to suffer a lot.
And finally, Rivian warns that the group also depends a lot on its suppliers.
“Our products contain thousands of parts that we purchase from hundreds of mostly single-source or limited-source suppliers for which there are no immediate or readily available alternative suppliers,” the automaker said.
The weight of suppliers in Rivian’s production is significant. At the beginning of March, the group had for example announced that its Normal factory had the capacity to produce 50,000 vehicles in 2022, but due to supply difficulties, Rivian would only manufacture half (25,000).