An investor event on Thursday for Rivian Automotive that focused on cost-cutting efforts, efficiency gains, and internal technologies and programs were not enough to build on the company’s substantial stock gains this week.
Shares of the all-electric vehicle startup fell about 2% to 6% for most of the event, eating into some of its 23% gain in the stock the day before after news of an investment of up to 5 billion dollars from The Volkswagen Group. Rivian shares closed up 1.8% on Thursday at $14.47 a share, down roughly 39% year-to-date amid investor concerns about cash burn and a slowdown in electric vehicle sales.
Rivian on Thursday reaffirmed its 2024 guidance that included production of 57,000 vehicles and a path to positive gross profit during the fourth quarter, including regulatory credits. It also outlined long-term growth, such as plans to achieve positive adjusted earnings before interest, taxes, depreciation and amortization in 2027.
“Everything you’re hearing from us, about our product, about how we’re running the business, about how we’re driving profitability, my hope is that you’re really seeing an extreme sense of urgency,” Rivian CEO RJ Scaringe said during the event. “We’re moving very, very quickly toward the improvements needed to get to positive free cash flow and, before that, positive margins this year.”
Rivian stock performance
Rivian also outlined long-term financial goals of a gross margin of about 25%, free cash flow of 10% and adjusted profit margin in the “high teens.” The company did not release a time frame for these targets.
Scaringe spent most of his time during the roughly four-hour presentation discussing efficiencies in products and manufacturing, which he said are expected to lead to a 20% reduction in material costs in his current vehicles, followed by targeted reductions of 45% in its next “R2”. vehicles, which are expected to begin production in early 2026.
The reductions range from physical savings, such as a 54% reduction in the design costs of its R2 vehicles compared to current models, to lower costs in more complex systems such as battery packs and electrical equipment. For example, the company is using 10 fewer internal electronic control units, or ECUs, in its recently redesigned R1 vehicles, allowing it to shave 1.6 miles of wire harness length and 44 pounds from the vehicle.
Rivian’s software expertise is at the heart of VW’s plans to invest $5 billion in the automaker by 2026, including an anticipated joint venture between the companies to create electrical architecture and software technology.
Volkswagen is expected to use Rivian’s electrical architecture and software for vehicles starting in the second half of the decade, Scaringe said during the investment announcement. He said the joint venture does not involve anything with battery technologies, vehicle propulsion platforms, high-voltage systems or autonomy and electrical equipment.
A provided image of Oliver Blume, CEO of the Volkswagen Group, and RJ Scaringe, founder and CEO of Rivian, as the companies announce joint venture plans on June 25, 2024.
Courtesy: Business Wire
Rivian CFO Claire McDonough reiterated Thursday that the capital from VW is expected to bolster the startup’s balance sheet, which ended the first quarter with $7.9 billion in cash.
The capital influx is expected to take Rivian through increased production of its smaller R2 SUV at its plant in Normal, Illinois, starting in 2026, as well as production of its mid-size EV platform at a plant currently suspended in Georgia.
Rivian is betting on the next generation of its all-electric vehicles to sustain the automaker’s growth and target profitability through the second half of this decade.
The company said Thursday it expects production of its next-generation R2 vehicles to represent up to 72%, or 155,000 units, of its production capacity of more than 200,000 units at its Illinois plant. The plant currently has the capacity to produce 150,000 commercial delivery vans, as well as SUVs and its flagship R1 vehicles.
The automaker’s $2 billion plant in Georgia, whose construction was suspended earlier this year to conserve capital, is expected to be able to produce 400,000 units on two lines.
This construction suspension was a large part of the company’s plans to reduce planned capital expenditures by $2.5 billion by 2025, including reductions of 55% in manufacturing and 20% in product development. The company still expects to spend about $2.7 billion through 2025, McDonough said Thursday.
“We’re focused on material cost and really reducing our overall cost of goods sold as well as our operating expenses,” she said. “Capex is another key lever for us that we’ve also focused on over the past few years that will be critical to our long-term success in bringing and scaling our R2 to market.”