When Rivian reports on Thursday, it is expected to announce its first quarterly revenue decline since its IPO three years ago. The company, which is focused on ramping up production of its R1 SUV and pickup while also introducing a more affordable R2 model, faces growing pressure to meet its goal of profitable growth. This challenge is intensified by a broader slowdown in electric vehicle demand, driven by higher interest rates and weak consumer sentiment. These factors have created a tough market environment for Rivian and other EV makers.
The stock has been down more than 8% since Rivian’s last reported earnings on Oct. 4, when it slashed its 2024 production target and fell short of delivery estimates, blaming a critical component shortage. According to people familiar with the matter, a miscommunication between Rivian and its sole supplier, Atlanta-based Essex Furukawa, left the carmaker without access to copper windings — essentially copper wires that carry electrical current in the electric motors Rivian makes in-house. The people said Essex Furukawa subsequently committed the copper windings to other customers. Rivian says its new in-house drive unit is much more cost-effective than previous versions, but it’s unclear when the benefits will be realized.
Rivian’s strategy to cut costs by enhancing efficiency and reducing the number of components in its cars, while simultaneously improving driving performance, offers a glimmer of hope. On the last call, CEO RJ Scaringe shared an internal test of the company’s new in-house dual-motor system pulling a service van and trailer loaded with tools that weighed about 11,000 pounds. Scaringe’s assurance that the Rivian R1T pickup could accelerate, brake, and pull the load without issues, instills confidence in the company’s potential.
However, Rivian’s production efforts are still in their infancy, and the duration of the critical parts shortage remains uncertain. The company is under pressure to revise its production schedules to minimize lost sales and implement other changes to maintain its vehicles in dealer showrooms. Depending on the length of the supply disruption, Rivian may need to reconsider its plans to expand production at its Illinois factory and establish another plant in Georgia with a 400,000-vehicle capacity planned to open in 2024. This uncertainty about the company’s expansion plans is a cause for concern.
Rivian’s struggles are not just its own but also reflect the challenges facing the entire EV market. As a rare example of an IPO that hasn’t generated significant revenues and has been forced to scale back its ambitions since going public, Rivian’s share price has fallen 55% this year, compared with a gain of about 1% for market leader Tesla (TSLA). With the gloomy outlook, seeing how the stock can get a leg up from here is challenging, which is problematic. This story was updated on Nov. 8 to reflect a change in the earnings report date and to add an image related to the article. For more coverage on e-mobility, follow us on Twitter @BloombergTech. 2019 Bloomberg L.P. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
