Cars

Rivian, Vw's new electric partner disappoints and goes deep into the red

In the second quarter the Californian manufacturer lost approximately $32,705 per vehicle. Red of 2.7 billion expected in 2024

by Finance Review

7 August 2024

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Assemblaggio di modelli R1 di Rivian nell’impianto di Normal, Illinois. REUTERS/Joel Angel Juarez//File Photo

3' min read

Key points

A 2.7 billion red
Stop Normal's plant in 2025
Partnership with Volkswagen

3' min read

Rivian Automotive, the American manufacturer of electric suvs and pick-ups with which the Volkswagen Group entered into a joint venture at the end of June, maintained its production and profitability targets, but warned of a shutdown period at its plant in Normal, Illinois, next year to prepare for the launch of a new model.

The company said during the presentation of its second quarter financial results that production in the three months was 9,612 vehicles, with deliveries totalling 13,790 vehicles. The forecast is for production of 57,000 vehicles in 2024, unchanged from previous projections for this year, volumes similar to those in 2023. The news did not excite investors, and the stock fell over 7% in after-hours trading and then lost over 3% during intraday trading. Rivian is trading below $14, far from the highs of $25 at the beginning of the year and already far from the peak of the rally that followed the announcement of the deal with Volkswagen (the jump had been more than 60% pushing the price from $11 to $18). The drop since the beginning of the year is about 37%. The US company was the protagonist of a historic IPO, which however deflated in only 6 months, in 2022.

A 2.7 billion red

For the second quarter, Rivian reported an adjusted loss of $1.13 per share, better than analysts' expectations of $1.20. Sales came in at $1.16 billion, below analysts' consensus estimates of $1.17 billion.

Rivian also confirmed forecasts of a full-year loss of 2.7 billion and capital expenditure of 1.2 billion. The Irvine, California-based automaker said it was on track to make a 'modest gross profit' by 2024, a promise repeated by CEOR.J. Scaringe to investors.

Stop the Normal plant in 2025

The uninspiring financial outlook follows a three-week shutdown of the R1 pick-up assembly lines in April to improve plant efficiency. Finance director Claire McDonough said the plant will be taken out of service for several weeks in late 2025, for further upgrades, ahead of the debut of the R2 model.

"We anticipate that our Normal plant will not produce vehicles for more than a month as we integrate new equipment in preparation for the launch of the R2 model in the first half of 2026," McDonough said.

"Rivian," commented Wedbush's Dan Ives, "posted results that were slightly ahead of revenue estimates, while coming in below expectations on adjusted EBITDA, as the company continues to build on its production and profitability story. Although the market will initially view this quarter's margin performance as challenging, the company has maintained its full-year outlook, which we believe is a step in the right direction, considering the (known) investments made during the year, and is now on the right track'.

The partnership with Volkswagen

The news regarding the joint venture between Rivian and Volkswagen was announced on 25 June 2024. This agreement will see both companies collaborate in the development of advanced software technologies and electrical architectures.

The cash injection of as much as$5 billion from VW is pure oxygen for the American company, which lost about $32,705 per vehicle built in the second quarter, compared to a loss of about $39,000 in the previous quarter. The German automaker's initial investment of $1 billion dispelled fears that Rivian might run out of cash before the debut of its upcoming models.

Rivian currently produces three models: a medium-sized pick-up truck, a medium-sized SUV and a commercial van, the latter mainly for key shareholder Amazon.com Inc.

The Californian brand is trying to reduce costs (a common obsession of all electric car manufacturers) ahead of the launch of the R2, a smaller and more affordable SUV. Rivian plans to start producing the R2 in the first half of 2026 and has plans for the next-generation R3 and R3X models.

"The joint venture with Vw," added Ives, "is a key move for safety and future trajectory, and the focus will remain on profitability and production. From a global perspective, Rivian is using this opportunity to support future growth while vertically integrating its software platform and electrical architecture, achieving further cost savings and delivering improved vehicles over time. Importantly, this partnership will provide the necessary capital for the ramp-up of the R2 in Normal and the ramp-up of the mid-size platform at its plant in Georgia, a big step in the right direction. While profitability remains a key market focus'.