Tesla rival Rivian posts losses of $1.7b, with worse to come

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Electric carmaker Rivian is reporting more trouble – this time it's the loss of $1.7 billion in Q3 alone, although the biz said it has enough cash on hand for three more years of business. 

In its Q3 earnings report, Rivian said its losses primarily stemmed from material costs increasing due to inflation, the termination of some expected purchase agreements (though without specifying which) and labor and losses from increases in on-hand inventory and subsequent depreciation.

Still, Rivian said it is working on plans to ramp up production at its plant in Normal, Illinois, where it has produced 7,363 vehicles in the third quarter. Rivian said it is adding a second shift to the plant that will put it on pace to meet its goal of 25,000 vehicles produced in 2022.

Rivian, which appeared in 2009 as a Tesla competitor, has had nothing but problems – like the fact that it only began delivering vehicles late last year, and has already had to recall most of them due to an issue that could cause the steering wheel to fall off. 

The recall, which occurred in October and therefore wasn't included in Q3's numbers, is sure to make Q4 even rougher for Rivian, though "worse" is a matter of perspective. 

Total operating costs in Q3 grew by more than $100 million compared to the same period last year, while administrative costs also grew considerably. R&D costs, which one would think an EV company would spend a lot of money on, grew by just $11 million compared to Q3 2021 – far less than admin and operating costs.

In sum, Rivian experienced an operational loss of $1.7 billion – $500 million deeper than last year's quarter. The biz has burned an extra billion in operations costs versus Q3 last year, and reported negative free cash flow of $1.6 billion, $500 million deeper than the same period in 2021. Bear in mind this is from revenues of $536 million versus a nominal $1m in Q3 2021.

Its smaller form factor R2 platform – expected to include a pickup and a few SUVs – was pushed back a year, according to an investor slidedeck: "We continue to work with the state of Georgia and the Joint Development Authority and expect our R2 platform will launch in 2026. We expect the R2 platform will unlock a global market opportunity for Rivian and are excited about the early development work that is underway."

The company hopes its smaller form factor, cheaper line of cars – originally slated to come out in 2025 – will be able to capitalize on upcoming environmental legislation including the Inflation Reduction Act, which includes nearly $400 billion in funding for climate and energy related programs over the the next decade.

Amazon hookup

The one bright spot for Rivian came in the form of the 1,000 electric delivery vans it has shipped to Amazon which are now making deliveries in 100 US cities. Amazon also announced plans to buy an additional 100,000 of the vehicles, but at current production pace it'll take some time for all of those to be built.

Rivian and Mercedes-Benz also recently announced a partnership to produce commercial and private electric vans, which Rivian said in a press release would involve the pair producing electric vans on common assembly lines. Amazon electric delivery vehicles weren't mentioned in connection to the Mercedes-Benz deal. 

But could the Mercedes-Benz partnership actually end up harming Rivian? It all depends on whether it can find a path to profitability, or at least a path to appearing as an attractive acquisition. 

Rivian said it "remained confident" it could fund operation through 2025, but included a Mercedes-Benz-shaped asterisk with that statement. The "2025" number, Rivian said, "exclud[es] the impact of the investment … with Mercedes-Benz." Whether that impact would be positive or negative isn't clear. 

Three years of funding might be looking really good to some of its competitors right now – such as British electric vehicle startup Arrival, which earlier this week warned it could run out of cash in less than a year.

Here's hoping Rivian can work through its growing backlog of vehicle pre orders – which it said recently passed 114,000 – before drowning in a sea of red ink. ®

 

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