Rivian faced a harsh market reality Wednesday as shares plunged 17% in after-hours trading. The electric vehicle (EV) maker revealed plans to slash its workforce by 10% while projecting a disappointing production forecast for 2024 – far below analyst expectations.
So, what’s behind the roadblock?
Factory upgrades are causing costly downtime. Plus, the rising interest rate environment is taking a toll on wider EV demand. Rivian is not alone; Tesla CEO Elon Musk has warned about affordability issues due to these economic headwinds.
“We remain unwavering in our belief in a fully electric automotive future,” CEO RJ Scaringe reassured in a statement. “But the near-term macro picture presents significant challenges.”
Burning Cash, Losing Ground
The Amazon-backed startup is hemorrhaging cash as it ramps up production of its R1S SUV and R1T pickup. Expensive factory expansions and a hefty loss on each vehicle sold are fuelling the burn rate. To make matters worse, Rivian recently lowered prices by $3,100, mirroring the price war sparked by Tesla. Competitor Lucid also painted a grim outlook with lowered production forecasts, even after slashing prices of its luxury Air sedans.
Dwindling Cash Reserves
Rivian ended the December quarter with a slightly reduced $7.86 billion in cash on hand. Weak deliveries further underscored the struggle, falling 10% in the fourth quarter and missing estimates.
A Glimmer of Hope?
While Rivian’s fourth-quarter revenue managed to surprise at $1.32 billion, it continues to lose money on every vehicle it produces. The company desperately needs a win and hopes to post its first-ever profitable quarter later this year. All eyes will be on the unveiling of the more affordable, smaller R2 platform slated for next month.
Paul Balo is the founder of TechBooky and a highly skilled wireless communications professional with a strong background in cloud computing, offering extensive experience in designing, implementing, and managing wireless communication systems.
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