Rivian took a novel approach to selling vehicles and yesterday held a one-day event at the parking lot of its Normal factory where customers could come and buy its cars.
Like Tesla, Rivian sells its vehicles online where users place an order with their preferred specifications that are then later shipped.
This is unlike legacy automakers like Ford and General Motors who have a sprawling sales and service network across the US.
Rivian converts its parking lot into a “dealership”
Meanwhile, coming back to Rivian, the company only sold the R1T pickup trucks at the event.
The Wall Street Journal reported that “A Rivian spokeswoman said it has excess inventory on some trucks because of some last-minute customer order changes. Additionally, it has built up stock of its most-requested vehicle configurations in anticipation of customer demand.”
Electric pickups are still a lucrative market
Notably, Rivian emphasized that it is not selling the R1T pickups at a discount. The competition in the EV industry is increasing, and Rivian faces tough competition from General Motors’ Silverado and the GMC Hummer, and Ford’s F-150 Lightning.
The electric pickup segment is still an attractive proposition as the competition is not as high as in sedans. Also, Tesla which has been at the forefront of the price war still does not have an electric pickup. The Elon Musk-run company expects to begin the deliveries of its Cybertruck later this year but does not expect mass production until 2024.
The model is running way behind schedule and Tesla received yet another jolt when its supply chain executive Mustapha El Akkari joined Rivian earlier this month.
Rivian R1T registrations have stalled
Citing data from S&P Global Mobility, the Wall Street Journal reported that the monthly registrations of R1T fell to a mere 950 in April – down sharply from a peak of 1,829 in September last year.
However, the monthly registrations of the R1S SUV have risen over the period.
On multiple occasions, Rivian has sought to downplay demand fears. Last week, speaking at the Deutsche Bank auto conference, its CFO Claire McDonough admitted that the company is seeing some impact of the macroeconomic slowdown.” He however stressed “But we’ve seen really a stable environment throughout the course of this year from a demand vantage point.”
Notably, Rivian previously used to provide the pre-order numbers during the quarterly earnings call but stopped the practice in November while releasing its earnings for Q3 2022. As of November 7, it had 114,000 preorders which were higher than the previous quarter.
Lucid and Rivian have stopped providing preorders data
Notably, Lucid Motors too stopped providing the reservation numbers after the metric fell for two straight quarters.
Lucid Motors has admitted that it is indeed facing demand issues and its 2023 production guidance of 10,000 is way below its installed capacity.
The company’s CEO Peter Rawlinson said that Lucid needs to work on brand awareness to increase its sales.
Rivian does not see demand as a worry
Responding to an analyst question on the demand for RIVN cars, CEO Robert Scaringe said during the Q1 2023 earnings call that the company’s order backlog extends “well into 2024” – reiterating what he said during the previous earnings call.
He added, “the engagement we have with customers and the level of satisfaction that our early customers the first 35,000-or-so customers are having really creates a powerful flywheel where our biggest, and I would say, most important advocates are the buyers of our vehicles.”
Rivian expects to produce 50,000 vehicles this year which is in line with its previous guidance.
RIVN 2023 guidance
Apart from the deliveries, Rivian also reaffirmed its 2023 adjusted EBITDA guidance of $4.3 billion loss and capex of $2 billion.
Also, Rivian said that it still expects to become gross profit positive by the next year. The company said that the increase in capacity utilization would drive half of the incremental margin expansion.
The remaining half it said would be split between higher vehicle prices and lower raw material costs.
Rivian is targeting a total annual production capacity of around 600,000 cars between its Normal and Georgia plants. It aspires to capture 10% of the global automotive market share which might seem a tall ask considering the massive competition.
At the upcoming factory in Georgia, Rivian would produce the affordable R2 where production is slated to begin in 2026 – one year behind the original schedule.
EV companies are grappling with a massive burn
While slowing sales amid macro slowdown is a headwind for startup EV companies, they are also grappling with perennial cash burn.
Rivian posted negative free cash flows of $1.8 billion in Q1 2023 – wider than the $1.45 billion in the corresponding quarter last year.
Among others, an increase in inventory dragged Rivian’s cash flows even as it was somewhat compensated by lower capex in the quarter.
Rivian ended the quarter with $11.78 billion in cash which excludes the $1.5 billion revolving credit facility.
During the quarter it raised $1.5 billion in cash through the sale of convertible bonds. Given the perennial cash burn, startup EV companies have had to raise cash at frequent intervals to keep their operations running.
Previously, Rivian said that it has enough cash to fund its operations until 2025.
Lucid also raised $3 billion in cash last month
Last month, Lucid Motors raised $3 billion through a stock sale – which was preceded by a $1.5 billion stock sale in Q4 2022 also.
Nikola has also raised cash by selling shares, most recently in April. The company is looking to increase the share count further which would enable it to sell even more shares in the future.
Nikola meanwhile could not get that proposal cleared in the annual meeting earlier this month and has now reconvened the meeting in July.
As for Rivian, it is among the most well-funded EV startups and is also backed by Amazon – which is not only its biggest investor but has also placed an order for 100,000 electric delivery vehicles with the company.
That said, the demand concerns now look real as startup EV companies look to scale production amid the tough macro environment.
The flurry of new models slated to hit the market over the next couple of years isn’t helping matters either especially as legacy automakers increase their EV footprint.
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