Electric truck developer Rivian Automotive reported wider losses than estimated in its second quarter earnings, losing $1.7 billion. The automaker’s losses more than doubled from the same period last year, when it lost $580 million. RIVN affirmed prior production guidance to launch the R2 vehicle in Georgia with the $15.46 bln cash on hand it still has. Last year the EV upstart raised $11.9 billion to become the largest IPO of 2021, and the largest IPO since Alibaba (NYSE: BABA) in 2014.
Earnings
Rivian’s Q2 adjusted EBITDA loss ballooned to ($1.305) bln from ($559) mln in the year-earlier period, causing it to lower its guidance. Along with costs associated with the ramp up at its Normal, IL plant, raw material inflation and expedited freight costs are battering the company.
Highlights
- Despite raising prices by 17% in March, the preorder rate actually accelerated in Q2 versus Q1. RIVN said they may be able to add a second shift on the assembly line towards the end of Q3. Simply they need to do this hit the 25K production target.
- Rivian CEO RJ Scaringe said “We weren’t even able to run a full single shift because of component supply,”
- Rivian had laid off 6% of its workforce in July, citing inflation and increased interest rates.
- Rivian still has more than $15 billion in cash to finance its operations, which it says will be enough to finance its upcoming Georgia manufacturing plant and a new vehicle platform, dubbed R2.
- The company also said that its delivery vehicles have carried more than 430,000 packages for Amazon since early 2021.
- Rivian’s chief financial officer, Claire McDonough, said that the automaker will introduce a lithium iron phosphate battery pack in its delivery vehicles. The battery chemistry has become increasingly popular with automakers as they face shortages of battery metals.
Production
Rivian produced 4,401 vehicles in the second quarter and delivered 4,467 vehicles, and its production increased 72% from the first quarter of the year, when it produced 2,553 vehicles. The automaker plans to produce 25,000 units this year.
RIVN reaffirmed its production target and reporting an 8,000 sequential increase in R1 preorders to 98,000. To reach its goal of 25K vehicles produced this year, RIVN will need to average about 9,500 vehicles produced in Q3 and Q4. The company produced 4,401 vehicles in Q1.
While there’s still plenty of risks and uncertainties surrounding RIVN, one item that investors can feel confident about is demand.
The risk, which RIVN acknowledged, is the supply chain constraints a limiting production.
Outlook and Risks
RIVN reaffirmed its FY22 production target of 25K vehicles but lowered its adjusted EBITDA guidance to ($5.450) bln from ($4.750) bln.
RIVN is confident in its ability to launch the R2 vehicle in Georgia with its cash on hand, which is quite sizable at $15.46 bln. However, if supply chain issues don’t improve, the company will have a difficult time reining in raw material and component costs, potentially chipping away at that cash balance.
Rivian CEO RJ Scaringe said on a call with investors that during “a lot” of the second quarter they were not able to fully utilize their production line.
“We weren’t even able to run a full single shift because of component supply,” Scaringe said.
Rivian expects supply chain shortages to continue to limit its growth, but it’s confident enough in an improved outlook that it said it expects to add a second shift at its Normal, Illinois, manufacturing plant later this year. Scaringe expressed confidence the production rate will continue to grow, as increasing the number of vehicles making it out of the factory doors is critical to achieving profitability.
Another risk is tax credit changes that are included in the Inflation Reduction Act. Specifically, RIVN’s vehicles won’t qualify for EV tax credits due to lofty sticker prices that exceed $80K. On the positive side, RIVN’s Electric Delivery Vehicles (EDVs) may qualify for up to $40K in incentives under the new law. Amazon (AMZN), who is a major shareholder ordered 98K EDVs and recently announced that it will begin rolling out these trucks across 100 cities by the end of the year.
Rivian IPO Recap
Rivian Automotive is a founder-led company and manufactures premium electric SUVs, vans, and pickup trucks, raised $11.9 billion by offering 153 million shares at $78, above the upwardly revised range of $72 to $74.
The company offered 18 million more shares than anticipated. It originally planned to offer its shares at $57 to $62, before raising the range this past Friday. New and existing investors had indicated on $5 billion worth of shares in the offering (42% of the deal).
At $11.9 billion, Rivian is now the largest IPO of 2021, and the largest IPO since Alibaba (NYSE: BABA) in 2014.
Although the company is in very early stages of commercialization, Rivian began its first deliveries in September of 2021, Rivian is the first automaker to bring a battery-electric pickup to market in the U.S. It’s also on track to make the most of its first-mover advantage when it starts deliveries of the R1S sport utility vehicle this year, giving it a lead in the market for full-size battery-electric SUVs.and has an order of 100,000 EDVs from Amazon through 2025 the internet giant owns a 20 percent stake in Rivian.
Day 1 for Rivian began trading at $106, up 36% from its offering price of $78 a share $RIVN reached a high of $119.38 at 10:15 a.m. PT/1:15 p.m. ET, and was at $100.73/share when markets closed at 1 p.m. PT/4 p.m. ET.
In September, Rivian began making deliveries of its first-generation consumer vehicle, the R1T, a two-row five-passenger pickup truck priced at around $70,000. The company also plans to launch the R1S, a three-row seven-passenger SUV, in December 2021. At quarter-end, it had approximately 48,000 preorders for the consumer vehicles with $1,000 refundable deposits. In the commercial market, Rivian collaborated with key investor Amazon.com to develop an electric delivery van with an initial order volume of 100,000 vehicles.
The IPO was run by Morgan Stanley, Goldman Sachs, J.P. Morgan, Barclays, Deutsche Bank, Allen & Company, BofA Securities, Mizuho Securities, and Wells Fargo Securities who acted as joint bookrunners on the deal.
The market cap of Rivian was over $85 Billion on Day 1, making it the third biggest auto maker in the US.
While demand for Rivian’s products will likely outweigh supply for a number of years, the company faces a “natural ceiling” of 300,000 to 400,000 units per year, New Street Research analyst Pierre Ferragu wrote in a note Monday.
That’s partly down to price: Rivian’s R1T truck starts at $67,500 for the most basic model, while its upcoming sport utility model is $70,000. “Above $70,000, the global addressable market for Rivian’s SUV and pickup is less than 1.5 million units, and it will be a crowded space,” Ferragu wrote.
Source: Renaissance Capital Rivian
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