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Rivian's Revenue Drop: A Cautionary Tale for EV Investors

AInvestWednesday, Nov 6, 2024 5:59 am ET
2min read
Rivian Automotive, the electric vehicle (EV) maker that went public in 2021, is expected to report its first quarterly revenue drop since its IPO. This development serves as a reminder of the challenges and uncertainties faced by EV companies in the current market landscape.

Rivian's revenue drop can be attributed to several factors, including supply chain disruptions, parts shortages, and a broader slowdown in EV demand. The company recently reduced its full-year production target due to a shortage of parts, which forced it to slash its 2024 production target. Despite delivering fewer-than-expected vehicles in the third quarter, Rivian reaffirmed its annual deliveries forecast, indicating that the shortfall was not supply-related and may be due to softer demand trends.

The broader slowdown in EV demand, driven by high interest rates and consumer preference for less expensive hybrid vehicles, has also impacted Rivian's potential revenue drop. Analysts at D.A. Davidson note that the slowdown in demand has led to a reduction in Rivian's full-year production target, from 57,000 units to between 47,000 and 49,000 vehicles. This reduction, coupled with a shortage of parts that forced Rivian to slash its 2024 production target, highlights the challenges the company faces in maintaining its growth trajectory.

Rivian's cost-cutting measures and plant retooling have significantly improved its production efficiency and potential revenue. In Q1 2024, Rivian produced 13,980 vehicles and delivered 13,588, exceeding its outlook by 49% and 71% respectively. The recently completed plant retooling upgrade in Normal, Illinois introduced new technologies and cost-focused material changes into the R1 vehicle platform, enabling the R1 line to run at an approximately 30% higher line rate. Additionally, Rivian transitioned to a new zonal network architecture, reducing the number of electronic control units in its vehicles by approximately 60%, taking substantial costs out of its vehicles. These measures have contributed to a significant improvement in the material and conversion cost of Rivian's vehicles, putting the company on track to achieve modest gross profit in the fourth quarter of this year.

Rivian's strategic decision to expand its Normal, Illinois plant with the help of state incentives is a pivotal move that enhances its long-term production capacity and revenue growth prospects. This expansion, expected to start R2 production in the first half of 2026, will save over $2.25 billion compared to the original plan of launching R2 production at Rivian's Georgia site. The incentives, aimed at improving public infrastructure and creating training programs for Rivian's workforce, further strengthen the company's commitment to the region. This strategic decision not only increases Rivian's production capacity but also positions the company to deliver its R2 SUVs, a crucial factor in maintaining revenue growth and market competitiveness.

Rivian's ongoing cost-cutting measures and supplier contract renegotiations are crucial for its profitability. In Q1 2024, Rivian's gross profit per vehicle delivered was $(38,784), negatively impacted by $9,346 per vehicle due to various supplier and other costs incurred in advance of new technology changes and parts integration. The company expects significant improvement in material and conversion costs post the retooling upgrade, aiming for modest gross profit in Q4 2024. These initiatives, coupled with the $5 billion lifeline from Volkswagen, should help Rivian achieve its goal of turning a gross profit this quarter.


Rivian's revenue drop serves as a cautionary tale for EV investors, highlighting the challenges and uncertainties faced by companies in this sector. While Rivian's cost-cutting measures and strategic decisions have improved its production efficiency and potential revenue, the broader slowdown in EV demand and supply chain disruptions pose significant risks to its growth prospects. Investors should remain vigilant and conduct thorough due diligence when considering investments in the EV sector.
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