Despite big losses, Rivian pushes on with big plans

Rivian is having a rough time navigating supply chain bottlenecks and soaring material costs that are roiling the global auto industry. But the California EV startup still has big plans for the future, despite lots of red ink and new Wall Street skepticism.

"While the near-term industry conditions remain very fluid, our path to creating long-term value is unchanged," CEO RJ Scaringe told analysts last week. "We are targeting the most attractive market segments with exceptional products."

Scaringe made the upbeat comments during an otherwise downbeat fourth-quarter earnings call. The young automaker is slashing production targets for its electric vehicles, backing off of unpopular price hikes for some customers and warning of continued financial losses.

Rivian reported a net loss of $2.46 billion in the fourth quarter compared with a loss of $354 million a year earlier. Revenue during the latest period tallied $54 million, well below investors' expectations of $60 million. The automaker's stock price fell to near-record lows.

In the short term, there is little the company can do to speed output of its R1T pickup, R1S SUV and EDV delivery van because of supply chain bottlenecks for critical parts.

Scaringe said the Amazon-backed automaker continues to put maximum pressure on suppliers as it tries to surpass a production target of 25,000 vehicles this year, which is half the number it could make at its Normal, Ill., assembly plant if it had enough parts in the pipeline.

But company executives said the EV maker will continue to make big investments as it rolls out a long-term business plan. For example, new versions of the R1T and R1S are now available to order, although some of the recently added configurations won't be available until 2024.

While the launch versions of the R1T and R1S only came with quad motors and the automaker's large battery pack, Rivian is now taking orders on dual-motor versions with battery options that are both bigger and smaller. That creates a broader range of starting prices, Rivian said, from $67,500 to $95,000.

The smaller, standard battery uses lithium-iron phosphate chemistry, which is different from traditional EV batteries that use mostly nickel. Tesla also is moving toward so-called LFP batteries to save on cost, since nickel was already getting more expensive before the recent jump in commodity prices.

"With our portfolio of three different battery packs and two different drive configurations, we have a really nice mix of options for customers," Scaringe said. "When you take a step back and look at the product at the new pricing levels, it is very competitively priced."

Scaringe also said Rivian is developing a propriety 800-volt battery architecture, which has advantages over the current 400-volt system. And the company plans to build its own motors in-house in the near future, rather than rely on outside suppliers.

Scaringe said Rivian also is looking to build its own batteries in the future.

Rivian forecast capital expenditures of $2.6 billion this year, including additional investments to expand capacity at its Illinois factory.

"In addition, we expect to realize increased capital spend associated with tooling for current vehicle platforms, future vehicle manufacturing lines, battery technology and supply, our service network, digital offering and general technology," the company said in its shareholder letter last week.

One measure of Rivian's new approach to pricing came when the company attempted on March 1 to apply price hikes to both current reservations and new orders.

While the move generated backlash from early adopters and prompted Rivian to backtrack, it also provided some valuable feedback for the company, executives said.

Existing reservation holders who canceled orders in response to the price hikes mostly returned once the increase had been rescinded for orders made before March 1. And new orders — at the higher prices — continued to roll in at a similar pace than before the hike, validating the new pricing.

Rivian said it now has 83,000 preorders for the R1T and R1S, compared with 71,000 reported in December. Separately, it has an initial order of 100,000 vehicles from Amazon for the EDV vans. The automaker said Thursday, March 10, it has built just 2,425 vehicles since launching output in the third quarter last year.

Despite consumer demand that might justify the higher pricing, Scaringe said the company made a mistake by surprising early adopters with price hikes. The company backtracked after just two days — not because of canceled orders but because the move damaged the trust of its core supporters, Scaringe said.

"This wasn't driven by some mass cancellation," he said, "but rather the recognition that the brand we're building is the foundation, is the platform upon which ultimately we're going to be selling millions of different vehicles per year."