Rivian faces cash burn, demand concerns with Q4 earnings

Rivian Automotive is looking at rising concerns over its cash burn, executive churn and consumer demand for its pricey adventure vehicles in the run-up to its fourth-quarter earnings report on Tuesday.

The electric vehicle startup is also facing headwinds from a challenging economic climate as the Federal Reserve raises interest rates, increasing the likelihood of a U.S. recession.

The automaker, which was first to launch an EV pickup in late 2021, has fresh competition from the Ford F-150 Lightning and the coming Chevrolet Silverado EV and Tesla Cybertruck.

Its fellow EV startups Tesla Inc. and Lucid Group have resorted to price cuts to incentivize demand, suggesting a more difficult sales climate for luxury EVs.

On the upside, analysts say, Rivian has compelling consumer products with the R1T pickup and R1S crossover. And it has a long-term contract from Amazon to build 100,000 of its electric delivery vans for commercial use.

In announcing layoffs earlier this month, Rivian CEO RJ Scaringe said the automaker is getting back on track after struggling with supply chain issues and higher production costs.

"In 2022, we took steps to focus our product portfolio and drive a lower cost structure," Scaringe said in an email to employees. "Continuing to improve our operating efficiency on our path to profitability is a core objective and requires us to concentrate our investments and resources on the highest impact parts of our business."

Rivian is expected to post revenue of about $720 million for the fourth quarter on deliveries of 8,054 vehicles, according to Refinitiv data cited by Reuters. Rivian does not break down deliveries by model. The automaker is also expected to post a financial loss similar to its third-quarter number, which came in at about $1.7 billion.

"I still consider Rivian one of the most promising startups out there," said Karl Brauer, executive analyst at iSeeCars.com. "But I don't consider them as promising as they were even a year ago."

Part of the reason for concern is the competition.

Ford Motor Co., once a key investor in Rivian, cashed out nearly all of its shares last year and launched the F-150 Lightning in May 2022. The Lightning outsold the R1T in December, Ford said. Rivian doesn't report monthly sales.

And legacy automakers are rolling out large electric crossovers to take on the R1S, which saw 1,769 registrations last year, according to Experian data. Mercedes-Benz recently launched its EQS SUV and the Polestar 3 is coming later this year. The Tesla Model X still dominates the segment.

"Rivian doesn't have the singular cool EV truck and there's going to be multiple options on the market soon," said Brauer. Rivian vehicles are still compelling, with "innovative and cool features," he added, but are going to have to share the market with legacy brands and Tesla, which have superior sales and service infrastructure.

Rivian's financial performance is another major concern. The company raised massive amounts of cash for its 2021 initial public offering, but is now burning through that cash quarter by quarter.

The automaker said it delivered 20,332 vehicles last year. As part of third-quarter earnings, Rivian said it had about $14 billion in cash to fund its operations, develop less-expensive vehicles and build a second plant. The base R1T has a starting price of $74,800 with shipping.

Rivian is not alone in drawing fresh scrutiny from industry analysts amid high hopes for EV startups in recent years.

Lucid Motors, which launched its Air sedan in late 2021, said last week that it needs to drum up greater demand against macroeconomic headwinds. Lucid reported a fourth-quarter net loss of $473 million. Lucid's stock price has fallen about 70 percent over the last 12 months.

Steve Weiss, managing partner at Short Hills Capital Partners, said on CNBC last week that Rivian's troubles are far from over. The automaker's stock price, down about 75 percent in the last 12 months, is likely to fall further, he said.

"They've got a lot of cash, but they're going to go through it," Weiss said. "No. 1, I don't find the vehicles particularly attractive. No. 2, they've had major problems. No. 3, they've lost a lot of executives and talent."

In the last six months, at least half a dozen executives have left the company.

Among the departures are Randy Frank, who was vice president of body and interior engineering, and Steve Gawronski, vice president for parts purchasing, The Wall Street Journal reported last month. Rivian confirmed the departures. Rivian also lost its chief lobbyist, general counsel and a senior strategy director.

The automaker has had two rounds of layoffs in the past year, each shedding about 6 percent of staff. The latest, in February, included about 840 employees out of a total work force of 14,000.

Brauer said Rivian is experiencing some of the troubles that Tesla faced when it was a younger company. Tesla took a decade to become profitable — and nearly went bankrupt in the process, according to its CEO Elon Musk. But Tesla had the advantage of being the only company with premium EVs at that time.

Rivian, on the other hand, is searching for a pathway to profitability in what looks to be an intense period of competition, with legacy automakers getting serious about EVs and Tesla planning the next phase of its product portfolio.

"The financials for Rivian are just painful right now," Brauer said. "They're spending lots of money and not coming anywhere near paying for it with sales."