Things aren’t going so well for Rivian (BANK) – Get the Class A report from Rivian Automotive, Inc. these days.
The young manufacturer of electric vehicles seems to be experiencing a series of slippages that never ends. What to wonder if this will stop anytime soon when the environment seems to darken for the automotive industry as a whole.
Supply chains that were already disrupted by the pandemic are further disrupted with the Russian invasion of Ukraine. Added to this is the recent surge in commodity prices in line with the rise in crude oil prices.
The price of nickel, a key element in the manufacture of batteries, has broken records in recent days.
Rivian doesn’t seem to know how to navigate this cloud of bad news.
The company, presented as one of Tesla’s great rivals (TSLA) – Get the Tesla Inc reportGM (GM) – Get General Motors company report and Ford (F) – Get Ford Motor Company reportannounced bad news again when releasing fourth-quarter results on Thursday.
The supply chain is a big headache
The firm plans to produce only 25,000 vehicles in 2022, while its order book shows 83,000 units. This ultra-cautious forecast, Rivian explained, is due to its ongoing problems with the supply chain.
Rivian seems to be struggling to handle the planned cadence increases. Rivian produces three models: the R1T pickup, the R1S SUV and the RCV electric van, of which Amazon, one of its shareholders, is a key customer. The automaker currently has a plant in Normal, Illinois, and will soon begin construction of a second production site in Georgia.
“In fiscal 2022, we plan to remain focused on ramping up production of the R1 and RCV lines in Normal, as well as investing in our technology and product portfolio for future growth,” said the company in its fourth-quarter letter to shareholders.
But there’s a big problem, the same one that’s been holding Rivian back since producing its first vehicle last year.
“We believe that throughout 2022, the supply chain will be a fundamental limiting factor to our total production for the Normal plant and that our equipment and manufacturing processes would have the capacity to produce enough vehicles to deliver more than 50 000 vehicles on our R1 and RCV platforms in 2022 if we weren’t limited by our supply chain,” Rivian explained.
But “due to supply chain constraints currently visible to us, we believe we will have enough parts and materials to produce 25,000 vehicles on our R1 and RCV platforms in 2022.”
“We continue to work with suppliers and seek technical solutions to help us address any anticipated supply chain issues.”
Basically, it is possible to produce 50,000 cars in 2022 but due to difficulties such as bottlenecks, Rivian will not achieve this.
“Our path to electric vehicle leadership will not be easy,” the company admitted. “In the immediate term, we are not immune to supply chain issues that have tested the entire industry. These issues, which we believe will persist at least until 2022, added a layer of complexity to our production ramp-up.”
After what looks like an admission of weakness, Rivian says he is doing everything to find a solution as soon as possible.
“We are working diligently and collaboratively with suppliers to identify and resolve any issues or constraints as quickly as possible,” the company said. “Over the next 12 months, we will remain focused on ramping up production at our Normal, Illinois facility, as well as initiating work on our second national manufacturing facility in Georgia.”
It is unclear whether investors will remain patient as production costs continue to rise along with losses.
Rivian announced a net loss of $2.46 billion in 2021, while its costs rose to $3.75 billion from $1.02 billion in 2020. Negative gross profit was $465 million , including $383 million in the fourth quarter.
It is difficult to see a glimmer of hope in the short term. Rivian produced only 1,015 vehicles in 2021 when the car group had planned to make 1,200. In 2022, it produced 1,410 vehicles as of March 8.
Rivian delivered 929 vehicles in 2021
“As we continue to ramp up our manufacturing facility, manage supply chain challenges, navigate continued inflationary pressures and minimize price increases for near-term customers, we expect to recognize negative gross margins throughout 2022.” the company warned.
Capital expenditure is expected to increase by $2.6 billion, up 45% from 2021, “due to additional investments in our Normal plant to bring total capacity to 200,000 units per year,” the company said. society.
Additionally, “we expect to realize increased capital expenditures associated with tooling for current vehicle platforms, future vehicle manufacturing lines, battery technology and supply, our service network, our digital offering and general technology”.
The only good news for investors is that Rivian has just raised the prices of its vehicles, which could stem the financial haemorrhage. But even that didn’t go smoothly, as the company had to resume increasing for customers already on its waitlist.