Rivian likes to think of itself as a trailblazer. It was first to market with an all-electric truck and is still one of the few companies today selling an electric three-row SUV. And its EVs are marketed for off-road adventures — the literal blazing of trails.
But on March 7th, Rivian will release its next vehicle, and arguably, it won’t be breaking a lot of new ground. The Rivian R2 is a two-row compact SUV with around 300 miles of range and a starting price somewhere around $45,000. It’s not exactly a major disruption by today’s standards, where the Tesla Model Y, Ford Mustang Mach-E, and other compact electric SUVs currently dominate the sales chart.
Rivian is revealing the R2 during an especially tumultuous time for EVs
Rivian is also revealing the R2 during an especially tumultuous time — for itself and the entire auto industry. EV sales are up, but growth has slowed considerably as more customers have proven reluctant to make the switch, wary of high prices and EV charging reliability. And Rivian is finding itself in a considerable cash crunch, as its costs grow beyond the pace of its revenue.
The R2 is a major moment for Rivian — no question there. But that car won’t start production until 2026 at the earliest, making this year and next crucial if the company hopes to live long enough to see it.
Photo by Daniel Golson for The Verge
Last month, Rivian reported its fourth quarter earnings for 2023, and it wasn’t pretty. The company reported losing $1.58 billion over the last three months of the year, bringing its net annual losses to $5.4 billion. It also announced plans to lay off 10 percent of its salaried employees, the third such round of layoffs in the last two years.
But it was the production numbers that most triggered a stock slide. Rivian predicted it would only produce 57,000 vehicles in 2024, down from the 80,000 vehicles that were anticipated by Wall Street and relatively flat from last year’s numbers.
But profits were on the horizon, the company promised. A multi-week shutdown of its Normal, Illinois, factory will bring improvements to the R1 line, with production rates improving “approximately 30 percent” as a result. Rivian predicted it would eke out a “modest gross profit” in the fourth quarter of 2024.
Investors were dubious. How could a company that couldn’t realistically predict a growth in production expect to compete in an increasingly volatile market? “Rivian’s results continue to largely disappoint, whether on volume or margin progression,” Morgan Stanley wrote in a note to clients.
Photo by Mitchell Clark / The Verge
Add to the mix the groundbreaking of a new $5 billion facility in Georgia, and you have a recipe for a turbulent year for the young company. (Rivian was founded in 2009 but only came out of stealth in 2018. It made its public markets debut in 2021.)
Rivian’s situation is not unique. As noted by Heatmap’s Robinson Meyer, the company is currently in what’s known as “the EV valley of death,” in which it has scaled up production but isn’t bringing in enough revenue to cover its operational costs.
Welcome to the “EV valley of death”
It’s an especially vulnerable period for a young company to be in. And Rivian lacks a financial benefactor with bottomless pockets like Lucid Motors has with Saudi Arabia’s Public Investment Fund. Amazon owns a 16 percent stake in Rivian, making it the company’s largest stakeholder. But the company’s influence over Rivian has diminished over time, especially after its “exclusive” delivery van partnership ended last year.
Rivian needs more customers, but that’s going to be tough because the market is cooling. EV sales are still growing, but Rivian still only makes up a fraction of the total. Tesla — a company that went through its own “valley of death” phase with the Model 3 and emerged as the most valuable car company in the world — still leads the pack.
Depending on what’s released on Thursday, the R2 will certainly bring more attention to Rivian. There will be a lot of free media, which the company can hopefully convert into a significant number of new reservations. But the vehicle itself won’t go into production until 2026. The world may look much different by then.
You don’t need a crystal ball to know there will be a lot more competition by that point. Companies with a lot more experience making mass-market vehicles will have a lot more EVs for sale. Rivian needs to sell its current generation of vehicles to more customers in order to survive the short term.
In terms of its cash cushion, Rivian said it had $7.86 billion in cash and cash equivalents at the end of the fourth quarter, down from the $9.1 billion it had at the end of Q3. At its current burn rate, the company is likely to run out of cash before the first R2 even comes off the assembly line.
Legacy car companies have whole lineups of internal combustion engine vehicles to fall back on when times are tough. Ford, GM, and others are reporting robust hybrid sales, for example, which helps take some of the sting out of the billions they’re losing on EV development and production.
Rivian is what’s known in the industry as a pure play EV company, meaning it only makes battery-electric vehicles. No hybrids. No gas. Just electrons. That also means no backstop, no safety net. If the EV market stumbles, then Rivian takes it square on the chin.
Rivian says the entire auto industry is moving to electric, and once it does, “the opportunity ahead is substantial.” That may be true, but Rivian will need to survive the next couple of years if it hopes to stick around long enough to see that happen.
