A month ago, investors were cooling to Rivian.
The young manufacturer of electric vehicles confirmed it was having difficulty increasing its production rates due to supply-chain disruptions.
Rivian, which manufactures the R1S SUV, the R1T pickup truck and the EDV van at its Normal, Ill., plant, announced a bond issue aimed at raising $1.3 billion. The funds were targeted to finance its operations, particularly the development of its low-cost vehicle expected in 2026.
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"Rivian intends to use the net proceeds from the offering to finance, refinance, make direct investments, in whole or in part, in one or more new or recently completed (within the 24 months prior to the issue date of the notes), current and/or future eligible green projects," the carmaker said.
These projects include investments in financings of clean transportation, renewable energy, energy efficiency and pollution prevention and control.
But the announcement suggested that Rivian was very quickly burning cash. That was worrying because the automaker is building a second plant in Georgia, east of Atlanta, and plans to start production of a smaller and more affordable vehicle, the R2 series, in 2026.
Rivian Has Big Plans for 2024
A month later, Rivian has just sent reassuring messages to investors and to its fans. During a presentation at the Bank of America Securities Summit last week, Chief Financial Officer Claire McDonough forecast the company will make a profit in 2024 after deducting the costs associated with making and selling its cars. The Twitter account Rivian Updates was the first to report McDonough's presentation.
This is what Rivian told investors in February: "We forecast reaching positive gross profit in 2024 and therefore expect that by the end of 2024." The carmaker is forecasting a loss excluding interest and amortization of $4.3 billion this year.
Gross profit only takes into account the cost of goods or products sold from revenue. Unlike net profit, it does not take into account all of the company's expenses like fixed costs.
In 2022, Rivian recorded a net loss of $6.75 billion, compared with $4.7 billion in 2021.
The Irvine, Calif., automaker plans to deliver 85,000 units of its R1S SUV in 2024, which is far more than all the vehicles it delivered last year across all models - R1S, RT1, and EDV.
Rivian produced 24,337 vehicles last year and announced on Feb. 28 that it would more than double that number to 50,000 units this year.
The firm has, however, told employees that its production is expected to be 24% higher than the target of its 50,000 vehicles target, which means that Rivian would produce nearly 62,000 vehicles this year.
Rivian explained that its caution for 2023 stems from the fact that the disruptions affecting the supply chain would remain a headache.
"Supply chain continues to be the main limiting factor of our production," the company said in letter to shareholders, explaining that during the 2022 fourth quarter it "encountered multiple days of lost production due to supplier shortages."
"As expected, during the fourth quarter of 2022, in-transit time from rail shipments combined with increased volumes from the ramp of our second shift towards the end of the quarter caused a larger discrepancy between production and deliveries," Rivian detailed.
Rivian Estimate: 200,000 R2 Cars in 2026
By announcing very ambitious goals for 2024, McDonough suggests that 2023 is the last year of problems and then operations will move smoothly.
The automotive group claims that by by mid-2023 it will be able to produce and deliver all vehicles that were ordered before the March price hike.
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The carmaker, which no longer discloses updates on its preorder book at the end of each quarter, indicated that it does not have a demand problem. Overall current demand backlog "goes well into 2024," McDonough said.
At the end of November, the group had 114,000 orders.
Among the most important announcements McDonough made is that Rivian plans to produce 200,000 R2 units in 2026, and double that figure -- 400,000 units -- each year beginning in 2027.
Production of this affordable vehicle will start in 2025-2026, the CFO said. The base price of the R2 is expected to be around $40,000, which would allow Rivian to target a wider audience.
Currently, the base price of the 2023 model year RS1 is $79,800, while the base price of the R1T pickup is $74,800.
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