Does Rivian lose more than $100,000 on every vehicle it sells?

2022 Rivian R1T truck with integrated tent

Reuters recently reported that every time Rivian Automotive Inc. sells an electric vehicle, it loses “hundreds of thousands of dollars due to staggering raw material and production costs, their latest earnings statements showed” (Sriram, 2022).

This is based on research that found the “cost of goods sold was about $220,000 per car versus an average selling price of $81,000 in the quarter,” wrote reporter Akash Sriran (2022).

The commentariat of Jalopnik questioned this assessment on two fronts. First, the story’s phrasing inaccurately implies that Rivian is losing money whenever it sells a vehicle. Second, that one vehicle costs upwards of $200,000 to produce.

Rivian R1T trunk
The Rivian’s R1T may not cost upwards of $200,000 to produce, but Sandy Munro has argued that it was underpriced. Yet when Rivian recently increased prices, it elicited a backlash (Barfield, 2022; photo courtesy Rivian Automotive Inc.).

Startups will have much higher costs than revenue

Jalopnik commentator OR (2022) noted that the data likely includes “all of their spending — including R&D for the whole line, marketing from day 0, etc — rather than just the cost of the cars they’ve actually brought to market.” 

Blockheads (2022) agreed, adding that the “same thing happened back when Tesla was getting up and running.  People were conflating Tesla’s spending with the profitability of each unit sold. You can’t simply divide the spend across the number of units sold and claim that a company loses that much on every unit. There’s well defined business and accounting practices that will determine it a different way.” 

Also see ‘Rivian is timid in reimagining American truck’

Zachary Shahan (2022), chief editor of CleanTechnica, weighed in on the side of Jalopnik commentators. “The problem in the auto world — or at least automotive and business media — is that people dramatize this and fear-monger by writing headlines like ‘EV Makers Losing Hundreds of Thousands of Dollars On Every Car.’” 

In fairness to the Reuters reporter, he did state in another part of his story that higher output for EV startups such as Rivian “would ultimately reduce the cost per car and limiting production can threaten the path to profitability, analysts said” (Sriram, 2022). However, this wasn’t noted until almost the end of the article.

Rivian Georgia plant
Rivian’s new Georgia plant is slated to produce up to 400,000 vehicles. The complex was also expected to include an R&D center, a test track and an “adventure trail” (Doll, 2022; image courtesy Rivian Automotive Inc.).

Rivian may have blown its chance to conserve cash

Sriran (2022) did make a useful point in his story that EV startups such as Rivian “must find ways to save money if they want to outlast a bad economy.” Here Rivian may have boxed itself in.

Last December the automaker announced that it was building a new $5 billion battery and assembly plant in Georgia. The complex could ultimately employ as many as 10,000 workers, “which would make it among the largest auto assembly complexes in the United States,” according to the Associated Press (2021).

“The company argues that electric vehicle adoption is at the ‘tipping point’ and it is well positioned for success because trucks and SUVs have long been the most profitable vehicles sold,” stated the Associated Press (2021). “But some analysts question whether it needs another plant besides the former Mitsubishi plant in Illinois, that Rivian bought for $16 million in 2017. Rivian says it has a yearly capacity of 150,000 vehicles, but is looking to expand there as well.” 

2022 Rivian R1S front
The Georgia plant is expected to produce “new-generation” models beginning in 2024 (Golson, 2021). Is Rivian not continuing to focus on existing models because they are too costly to build (photo courtesy Rivian Automotive Inc.)?

Could lawsuit against plant give Rivian an out?

One stumbling block to building Rivian’s proposed facility is that last month a Georgia judge rejected a big tax break for the automaker. Among the reasons for the rejection is that a local development authority had not adequately documented that the plant was “sound, reasonable and feasible,” which is a state-level requirement (Amy and AP, 2022).

The state of Georgia and the development authority are appealing the decision. If it stands, Rivian would lose $700 million of a $1.5 billion package of incentives to build the facility (Trubey, 2022).

Also see ‘Tesla vs. Rivian: Henry Kaiser, meet Joe Frazer’

Rivian announced the plant when it was flush with cash and had a market value of $95 billion, which was more than either Ford or General Motors (Associated Press, 2021). In just one year that market value has fallen by almost 73 percent to under $26 billion (companiesmarketcap.com, 2022).

One might reasonably argue that Rivian’s best move at this point is to put on hold the new complex and focus on ramping up production at its existing plant, which is being expanded to 200,000 units (Golson, 2021). Is Rivian management capable of downsizing its ambitions? Or does CEO R. J. Scaringe suffer from the same hubris that led Henry J. Kaiser to kill his fledgling automobile company by expanding too quickly?

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