Unlike Fisker, a US electric vehicle startup that went bankrupt, Rivian announced that its profitability is dramatically improving through cost reductions. Rivian sold more than 50,000 units in 2023. In the first quarter of this year, the R1S (pictured above) ranked as the fourth best-selling electric vehicle in the U.S. market, following the Tesla Model Y, Model 3, and Ford Mustang Mach-E. Meanwhile, Rivian delivered 13,588 vehicles in the first quarter of 2024, down slightly from the 13,972 vehicles delivered in the fourth quarter of 2023. Meanwhile, as of early April 2024, Rivian’s cumulative sales volume exceeded 100,000 units.
Rivian announced in November 2023 that it would temporarily suspend production at its Normal, Illinois plant in April 2024 to improve production efficiency and reduce costs. Rivians CEO and founder RJ Scaringe said during a recent fireside chat that the planned shutdown in April “introduced a dramatic cost reduction in material costs.”
Scaringe warned, “From an investor perspective, the second quarter’s going to be messy,” following a month-long shutdown. “You won’t see many of those benefits until you get to the third quarter,” he added. One of the reasons for the improvement starting in the third quarter was the addition of hundreds of new robots, which increased the line processing rate by 30%.
Rivian has eliminated 100 steps from battery making, 52 pieces of equipment from the body shop, and over 500 parts from the design of the R1T and R1S. Scaringe told Reuters during a recent factory tour that the upgrade earlier this year resulted in a 35% cost reduction of materials for its vans. The new changes provide savings of a “similar magnitude” for its other vehicles. In detail, Rivian’s cost of building vehicles has “improved dramatically,” Scaringe said. “The design of the parts and the design of the plant facilitate making the vehicle easier to build.”
Rivian’s gross vehicle margins have improved over the last year after it lost around $39,000 on each EV built in the first quarter of 2024. That’s down from the $67,300 loss in the first quarter of 2023 but up slightly from the $32,594 and $30,500 losses in the second and third quarters of 2023, respectively.
Rivian expects the cost savings to help it reach a positive gross margin by 2024. Rivian ended the first quarter with just under $8 billion in cash and equivalents, which is enough to launch its smaller, more affordable R2 model. Furthermore, Rivian expects R2 to expand significantly its market after the $45,000 electric SUV earned over 68,000 reservations in less than 24 hours.
The R2 will be built at its Normal plant starting in early 2026. Rivian initially planned to begin R2 production at its new Georgia facility, but the move helped save $2.25 billion while accelerating the launch.
Rivian’s R2 will account for 155,000 of the 215,000 future capacity at Rivian’s Normal plant. The plant’s current capacity is around 150,000 vehicles.
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