© Reuters. FILE PHOTO: Employees work on an assembly line at startup Rivian Automotive’s electric car factory in Normal, Illinois, USA April 11, 2022. REUTERS / Kamil Krzaczynski
By Tina Bellon
(Reuters) – When Jeff Wells booked a Rivian R1T pickup in early 2019, he was one of the first in line for a truck from Amazon.com (NASDAQ 🙂 Inc-supported startup of electric vehicles that on that time promised to exploit a niche not served by other automakers.
But Wells, an accountant from Southern California, has become more and more frustrated as he sees others who placed their orders years after him receive trucks while he keeps waiting.
“It’s just annoying and it feels like there’s no order in how they do things,” he said of Rivian.
Wells is one of dozens of reservation holders who in recent weeks have complained about unreliable delivery timelines and delays in online groups and forums.
The complaints arose after Rivian Automotive Inc said in late April that it was changing the production order of vehicles, prioritizing them with specific interior and exterior color and wheel options.
“Building in a few building combinations reduces the complexity of our suppliers and the factory and allows us to build a larger number of vehicles,” Rivian told customers in an email.
This meant that many early reservation holders who stuck to their original color preferences had their orders delayed.
Rivian said in a statement to Reuters that delivery dates are not only based on the time of a pre-order and that it explored new ways for customers to speed up deliveries.
Rivian’s delivery headache has not attracted the same attention as the California company’s cut production plans or its messy communication about vehicle price increases, which it first announced across the board but later scrapped for existing reservation holders after setbacks.
But delivery problems can prove just as harmful.
While all automakers are struggling with global supply chain spinners, including lack of semiconductors and rising raw material costs, startups like Rivian have less room to get things fixed. Major investors, including Ford Motor (NYSE 🙂 Co and Tiger Global Management, have relieved Rivian shares after the lock-up period after the IPO expired. 9b55ce3c-c70c-46c1-8d0c-b135de26562c1
Graph of Rivian’s stock performance:
Rivian’s supporters have largely remained loyal despite the company’s chaotic price changes. Pre-bookings have increased to 90,000 vehicles even after the price increases, which now only apply to new bookings.
But delivery delays can prove costly as other automakers launch their own electric pickup trucks, including Ford Motor Co ‘s F-150 Lightning.
Rivian said on May 11 that it was working on revising its ordering system to separate reservations from the configuration process in an apparent attempt to tackle customer criticism over supply shortages in its ordering system.
Rivian said in the statement that the change allowed for pricing and timing transparency.
‘THE WORLD HAS CHANGED’
Rivian’s struggles to revise its ordering system also reflect broader industry challenges. Inflation and supply chain spinners have shredded financial forecasts and increased pressure on EV startups to reduce costs at a time when investors are closing their checkbooks.
“The markets are closed to all companies, good and bad. You have to bend down and set your priorities and do whatever it takes to get to the other side,” said Daniel Ninivaggi, CEO of EV- startup Lordstown Motors Corp., which sold its plant to Taiwanese contract maker Foxconn this month as liquidity reserves fell.
Rivian said it consistently monitored capital markets and had planned an increasingly difficult environment by “optimizing its product roadmap and operating expenses.”
With $ 16 billion, Rivian boasts significantly more money than Lordstown and other small electric car startups, such as Canoo Inc, which issued a going-concern warning this month.
But Rivian burned about $ 1.2 million a year. vehicle it delivered in the first quarter and is estimated to spend a total of $ 7 billion in cash this year, according to Morgan Stanley (NYSE 🙂 analyst Adam Jonas.
“I certainly would not put Rivian in the same basket as these other companies, but I think they have a high burden and they need to show that they can deliver,” said Vitaly Golomb, partner at investment bank Drake Star, who heads its EV and mobility practices and is also a rival investor and reservation holder.
While Rivian has told investors they had enough money to open its second US $ 5 billion plant by 2025, patience may be running out.
“Since your listing, the world has changed dramatically, investors just do not want to finance negative EBITDA growth companies in this environment,” Jonas said in the company’s recent earnings call with investors, in which he cut off Rivian CFO Claire McDonough.
CEO RJ Scaringe and McDonough said the company would bring costs under control by simplifying its vehicle range and minimizing costs.
Scaringe also said Rivian, like some automakers, believed the worst of the semiconductor shortage was behind it. However, other carmakers have said the shortage could last into 2023.
Rivian has not said when it expects to produce vehicles with a profit margin. The price increases, which increase the sticker on its currently available pickup from $ 67,500 to $ 79,500, are supposed to improve the economy and offset higher raw material costs. They apply to orders placed after March 1st. Rivian also said in an email to customers on March 3 that it would launch a more basic R1T model for $ 67,500, which it expects to deliver in 2024.
But industry competitors say it will be a challenge to make money even at that price.
Peter Rawlinson, CEO of luxury car maker Lucid Group Inc and former chief engineer at Tesla (NASDAQ 🙂 Inc., estimates that Rivian spends about $ 22,000 on its starter battery pack and about $ 20,000 on drive trains supplied by Robert Bosch GmbH – requiring a vehicle label price of $ 95,000 for to return a profit.
“The only way they could ever make that business model work is if they lose money on every truck they sell,” he told Reuters in March.
Rivian said it was confident of its “price journey.” It also said it is working on a cheaper internal engine and new battery designs.
For Rivian reservation owner Wells, profit margins mean less. He just wants his fingers in a truck as soon as possible. While saying he prefers the Rivian’s R1T, Wells last year also made a reservation for the F-150 Lightning made by Ford.
“At this point, if Ford comes through first, I think I will take them,” Wells said.