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Rivian Reveal Exposes Enormous Financial Woes (Video)

Rivian’s fans are crossing their proverbial fingers that the company’s all-electric pickup truck and SUV will have enough appeal to draw market share away from Tesla.

What happened at Rivian Automotive this month? The electric vehicle company’s US initial public offering (IPO) filing disclosed startling fiscal gaps:

  • In the first 6 months of 2021, the company’s net loss deepened from $377 million a year earlier to $994 million.
  • The losses since the start of 2020 have amounted to nearly $2 billion.

The stark financial picture was revealed in filings to the Securities and Exchange Commission (SEC).

The huge losses and a stunning thirst for cash create a fascinating, if tenuous, backdrop to the company’s highly anticipated IPO.

Rivian filed paperwork with regulators for an IPO in August; the company’s trading symbol on the NASDAQ will be RIVN. Morgan Stanley, Goldman Sachs, and JP Morgan are the lead underwriters for the Rivian IPO.

Amazon has invested over $1.8 billion in the company and has a contract with Rivian to purchase 100,000 electric delivery vehicles in attempts to lower its transportation emissions. Rivian also has financial backing from Ford.

Rivian has not yet set terms for its offering, although Reuters suggests that the electric vehicle maker is aiming to raise between $5 billion and $8 billion and is seeking a valuation of about $80 billion in the listing, which is expected to land in late October or November. That cash influx will be directed to facilities and equipment through the end of 2023.

Rivian has a 2-track strategy:

  • Building electric delivery vans for Amazon
  • Developing an electric pickup and SUV brand aimed at affluent individuals

The company manufactures an upscale all-electric R1T pickup truck, which was launched last month, and a sport utility vehicle, the R1S, which will hit the roads later this year. Both are designed to be driven off-road and will be produced at the company’s main production facility in Normal, Illinois. The company employs 2,500 workers there and had a total work force of 6,274 employees in June, 2021.

The company slogan is “Keep the world adventurous forever.”

The company was first to release an electric pickup truck, although Tesla, General Motors, and Ford have boasted about impending electric pickup truck additions to their catalogs. Rivian had about 48,390 preorders total for its R1T pickup trucks, which start at $67,500, and R1S SUVs in the US and Canada, which start at $70,000.

Rivian’s IPO is part of a strategic move to become a lead player in the electric vehicle market, which is expected to grow exponentially over the next 2 decades. Tesla holds the top place in all-electric vehicle sales, having already gone through growing pains over supply chain, battery manufacturing, sales, robotics, marketing, design, and union issues. It is the most highly valued and keenly observed automaker in the world.

The Costs of All-Electric Vehicle Manufacturing

Gaining and holding ground in the electric vehicle market is a really, really expensive business endeavor.

Like other electric vehicle companies such as Nikola and Lordstown Motors, Rivian has big losses because of significant costs to set up and run production lines at a time when it cannot balance losses with adequate sales. In the first half of the year, the company lost $994 million, compared with a $377 million loss in the same period last year, according to the IPO filing. In 2020, it lost $1.02 billion. It also borrowed $2.5 billion through “convertible promissory notes” in July.

“We do not expect to be profitable for the foreseeable future as we invest in our business, build capacity, and ramp up operations,” Rivian said in the filing, “and we cannot assure you that we will ever achieve or be able to maintain profitability in the future.”

Being the new kid on the block means that the Rivian systems and structures need to be refined. Tesla had a comparable introductory trajectory, having lost $56 million in 2009 before going public in 2010. The first fully profitable year for Tesla was 2020.

“Tesla has a more efficient supply chain,” Wedbush analyst Dan Ives tells Barron’s, pointing to streamlined manufacturing at only 2 sites: Fremont, California and Shanghai, China. The China connection also provides Tesla with better access to sourcing chips. “Ford and GM among others have very complex supply chains, which put them in the eye of the storm,” he explains.

On July 2, Tesla reported that, in the second quarter, the company produced and delivered over 200,000 vehicles. It complimented its teams for having transcended difficulties arising from the aftermath of the global covid-19 pandemic. “Our teams have done an outstanding job navigating through global supply chain and logistics challenges,” the company said in a statement then.

And, to top it off, Tesla delivered 241,300 electric vehicles during the third quarter of 2021, the company said Saturday. Today, Tesla’s $777 billion value on the stock market is 10 times that of General Motors.

It’s not just Rivian and the other new electric vehicle players who are struggling to make ends meet. Volkswagen’s CEO Herbert Diess is worried that the company is falling behind the competition and needs to implement big changes in its manufacturing facilities. “We have great responsibility for this location,” Diess said. “We have to accept the new competition. We need the will to live and a jolt at this location.”

What Other EVs Will Be Introduced in the Next Year+?

Rivian is just one electric vehicle manufacturer that is bringing new models to market.

  • Ford Motor began selling an electric sport utility vehicle, the Mustang Mach-E, and will add an electric version of its popular F-150 pickup truck next year.
  • Volkswagen revealed the ID.4 SUV.
  • GM is getting ready to sell a battery-powered GMC Hummer pickup truck.
  • The Cadillac Lyriq is receiving orders for mid- to late-2022 deliveries.
  • Mercedes-Benz, BMW, and Hyundai are among automakers adding new EVs choices.

Back to the Beginnings with Rivian

R. J. Scaringe, the Rivian founder, started the company in 2009 with the name “Mainstream Motors” but changed it in 2011 to “Rivian,” which is a mélange of the words “Indian River.” That location in Florida, known for its citrus crops, held a fond place in Scaringe’s mind due to many evocative afternoons he spent there on a rowboat as a young person.

Scaringe has promised to apply 1% of equity in its environmental program called “Forever,” which has as its goal to mitigate the climate crisis by preserving remote lands and waterways.

Scaringe, with a Ph.D. from MIT in engineering, has been subdued about the company’s prospects. His compensation was $1.3 million last year, according to the filing. Like many CEOs, his compensation will be commensurate with Rivian’s stock performance.

In January, Rivian’s board granted Mr. Scaringe 6,785,315 shares and a performance-based option to purchase up to 20,355,946 shares.

Image provided by Rivian

 

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Written By

Carolyn Fortuna (they, them), Ph.D., is a writer, researcher, and educator with a lifelong dedication to ecojustice. Carolyn has won awards from the Anti-Defamation League, The International Literacy Association, and The Leavy Foundation. Carolyn is a small-time investor in Tesla. Please follow Carolyn on Twitter and Facebook.

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