Troubled EV Maker Rivian Lays Out Path To Profitability

rivian factory Image credit Rivian

At first-ever investor day EV maker Rivian lays out profitability plans after $5bn deal with VW offers it financial lifeline

Electric vehicle maker Rivian has outlined a plan to achieve profitability within three years, after a $5 billion (£3bn) joint-venture deal with Volkswagen handed the company a badly needed financial lifeline.

At its first-ever investor day Rivian said design changes, the falling price of lithium and renegotiated supplier agreements would allow it to cut its bill of materials by about 20 percent in the fourth quarter of 2024 compared to the first.

This should make the firm profitable at the gross-margin level, the company said, eliminating the current negative-margin situation that increases Rivian’s losses with each EV it sells.

The R2 line of pickup trucks and SUVs, set to launch in 2026, should bring in another 45 percent reduction in materials costs compared with the second-generation R1 models it recently switched to.

Rivian chief executive RJ Scaringe. Image credit: Rivian
Rivian chief executive RJ Scaringe. Image credit: Rivian

‘Sense of urgency’

The R2 line is also intended to be priced more affordably than the R1 flagship line, at $45,000, allowing it to compete directly with Tesla’s Model Y crossover SUV.

As it increases production of the R2 vehicles Rivian believes it can become profitable on adjusted earnings before interest, taxes, depreciation and amortisation in 2027.

“Everything that you’re hearing from us, around our product, around how we’re running the business, around how we’re driving toward profitability, my hope is that you’re seeing really an extreme sense of urgency,” said Rivian chief executive RJ Scaringe at the event.

“We’re very, very fast driving towards the improvements necessary to get to positive free cash flow and, before that, positive margins this year.”

The company outlined long-term financial targets of roughlly 25 percent gross margin, 10 percent free cash flow and adjusted profit margin in the “high teens”, but did not set a timeline for the targets.

Rivian's R1S electric SUV. Image credit: Rivian
Rivian’s R1S electric SUV. Image credit: Rivian

VW deal

The company’s plans did not deliver a significant stock price boost over the 25 percent increase that accompanied the announcement of its deal with VW earlier last week.

Rivian’s shares are down roughly 36 percent so far this year and are currently trading at around $13, far below their IPO price of $78 per share, amidst challenges including a slowdown in EV sales and competition from Chinese EV makers.

The VW deal gives the German automaker access to Rivian’s software and other EV technology and will see the two firms set up a joint venture to develop next-generation EV products.

Scaringe said the venture would not include battery technologies, vehicle propulsion platforms, high-voltage systems or autonomy and electrical hardware.