Rivian Posted Narrower Losses in Q2 2023 & Raised its Production Target

Key Points

-The Q2 results showed improvement in Rivian's financials, with revenues rising and losses narrowing.

-the EV start-up also raised its 2023 production target to 52,000 units, helped by the significant increase in Q2 output.

-The results are encouraging, after the hardships of 2022, but there are still challenges.

Rivian Turns the Corner

The auto industry faced multiple headwinds last year. High inflation raises production costs and makes cars more expensive. Elevated interest rates make corporate funding more expensive, while consumers face higher loan costs for purchasing cars. More to it, economic uncertainty make prospective buyers hesitant.

Cash-strapped electric vehicle (EV) startups grappled with an even more perilous environment, since they are often unprofitable and thus more vulnerable to these hardships. Furthermore, ramping up production is a costly and hard endeavor, which became more challenging due to the supply chain disruption.

US off-road maker Rivian Automotive was no exception and definitely felt the burn from these adversities. However, the external environment has been improving this year, with the Fed having slowed down the pace of tightening, inflation coming down and the economy proving resilient.

Its performance in the second quarter of the current year is encouraging and shows that Rivian is turning the corner.

Uprgraded Production Target

The first positive signs came at the beginning of previous month, when the EV maker announced the delivery of 12,640 vehicles in Q2. This was nearly triple from a year ago and up roughly 60% q/q. Furthermore, output jumped over 200% y/y and nearly 50% on quarterly basis, to 13,992 units.

Adding more color to these metrics on Wednesday, during the earnings call, the firm noted that Q2 was the first time output of the newest R1S SUV "outpaced" that of the R1T pickup. ^[1]

The company offered more encouraging news on Wednesday, as it raised its production target to 52,000 units, form previous goal of 50K. During the earnings call, CEO DJ Scaringe stressed that "we remain focused" in scaling up output.

Improved Financials

The higher number of deliveries helped the firm to an impressive 70% y/y rise, to a record of $1.21 billion, according to Wednesday's Q2 results. These also reflected progress on the firm's push to become more efficient and cut down costs, in response to the hardships of 2022.

Operating Expenses were trimmed, staying below $900 million, while Net Loss narrowed to $1.195 billion. The gross loss on every vehicle delivered was significantly improved, by roughly $35,000, compared to the previous quarter. Mr Scaringe spoke of "meaningful reductions" in the costs of the R1 retail EVs and the delivery van (EDV) it manufactures for Amazon.com.

In one of the gloomy parts of the report, Rivian ended the second quarter with Cash of just $10.202 billion, which marked another decline.

Conclusion

Rivian was confronted with multiple 2022 adversities in the past year, during which its stock (RIVN.us) had shed more than 80% of its value. The Q2 results however show that the EV startup is turning the corner. RIVN is up on the year, helped by a very strong July as markets reacted positively to the increased output/delivery figures.

It is making progress on scaling up with a higher production target, its financials improved and its already working on the cheaper and smaller R2, although deliveries are not expected before 2026.

However, challenges still lay ahead. Although the external environment is improving, there are still pitfalls. The output/delivery gap and the series of prices cuts by many EV makers, are signs of weak demand. Startups like Rivian Automotive may have a hard time following and competing in a lower price/margin environment.

Furthermore, Rivian beat everyone to the electric pickup truck market, but now competition heats up. The Ford Motor Company has already been selling its F-150 Lightning for more than a year now and more legacy automakers are entering the arena and Tesla Motors Inc is finally getting ready to begin deliveries of it futuristic Cybertruck.