Rivian produced $663 million in revenue in the fourth quarter and $1.66 billion for the year, which was boosted by an increase in production and deliveries near the end of the year but was insufficient to meet Wall Street’s expectations.
Rivian was expected to generate $742.4 million in the fourth quarter and $1.73 billion for the entire year, according to Yahoo analysts polled.
Shares fell 8% as investors focused on three pieces of bad news: missed assumptions, a recall, and an increased, but still lower-than-expected, production forecast for 2023.
The company announced a fourth-quarter net loss of $1.72 billion and a full-year net loss of $6.8 billion. It reported an adjusted loss of $1.5 billion for the fourth quarter and $5.2 billion for the entire year.
Limited negotiating leverage
The company likened its net loss to high costs, mentioning that many of its material cost supply contracts were formed before the start of production in 2018 and 2019 when it had “limited negotiating leverage.” Rivian also disclosed losses on firm purchase commitments totaling $920 million.
Rivian anticipates that these costs will continue in 2023. However, it is working to reduce the cost of goods sold per vehicle and to strengthen its supply chain.
As we look at 2023, we have much better visibility and a much clearer picture of access to supply and where there are going to be challenges or constraints, and that’s very different than where we were last year, That visibility allows us to focus on exactly what will go wrong or what will be a gap
RJ Scaringe, CEO of Rivian stated on earnings call
Rivian said it expects to emerge from this deep hole of losses and achieve “positive gross profit” (a non-GAAP metric) in 2024. The company expects to have no more extended material inventory fees and losses on firm buy commitments linked with its Normal, Illinois facility by the end of 2024.
Rivian’s operating expenses for the fourth quarter and the whole year were $795 million and $3.7 billion, respectively, in terms of cash burn, indicating that the company is still burning more money than it brings in revenue.
It’s also worth noting that its full-year operating expenses in 2022 were almost similar to those in 2021. Rivian reduced some operating costs by laying off employees beginning last summer.
Rivian partially reduced capital expenditure costs because it has progressed in developing its production capabilities at the Normal, Illinois plant.
Rivian’s capex in the fourth quarter was $294 million, down from $455 million in the same quarter last year. Capex for the entire year was $1.4 billion, down from $1.8 billion in 2021.
Rivian plans on spending $2 billion on capital expenditures in 2023 as it ramps up production of its R1T truck, R1S SUV, and two variants of its commercial van, which it supplies to Amazon.
Capital expenditures are also expected to rise as Rivian builds its second factory in Georgia, where it intends to manufacture its next-generation R2 platform.
According to the company, the R2 platform is designed for smaller, more budget-friendly EVs. Rivian had planned to launch the R2 in 2025 but delayed it until 2026 at the end of the third quarter.
Rivian intends to grow its customer business with its existing commercial business, including the R2.
Rivian’s cash flow is still negative at $6.4 billion. Rivian ended the year with $11.6 billion in cash and cash equivalents, giving it a two-year runway at its current cash burn rate.
The company is open to raising additional capital but hopes to reduce cash burn in 2024 versus 2023 significantly.
Production and Max Pack have returned
Rivian has struggled with supply chain issues, particularly the supply of power semiconductors, since the start of production of its R1T truck in late 2021.
These issues persisted in 2022, forcing the company to reduce its production forecast from 50,000 to 25,000 vehicles.
Rivian didn’t quite hit the mark even with that lower, more conservative guidance. In 2022, Rivian generated 24,337 vehicles and supplied 20,332 cars.
The company increased production in the year’s second half following a slow start. It produced 10,020 EVs in Q4 and supplied 8,504 in the same period.
The company raised its estimated production figure to 50,000 vehicles on Tuesday. That is still significantly less than the total capacity of its Normal, Illinois plant.
Rivian claims that once fully operational, the Illinois factory will be able to produce 150,000 EVs per year, with plans to expand to 200,000.
The company has finally set a release date for its long-awaited “Max Pack” battery, an upgrade to the current battery configuration. The first deliveries of a 400-mile R1S Max Pack with a dual-motor configuration are scheduled for fall 2023.
The company removed the “Max Pack” option from its website late last year. The option will be available to current pre-customers, according to the company.
Problems with recall
In its full-year and fourth-quarter earnings report, Rivian also announced a recall for a front passenger seat belt system sensor in certain 2022 R1T and R1S vehicles.
This arrived five months after Rivian issued a voluntary recall of all 13,000 vehicles it had previously delivered due to a loose fastener.
The company, which discovered the seatbelt detector issue in February, stated that while there are 12,716 potentially affected vehicles
we believe the estimated affected population is less than 1 percent — fewer than 100 vehicles — which will require part replacement, Inspections are estimated to take less than 10 minutes. For the very small percentage where part replacement is necessary, the work can be completed in less than 30 minutes during the same visit
Rivian stated on voluntary recall
The problem first surfaced in July 2022, when Rivian and a supplier reviewed a vehicle’s performance in which the “passenger airbag off” light was operated with certain passengers in the front passenger seat, prompting the carmaker to issue a service request.
The company started its investigation to see if the signal from the seat belt sensor that senses if the automatic locking retractor (also known as ALR) was working correctly.
According to Rivian, as of February 27, 2023, no accidents or injuries have been connected to this problem in any market.
